As an initial step, the new Administration implemented a short-term 100-Day Plan for the New Economy in March 1993, designed to promptly create conditions conductive to revitalizing the economy. This was followed by the development of a new five-year economic development plan. Formally announced in July 1993, the Five-Year Plan for the New Economy was conceived primarily to lay the basis for joining the ranks of advanced countries and thus to effectively prepare for the eventual unification of the Korean Peninsula.
The Government will continue its efforts to ensure the effective implementation of the five-year plan through the spontaneous participation of the people by reforming economic institutions including the improvement or simplification of existing financial and tax systems and administrative measures. Furthermore, the Government will continue to endeavor to fully realized the nation's economic growth potential, strengthen its international competitiveness, and improve the economic conditions of the public.
If the plan is implemented as intended, the Korean economy is projected to change as follows:
First with increased efficiency and greater realization of growth potential, the gross national product should rise at an average annual rate of about 6.9 percent, raising per capita GNP to US$14,076 in 1998.
Second, greater price stability should prevail as balance is maintained between the more steadily rising demand and the more briskly expanding supply, while wage increases are linked to rises in productivity. The stabilization of the value of the won currency should help stabilize the prices of imported goods and services. The net effect should be to hold down the rise in consumer prices to an annual average of 3.7 percent, the increase in producer prices to an annual average of 1.6 percent and the rise in the GNP deflator to an annual average of 4.6 percent.
Targets of the 5-Year Plan for the New Economy
GNP growth, %
Per capita GNP, US$
Rise in producer prices, %
Rise in consumer prices, %
Rise in GNP deflator, %
Balance on curren account,
Exports 1) ,US$ billion
Rate of increase, %
Imports, US$ billion
Rate of increase, %
Note: 1) On a balance-of-payments basis
2) In terms of 1998 current market prices
The Real name Financial Transaction System
On August 12, 1993, the President took a decisive step toward revitalizing the economy and eliminating corruption by announcing the inplementation of the long-anticipated real-name financial transaction system. In the past, it had been possible to open accounts and conduct business transactions under false names, directly and indirectly fostering institutionalized-corruption and illegal financial dealings. Deeming this reform as the most important in the creation of a New Korea, the President announced this action in a Presidential Emergency Decree, stating that the real-name system was essential for cutting the dark link between politics and business.
With the introduction of the real-name financial transaction system, it appears that financial dealings are becoming fully transparent and underground economic dealings and nonproductive land speculation are diminishing. It is hoped the funds that had been channeled into political circles in the past as a result of government-business collusion are now available for more productive activities.
The implementation of a real-name financial transaction system, the easing of administrative controls, expanded capital investment by major enterprises, and increased financial and administrative support for small-and medium-sized enterprises all combined to lay a solid foundation for another economic take-off. Exports rose 7.6 percent in 1993 to US$82.4 billion, while imports grew just 2.5 percent. Korea was thus able to register a US$600 million trade surplus last year for the first time in four years. The current account also yielded a surplus of US$200-300 million. Industrial production has been growing at about a 10 percent rate during the first half of 1994. Furthermore, labor disputes decreased markedly last year, while the composite stock index of the Seoul Stock Exchange climbed markedly. In view of these indications, the Korean economy seems to be well on the way to revitalization.
External Policies for Greater International Cooperation
Korea is committed to fulfilling its international responsibilities. It positively supports the trend toward openness and utilizes it as a catalyst for further enhancing the international competitiveness of industry and thus speeding the advancement of the economy, so that it can join the group of advancedcountries.
Since 1980, Korea has made continuous efforts toward import liberalization. The import liberalization rate increased from 68.6 percent in 1980 to 98.1 percent in 1993. The average tariff rate decreased from 24.9 percent to 8.9 percent during the same period and is expected to be only 7.9 percent by the end of 1994, the same average level of tariffs found in OECD member countries.
In October 1989, Korea decided to relinquish GATT balance of payments protection which mostly covers agricultural products. According to the decision Korea will move to eliminate its remaining restrictions or otherwise make them conform with GATT rules by July 1, 1997.
Liberalizing Foreign Exchange Transactions and Capital Markets