THE TIGER that stands FIRM

When the term ‘Asian Tiger' was coined in the 1990s, it referred to the four fastest-growing Asian economies: Hong Kong, Singapore, Taiwan — and South Korea.

South Korea especially tells an amazing success story in this respect. The country has seen supercharged growth from the late 1960s to the present day — with a few setbacks in between — due to industrial policies that allowed it to export aggressively while protecting its internal economy by implementing strict import substitutions and government subsidies. These policies, contradicting the neo-liberal economic concept of the United States and the free-market ideas of the European Union, made it possible for South Korea to enjoy extremely high growth rates over decades.

Today, South Korea is a member of the G20 grouping of major economies and was, according to the CIA World Factbook, the seventh-largest exporter and the tenth-largest importer in the world in 2010. It is a high-income country with an economic backbone in shipbuilding, electronics, automobile and steel and construction, enjoying a remarkable resilience against economic volatilities first shown during and after the 1997 Asian financial crisis, and later after the global financial crisis struck in 2008.

Despite being severely hit, the country recovered sharply and quickly in both cases, benefiting from low state debtand high fiscal reserves that could be mobilised quickly.

A positive outlook

In a report published this August, the International Monetary Fund (IMF) said that South Korea's economy remains healthy after having rebounded from the global financial crisis, and projected a growth of 4.5 per cent in 2011 and 4.2 per cent in 2012.

"The growth outlook for Korea is robust over the near term. Korea has been at the forefront of the recovery from the global crisis," Subir Lall, the IMF's mission chief for Korea, said in the report titled "Korea: Robust Expansion, But Further Tightening Needed", released on August 4, 2011. "So we have a growth forecast of 4.5 per cent for 2011. This is above Korea's potential growth, which we estimate at about 4 per cent. Next year, we expect growth to remain slightly above its potential," Lall added.

However, he said that "the high dependence [of Korea] on exports makes the economy vulnerable to shocks happening elsewhere in the world, and eventually it affects all Koreans through its impact on employment and incomes."

A pertinent example here is the after-effects of the recent tsunami and earthquake in Japan. Korea relies heavily on Japanese imports for its own manufacturing industry to make steel, cars, electronics and petrochemical products. Some $65 billion (about Dh238 billion) worth of goods are imported from Japan every year, accounting for 15.3 per cent of overall imports. South Korea's exports to Japan soared 29.2 per cent year-on-year to $28.2 billion in 2010.

In an immediate reaction to the Japanese disaster, the South Korean Ministry of Trade said in March this year that the disaster is "not likely" to cause long-term drawbacks in trade relations. Though South Korea's carmakers, steel companies andthe tourism industry, including airlines, felt the immediate impact of the earthquake, the overall losses in trade and business have been minimal, the Korea Trade-Investment Promotion Agency (Kotra) elaborated.For the South Korean car industry, the disaster has even been favourable, the agency added.

For smaller exporters, the South Korean government granted emergency financial aid of up to $196 million to secure liquidity.

Adding another element of uncertainty to the country's economy is the decade-old conflict with South Korea's northern neighbour, the secluded communist state of North Korea.

Living in constant fear that the regime in the North might collapse and millions of impoverished North Koreans might flood the southern part of the Korean peninsula, almost every skirmish at the heavily fortified border between the two countries has effects on the stock market in Seoul and from time to time also an impact on the country's credit rating.

The South follows a moderate policy, trying not to let things escalate and tries to keep the economic relations to the North in balance, which mainly consist of a touristic cooperation in the south-eastern part of North Korea and an industrial park near the North Korean town of Kaesong in the west, where South Korean companies have established manufacturing outlets for textile and electronic contract production.

Industrial complexes

One singularity of the South Korean economy is that it is dominated by large industrial complexes, called the chaebols.

There are several dozens of such family-run conglomerates which also have close ties to politics and are quite immune to regulation laws.

The largest chaebols are also world-renowned brand names such as Samsung, Hyundai or LG, as well as SK Group (energy, telecom), Lotte (food and retail), STX Group (shipbuilding), Hanjin (heavy industries) and Kumho Asiana (petrochemicals). The largest chaebol, Samsung Group, recorded revenues of around $258 billion and a profit of $27.6 billion in 2010 and employs more than 270,000 people.

The Economist Intelligence Unit (EIU) has in January 2011 released a five-year outlook for South Korea's economy. According to the research, the outlook remains "positive and relatively stable for 2011 to 2015."

The EIU experts anticipate South Korea's GDP will rise an estimated 3.8 to 4.1 per cent annually throughout the five-year forecast period.

"The government will continue to pursue business-friendly policies for the forecast period of 2011 to 2015," the experts stated.

"Even though he faces opposition to his policies, president Lee Myung-bak is expected to keep the short-term focus on continuing to apply fiscal stimulus measures in order to support the local economy amid uncertainty in the wider global economic outlook," they said.

SOUTH KOREA AND THE UAE

Biggest export market

The UAE is the biggest export market for South Korea in the Middle East, according to figures provided by the South Korean trade agency. In 2010, South Korea exported goods worth more than $4.7 billion to the UAE — mostly electronics, cars, ships, textile and steel. The UAE exported oil and petroleum products worth $11 billion to South Korea in 2010, making it the second-largest exporter of oil to South Korea after Saudi Arabia.

— A.M.

UN REPORT

South Korea still topping world communications economy

South Korea was the world's most advanced internet and telecommunications economy in 2010, with high levels of access, usage and skills, while high-speed web access remained unaffordable in many low-income countries, the UN's International Telecommunication Union (ITU) found in its annual information and communication technology (ICT) report.

Sweden, Iceland, Denmark and Finland were the next most advanced ICT countries after South Korea, according to the ITU's development index. The United States was 17th, and China — with the world's most internet users — 80th.

— Reuters