Description
Presentation on relationship between India and Korea in terms of trade between them.
A Tale of Two Countries India and Republic of Korea
1950-1980 :India and Korea
Year
1950s
India
Rising Star
Korea
Basket Case
1960s
Signs of Fatigue
Turnaround of Economy Double Digit Growth Rate Status of Upper Middle Class Economy
1980s
Unqualified Failure
History of Korean Miracle
? Ruled By Japanese from 1910-1945 ? Annual Growth Rate=2.3% from 1911-1940
period
? 1945=End of Japanese Rule (+) Partition of
Korea into North and South Korea
? In 1948, Syngman Rhee became the first
President of South Korea
Korea- Phase I:1945- 1963
? Basket Case
? Massive Doses of U.S. aid
? In 1957, U.S. economic aid >10% Korean GDP
(other than military) ? Korean Economy During 1950s:
? A large current account deficit ? High Protection through Tariffs ? Import Substitution Industrialization
President Rhee ousted by Student Protest in 1960.
Phase I:1945- 1963(contd.)
? General Park Chung Hee became the President
in 1961
? Park’s Objective:
“ Beat North Korea in the race of economic prosperity.” at a time when the per capita income of North Korea was estimated to be double than that of South Korea
INDIA : Phase I
? Growth Rate = 4.1%
? Better performance than Korea because:
? Korea had achieved the growth rate of 4% during
Japanese occupancy ? Korea received massive foreign aid in relation to its GNP
? For India , foreign aid never exceeded 2-3% of
the GNP ? India started relatively open trade regime in 1950 ? Turned inward : Foreign exchange crisis in 19571958: Foreign Exchange Budgeting (+)tightening of
Korea-Phase II: 1963-1981 Trade Openness
? View I : Government Plans & Actions
Expansion of investment required import
Increased Export
Machinery
Increased
Import ? View II : Increased exports was the result of active policy. Export expansion manufactured output ? As much open to imports as to exports ? Huge trade deficits(import)-financed by external
Korea- 1963-1973
? Decisive turn to outward oriented policies-
Neutral across industries
? Growth Rate= 9.5% ? Decided to compete with the world’s most
efficient producers (+) imported state of the art technology
Heavy and Chemical Industry Drive 1973-1979 (HCI)
? A move from INDUSTRY-NEUTRAL policies to
SELECTIVE TARGETING OF HEAVY & CHEMICAL Industries
? Factors contributing to this shift:
? Military withdrawal by the U.S. : Need to develop
strategic industries for defense ? Rising Trade Deficits ? Rising Competition from light manufacturing units
Heavy and Chemical Industry Drive 1973-1979 (HCI) (contd.)
? Instruments used by the Government Machinery:
? Low rates of Bank Credit
-( by largely state owned commercial banks) 60% of Bank Loans and 75% of manufacturing investments went into HCI drive. But, a large part of these investments was financed by external borrowings.
? Tax and Trade policy Concessions : Like Tax
Holidays
? Introduction of a no. of laws to accommodate
State Intervention in Korea
? Korean HCI relied heavily upon market instruments.
HCI drive was highly selective State didn’t get into the manufacturing activity directly No licensing to restrict entry and investment in unselected sectors. ? Real wages Savings (+) Education level (+) Skilled Labour
Advantage towards skilled-labour capital intensive industries that were now targeted Thus, this shift would have taken even without interventions Just the speed was fastened up
State Intervention in Korea(contd.)
? Prior to 1973, growth of 9.5% annually already.
? ? ?
?
Firms became more competitive to World markets The period registered a fall in growth rates to 7.2% in this period Real Export growth stared to decline sharply in 1977 Declining share of light industries Favoured sectors failed to compensate for weaker performance in the unfavoured ones
Korea: 1979- 1981
? Comprehensive Stabilization Program (1979):
Marked the end of HCI Drive ? Woes of the country:
? President Park assassinated ? II oil price crisis ? Major crop failure resulting from cold spell
? General Chun Doo Hwan became the President ? GNP during these years = 3.5%
INDIA : Phase II
? During 1966-68: Brief Liberalization in –
Import licensing(+) Cut in import tariffs (+) Export
Subsidies ? But in 1969-70: Policy reversed ? Progressively more inward and interventionist ? Growth rate = 3.2% Whereas Korea consciously moved away from import substitution to outward oriented trade regime, India became progressively protectionist
Korea-Phase III: 1981- 1988
? 1980s saw trade and financial liberalizations
? Preferential credit and tax treatment to strategic
units abolished ? List of industries classified as strategic-Trimmed ? Upgradation of technology ( R & D by private firms) For this, it liberalized FDI… ? Privatization of Commercial Banks. ? Unrestricted entry of nonbank financial institution
? Overall growth= 9.1% - return to pre-HCI level ? Were HCI’s effects- +ve or –ve ???
INDIA : Phase III
? Gradually began to turn away from interventionist
policies
? Since the change was from a very high level of
interventionism, growth rate rose to only 4.8%
Changes in the Korean Economy:
Thus, Korea transformed from primarily Agriculture to primarily Industrial Nation in a span of 30 years. Employment share of manufacturing rose from 9.4% in 1965 to 22% in 1980.
Savings and Investments
KOREA (Time Period) Early 1960s 1970 1980 1985 INDIA (Time Period) Early 1960s 1970 1980 1985 SAVINGS <4% 16.2% 20.8% 28.6% SAVINGS 11.6% 14.6% 18.9% 19.5% INVESTMENT 11-13% ( External Aid) 24.6% 32.1% 31.% INVESTMENTS 12.7% 14% 18.5% 20.6%
Special about Korea
Thus growth rate
because of investments, which in turn was a result of savings
Thank You..
doc_428496182.ppt
Presentation on relationship between India and Korea in terms of trade between them.
A Tale of Two Countries India and Republic of Korea
1950-1980 :India and Korea
Year
1950s
India
Rising Star
Korea
Basket Case
1960s
Signs of Fatigue
Turnaround of Economy Double Digit Growth Rate Status of Upper Middle Class Economy
1980s
Unqualified Failure
History of Korean Miracle
? Ruled By Japanese from 1910-1945 ? Annual Growth Rate=2.3% from 1911-1940
period
? 1945=End of Japanese Rule (+) Partition of
Korea into North and South Korea
? In 1948, Syngman Rhee became the first
President of South Korea
Korea- Phase I:1945- 1963
? Basket Case
? Massive Doses of U.S. aid
? In 1957, U.S. economic aid >10% Korean GDP
(other than military) ? Korean Economy During 1950s:
? A large current account deficit ? High Protection through Tariffs ? Import Substitution Industrialization
President Rhee ousted by Student Protest in 1960.
Phase I:1945- 1963(contd.)
? General Park Chung Hee became the President
in 1961
? Park’s Objective:
“ Beat North Korea in the race of economic prosperity.” at a time when the per capita income of North Korea was estimated to be double than that of South Korea
INDIA : Phase I
? Growth Rate = 4.1%
? Better performance than Korea because:
? Korea had achieved the growth rate of 4% during
Japanese occupancy ? Korea received massive foreign aid in relation to its GNP
? For India , foreign aid never exceeded 2-3% of
the GNP ? India started relatively open trade regime in 1950 ? Turned inward : Foreign exchange crisis in 19571958: Foreign Exchange Budgeting (+)tightening of
Korea-Phase II: 1963-1981 Trade Openness
? View I : Government Plans & Actions
Expansion of investment required import
Increased Export
Machinery
Increased
Import ? View II : Increased exports was the result of active policy. Export expansion manufactured output ? As much open to imports as to exports ? Huge trade deficits(import)-financed by external
Korea- 1963-1973
? Decisive turn to outward oriented policies-
Neutral across industries
? Growth Rate= 9.5% ? Decided to compete with the world’s most
efficient producers (+) imported state of the art technology
Heavy and Chemical Industry Drive 1973-1979 (HCI)
? A move from INDUSTRY-NEUTRAL policies to
SELECTIVE TARGETING OF HEAVY & CHEMICAL Industries
? Factors contributing to this shift:
? Military withdrawal by the U.S. : Need to develop
strategic industries for defense ? Rising Trade Deficits ? Rising Competition from light manufacturing units
Heavy and Chemical Industry Drive 1973-1979 (HCI) (contd.)
? Instruments used by the Government Machinery:
? Low rates of Bank Credit
-( by largely state owned commercial banks) 60% of Bank Loans and 75% of manufacturing investments went into HCI drive. But, a large part of these investments was financed by external borrowings.
? Tax and Trade policy Concessions : Like Tax
Holidays
? Introduction of a no. of laws to accommodate
State Intervention in Korea
? Korean HCI relied heavily upon market instruments.
HCI drive was highly selective State didn’t get into the manufacturing activity directly No licensing to restrict entry and investment in unselected sectors. ? Real wages Savings (+) Education level (+) Skilled Labour
Advantage towards skilled-labour capital intensive industries that were now targeted Thus, this shift would have taken even without interventions Just the speed was fastened up
State Intervention in Korea(contd.)
? Prior to 1973, growth of 9.5% annually already.
? ? ?
?
Firms became more competitive to World markets The period registered a fall in growth rates to 7.2% in this period Real Export growth stared to decline sharply in 1977 Declining share of light industries Favoured sectors failed to compensate for weaker performance in the unfavoured ones
Korea: 1979- 1981
? Comprehensive Stabilization Program (1979):
Marked the end of HCI Drive ? Woes of the country:
? President Park assassinated ? II oil price crisis ? Major crop failure resulting from cold spell
? General Chun Doo Hwan became the President ? GNP during these years = 3.5%
INDIA : Phase II
? During 1966-68: Brief Liberalization in –
Import licensing(+) Cut in import tariffs (+) Export
Subsidies ? But in 1969-70: Policy reversed ? Progressively more inward and interventionist ? Growth rate = 3.2% Whereas Korea consciously moved away from import substitution to outward oriented trade regime, India became progressively protectionist
Korea-Phase III: 1981- 1988
? 1980s saw trade and financial liberalizations
? Preferential credit and tax treatment to strategic
units abolished ? List of industries classified as strategic-Trimmed ? Upgradation of technology ( R & D by private firms) For this, it liberalized FDI… ? Privatization of Commercial Banks. ? Unrestricted entry of nonbank financial institution
? Overall growth= 9.1% - return to pre-HCI level ? Were HCI’s effects- +ve or –ve ???
INDIA : Phase III
? Gradually began to turn away from interventionist
policies
? Since the change was from a very high level of
interventionism, growth rate rose to only 4.8%
Changes in the Korean Economy:
Thus, Korea transformed from primarily Agriculture to primarily Industrial Nation in a span of 30 years. Employment share of manufacturing rose from 9.4% in 1965 to 22% in 1980.
Savings and Investments
KOREA (Time Period) Early 1960s 1970 1980 1985 INDIA (Time Period) Early 1960s 1970 1980 1985 SAVINGS <4% 16.2% 20.8% 28.6% SAVINGS 11.6% 14.6% 18.9% 19.5% INVESTMENT 11-13% ( External Aid) 24.6% 32.1% 31.% INVESTMENTS 12.7% 14% 18.5% 20.6%
Special about Korea
Thus growth rate
because of investments, which in turn was a result of savings
Thank You..
doc_428496182.ppt