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• TNCs have brought in valuable foreign currency which has been used to increase
domestic production, reduce imports and fund infrastructure and social development
• Old and new technologies have been introduced and this has allowed the
development of Asian TNCs in these fields
• With increased prosperity Asian NICs rapidly improved their essential
infrastructure such as roads and airports and then set about improving the quality of basic
life.
- After the Korean War of 1950-3 the South had a GDP per head the same as much of
Sub Saharan Africa. It is now the 14th richest country in the world.
- From the early 1960s the economy took off achieving amazing rates of growth for 40
years.
- Wages rose steadily and all aspects of the quality of life improved.
e.g. life expectancy increased from 47 years in 1955 to 75 in 2002.
- Government influence
- Location. To the west of SK lies China and to the southeast lies Japan
- Attracting FDI. SK extremely successful in attracting foreign investment. Much of this has
come from the Transnational companies.
• From the 1960s to 1990s SK transformed itself from an exporter of mostly textiles and
shoes into a major global producer of cars, shipbuilding and steel and later, high technology
fields such as mobile phones and semi-conductors.
1960s
Government - 5 year Economic Development Plan. Shift of policy away from inward looking
strategy of import substitution to outward looking strategy of export of light manufactured goods,
Korea has comparative advantage due to cheap labour
1970s
Government policy – restructuring of type of exports in favour of - more sophisticated products
- higher value added products
- increase in agricultural products
1980s
Government policy:
- Rationalisation of industries with the example of ship building. Concentration of
economic power increases because many of the troubled companies are taken over by the
growing TNCs, CHAEBOLS
- government restrictions on FDI relaxed, recognition of FDIs role in promoting
competition and transferring advanced foreign technologies
- industrial restructuring aimed at promoting small and medium companies
1990s Globalisation
Government Policy – Needs to change economic strategy. Previous one, which promoted
exports using cheap labour, not working. Lost comparative advantage, 1990s wage increase
averages 18% a year. Also liberalisation occurs. Keeping domestic markets protected from
foreign competition has shown its limits.
- Downturn in the semiconductor, metals and petro-chemical businesses and the value of the
yen fell, increasing the price of SK’s products compared with Japan. Profits slumped and compan
borrowing rose. SK’s foreign debt doubled between 1995 and 1997