Psy performing “Gangnam Style,” a reference to S. Korea’s posh tech district. Photo Credit: Eva Rinaldi / Creative Commons
While South Korea is now the 12th largest economy in the world despite only having the 26th largest population globally, like ourselves in Ireland, it had a difficult economic past – this is how they made lemonade out of lemons.
I was in South Korea in November representing Ireland at the Startup Nations Summit, which was hosted at the Banks Foundation’s D.Camp startup facility. The Chairman of the board of the Banks Foundation said in his opening speech to the summit that their hosting of the Startup Nations Global Conference, the first global conference in Asia to focus on startup ecosystems, was very much to underpin the national strategy of South Korea’s ambition to become the startup hub of Asia.
A short history lesson on South Korea’s economy – don’t waste a crisis
While South Korea is now the 12th largest economy in the world despite only having the 26th largest population globally, like ourselves in Ireland, it had a difficult economic past. With very few natural resources and suffering from overpopulation in its small territory, South Korea adapted an export-oriented economic strategy to fuel its economy. Following the Korean War, South Korea remained one of the poorest countries in the world for over a decade.
A key component in South Korea’s economic transformation were the big family-owned conglomerates, known as the Chaebols. Government loans offered under attractive terms and restrictions on imports, which gave a head start to some of these firms. Several of them, such as Samsung, LG, and Hyundai (which together contribute 16% of the economy’s GDP), emerged as truly global brands in the ’90s.
In the 1997 Asian financial crisis, the South Korean economy suffered a liquidity crisis and relied on the bailout by the IMF that restructured and modernized the South Korean economy. By January 1998, the government had shut down a third of Korea’s merchant banks. Factory automation systems were introduced to reduce dependence on labor, to boost productivity with a much smaller work force, and to improve competitiveness. Government initiatives played an important role in this process.
