70 years on, the Miracle on the Han continues

Korea's modern history is punctuated with crises.  Buffeted by powerful neighbors, the challenges hurled at this landlocked peninsula over the past 70 years have tempered the psyche of 50 million Koreans.  In response to crises, Koreans have learned to adjust quickly to new environments and situations creating a ppali ppali (fast and responsive) attitude.  The result is a country that has emerged from being essentially a basket case in 1945 to the world’s 10^th largest economy today.

Impressive responses to crises

The Republic of Korea (South Korea) was born in crisis.  With its liberation from Japan in 1945, the resulting euphoria was quickly squashed as the realities of a divided nation (at the hands of global powers) set in.  The South had to learn quickly to live without the plentiful natural resources and electrical power generated in the North. 

Even before finding its feet, the peninsula was thrown into an internecine war that killed five million people – half of them civilians.  Starting with virtually a zero base (no factories, ravaged infrastructure, and no natural resources) the country began to pick up the pieces in the 1960’s following a military coup that prioritized economic development.  With a dedicated and hard-working population, central government planning and an export-focused strategy, Korea became the factory of Asia, importing raw materials and exporting finished goods.

A decade later, the industrializing economy was again dashed by the oil shocks of 1973 and 1979.  At that time Korea was the world’s fifth-largest importer of oil. The economy shrank by -6.5% and inflation soared to 30%.  This disaster taught Koreans to become more efficient and always be prepared.

Politics landed another punch with a second coup in 1980 and yet another set of rules and rulers.  Public resistance to military rule led to a rapid democratization beginning in 1988.  The fledgling experiments with democracy were costly in an industrializing nation as labor unions were legalized and strikes paralyzed the manufacturing sector.  Companies adapted by rapidly automating processes. 

The Asian Financial Crisis

Liberalization of the financial sector unleashed pent up demand for capital, and firms borrowed heavily from overseas (often borrowing short and investing long).  This opened the door to the Asian Financial Crisis, by far the largest blow to Korea's recent economic development.

Concentrating on rapid development and quick results, Korea was overextended by debt – and faced with a currency crisis, the country ran out of cash.  The country was bankrupted. It turned to the International Monetary Fund (IMF) to overcome this crisis. In parallel, Korean citizens recognized the urgency of the crisis and rallied together, collecting $1 billion in gold and donating it to the government. Some even donated their own gold teeth to the cause!

What a tremendous testament to the character of the Korean people that they bailed out their government to overcome a financial crisis.  The collective determination of the Korean people to make a better life led to this effort which is unprecedented in the modern world.

The lessons learned stood Korea in good stead with the arrival of the next global financial crisis that hit in 2008. Koreans were well prepared.

The COVID-19 crisis

There are some similarities between heath and economic crises. The current COVID-19 pandemic is a global crisis of public health.  Korea was caught off-guard when SARS Covid-1 hit the country in 2003 from its neighbor, China.  The medical profession and the Korea Disease Control and Prevention Agency (KDCA) was severely criticized for their failures to adequately respond.  Later, when MERS was 'imported' from Saudi Arabia in 2015, Korea was better prepared.  Systems were put in place, both medical and social, to deal with a pandemic.  Korea was therefore well prepared for COVID-19.

When the current pandemic first started in Korea in February 2020, the central government’s response was impressive.  To date, there have been four major waves. Compared with most industrialized nations, however, COVID-19 cases were well managed.  There have been no total shutdowns nor any great panic buying to stockpile necessities (with the exception of masks).  The public was accepting of the infringements on personal liberty that carefully tracked citizens’ movements and informed people where clusters were concentrated.  Korea's national medical system provides universal access to affordable healthcare.  Social distancing was made easier due to advanced logistical infrastructure, home delivery services and online platforms that made it possible to purchase almost anything without leaving the house.

The COVID-19 pandemic remains an ongoing issue, but Korea has become known in the global media for its fast and effective response to the crisis. 

Korea the stable marketplace

Korea is an advanced global player that responds quickly to crises which helps shape its reputation as a stable market to do business.  There are many factors to consider when entering an international marketplace, but how that market reacts to crises is worthy of attention.

To learn more about the Korean market, business and culture, contact IRC Consulting.