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 10th 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.
