What happened was the Asian financial crisis (in 1997), underscored how government officials needed to open their economy up to foreign investors. As a result, the total amounts of money that was coming in began to increase dramatically with these figures currently sitting at $115.6 billion dollars. This is a part of an effort to diversify the economy away from the manufacturing sector. Over the course of time, this has allowed South Korea to build up their infrastructure and improve personal income with this coming in at $30,000.00 per year. This is significant, because in the early 1970's the average South Korean earned $1,200.00 per year. ("South Korea")
The different policies that were enacted have meant that the South Korean government is now running a large budget surplus. This is because the tremendous amounts of growth and economic assistance have helped the country to experiencing a positive balance of trade. Where, the government realized a $35 billion trade surplus last year. Over the course of time, this has allowed them to provide the public with more services and to focus on how to diversify the economy. These different strengths are significant, because they have helped South Korea to become an economic powerhouse in Asia. ("South Korea")
As far as the weaknesses are concerned, South Korea is dealing with a number of challenges that could have an impact on economic growth in the future. A few of the most notable issues that they are dealing with include: an aging population, an inflexible labor market and a dependence upon the manufacturing sector for economic growth. The aging population is problematic, because this can have an adverse impact on economic growth by causing productivity to decline. Evidence of this can be seen by looking at the below table (which is illustrating the majority of the population is classified as a part of the 15 to 64 years old age bracket). As, the median age is: 37 years old for males and 39.8 for females. ("South Korea")
Age Demographics of South Korea
Age
Percentage
0 -- 14
15.7%
15 -- 64
72.9%
65 and over
11.4%
("South Korea")
These figures are significant, because they are showing how over the next 30 to 40 years South Korea will have the majority of their population classified as over 65 years old. This is troubling, because this means that there could be labor shortages, which will lead to a decline in productivity and the standard of living. ("South Korea")
An inflexible labor market is a major issue that will have an impact on future economic growth. The reason why, is because there are certain policies that are giving executives less control in adjusting to changing economic conditions. What has been happening is the South Korean government, has restriction on how and when layoffs will be conducted. This is troubling, because it prevents firms from having large scale layoffs when they seeing decreases in demand. Over the course of time, this will have an adverse effect on the ability of executives to react to a host of situations (which is giving them a competitive disadvantage). (Chung 715 -- 209)
Moreover, there have also been frequent labor slowdown and work stopages. This is because there have been disputes between executives and employees on a host of issues. A few of the most notable include: pay, working hours, conditions and added compensation. These issues are troubling, because they are sign that the labor market could create a number of problems for South Korea in future. As, executives are concerned about how: they can be able to increase productivity and keep labor costs low. Over the course of time, this creates a situation where foreign direct...
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