KOREA: Economic Policy Analysis

This site presents an analysis of the Korean government's economic policies compared to a list of 34 economic policies as prepared by Sung A. Park with the McKeever Institute of Economic Policy Analysis in the Spring of 2012 (MIEPA). To read the analysis scroll through this site. To learn more about the background policies, click here

Introduction and Policy Recommendations

To learn more about MIEPA, click here

Return to MIEPA's Home Page

Several foreign born students living in California have completed a study of their home country governments' economic policies as compared to the MIEPA list of policies as outlined above. The study on Korea is shown below. The ratings herein are based on the following rating scale:


5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 2012 Used herein with permission]

To read a disclaimer about the analysis in this file, scroll to the bottom of the file.

Return to MIEPA's Home Page


Comparison of Korean economic policies to MIEPA criteria as prepared by native student of Korea, Sung A. Park, studying in San Francisco in Spring, 2012.



      1               4.5           13.5             15.0        90%

      2               3.0            9.0             15.0        60

      3               5.0           15.0             15.0       100

      4               5.0           15.0             15.0       100

      5               5.0           15.0             15.0       100

      6               5.0           15.0             15.0       100

      7               4.0           12.0             15.0        80

      8               4.0           12.0             15.0        80

      9               3.0            9.0             15.0        90

      10              4.5           13.5             15.0        90

      11              5.0           15.0             15.0       100

      12              5.0           15.0             15.0       100

      13              5.0           10.0             10.0       100

      14              5.0           10.0             10.0       100

      15              3.0            6.0             10.0        60

      16              3.5            7.0             10.0        70

      17              4.5            9.0             10.0        90

      18              4.0            8.0             10.0        80

      19              4.5            9.0             10.0        90

      20              5.0           10.0             10.0       100

      21              4.0            8.0             10.0        80

      22              3.0            6.0             10.0        60

      23              2.5            5.0             10.0        50

      24              2.5            5.0             10.0        50

      25              4.0            8.0             10.0        80

      26              4.5            9.0             10.0        90

      27              3.0            6.0             10.0        60

      28              4.5            9.0             10.0        90

      29              3.5            3.5             5.0         70

      30              2.0            2.0             5.0         40

      31              2.5            2.5             5.0         50

      32              4.0            4.0             5.0         80

      33              5.0            5.0             5.0        100

      34              5.0            5.0             5.0        100           

  TOTAL             137.5          306.0            365.0       83.8%
                    =====         ======           =====        =====
Return to MIEPA's Home Page


1. Freedom from Internal Control: 4.5

According to a survey conducted by the Center for Free Enterprise, reported in a Korean publication, South Korea’s economic freedom ranks 38th out of 123 nations in 2000 in the world. It scored 7 on a scale of zero to 10 in the survey on economic freedom. The ranking tied with six other countries, including Jamaica, Kuwait, the Philippines, France, and the Czech Republic, South Korea’s score ranged from 5.7 in 1980 to 7 in 2000, and its ranking ranged from 31st to 38th. Since the establishment of the Republic of Korea after World War II, there has been an effort to liberalize or “de-Japanize” the state-controlled, colonial-developed Korean economy into a more Westernized, market-oriented economy. This has taken nearly a half century, yet it remains somewhat behind that of Japan. South Korea must continue to relax government control of its economy, including banks and private enterprises, so that they will be able to manage their businesses on their own.

2. Freedom of Speech: 3.0

The Korean constitution guarantees that ‘‘all citizens shall enjoy freedom of speech.” But not so fast, it goes on to say that ‘‘neither speech nor the press shall violate the honor or rights of other persons nor undermine public morals or social ethics.’’ This caveat has allowed for the creation of and support for a web of controversial laws that curb speech.

Since 2008, the Korea Communications Standards Commission (KCSC) began screening the internet to prevent and detect obscenity, defamation, and threats to national security. Some believe that the KCSC’s work marks the advent of a new era where free speech on the internet is limited. The numbers seem to support this conclusion. Before the KCSC South Korea blocked few websites, but today it blocks tens of thousands of websites for various and often unclear reasons. Freedom of speech is always a difficult balance between liberty and order. As demonstrated by the foregoing, South Korea is an open society with a vibrant market place of ideas. Both sides (or all sides) are engaged in a struggle for influence, and I can relate to the viewpoints of both the government and concerned citizens. “Is freedom of speech dying in South Korea? Minerva, creeps, and candlelight protests.”

3. Effective, Fair Police Force: 5.0

On 01 August 1991 the NPA was inaugurated as an independent government organization which is not a subordinate organization of the Ministry of Home Affairs. It was reorganized to one Deputy Commissoner General, nine major staffs, and 41 sections, with reenforced management through the planning, readjustment and control. The NPA was reorganized into large departments and large sections by considering specialization and efficiency.

The police box is a first-line organization of the police and served as a base for anti-crime activities for maintaining the security of an area in consideration of the population, area, administrative district, frequency of crime. The total number of nationwide police boxes is 3,422, manned by 38,000 policeman; 43% of the entire police force work day and night in protecting the population from crime. The NPA performs various surveillance activities to guard against the appearance of anarchistic ideology struggle; reappearance of anti-democratic and anti-government violence. It also monitors increased labor circle meetings and demonstrations due to the IMF impact. Activities include watching various events such as ceremonial meetings, athletic events, and guarding the people visiting hometowns or parent's graves. The NPA utilizes its own order keeping guardians as well as guardians from security guard service company, allocating a minimum number of policemen when keeping order is required. It is also responsible for checking the protection status of important facilities and paying guidance visits to protect them from various dangerous activities. The chief of the facility takes primary responsibility for protection; the police takes responsibility for guidance and supervision. Protection of candidate activities include pre-investigate and present disrupting activities to the election speech sites, voting place and ballot counting locations.

4. Private Property: 5.0

The credibility of the Korean property rights system was damaged through the abuse and disorder in the tax system as well as through active governmental development policies. Epirical comparisons using cross-country data also suggest that the Korean economy belongs to the category of high-transaction-cost economies where the protection of property rights is very weak, and therefore the proportion of small and medium firms is relatively high. This is an interesting point because it is a common perception in Korea that large business corporations are dominan and that economic power is highly concentrated within a few chaebol, which unfortunately has been the basis for the implementation of various economic policies in the past.

5. Commercial Banks: 5.0

Commercial banks refer to financial institutions established according to the Banking Act, which focus on the businesses of deposit taking, lending and payment settlements. Traditionally, commercial banks have played a key role in Korea’s financial system. In 1999, for example, commercial and special banks channeled 60.1% of all funds used by individual sectors, and 28.3% of all fund sources for the corporate sector in Korea1. Commercial banks consist of nationwide commercial banks, regional banks, and foreign bank branches. Each group of commercial banks in Korea retains certain distinctive characteristics.

Financial Supervisory System in Korea

6. Communication Systems: 5.0

Korea continues to be a world leader in broadband services and is now exploring more innovative technologies to support ‘next generation convergence services’ to capitalize upon this success.

Since coming to office in early 2008, President Lee Myung-Bak has made digital convergence across the industries a key to Korea’s new Engines of Growth Strategy. Investments in technology convergence across many industries (automotive, energy, shipbuilding, etc.) is planned to further the administration’s “Low Carbon, Green Growth” initiative and ensure continued economic prosperity. The Korean Communications Commission (KCC is formerly the Ministry of Information and Communication), and the new overarching Ministry of Knowledge Economy (MKE) are expected to oversee the growth of new convergence projects, spending USD 11.6 billion in the digital convergence technology development.

7. Transportation: 4.0

Transportation services are delivered largely by the private or quasi-private sectors, except for rail transport and subways. The transportation services run by the private sector operate in a fairly competitive environment, and are considered to be efficient. However, transport services are greatly limited in their ability to improve their service because of restrictive price controls.

Infrastructure Development in Korea

8. Education: 4.0

In Korea, where the literacy rate is 97.9%, education is seen as the key to success in life. Korean parents will make tremendous sacrifices to get their children the best education possible. Education is free and compulsory until the end of middle school (age 14 or 15), however, most go on to finish high school and Korea has the highest rate of secondary school completion in the world (97%). Until recently schools were segregated by sex, but now they are mostly co-educational. Education has helped to change the lives of Korean women. In traditional Korean society women received little education but today it is accepted that women are entitled to tertiary education. This in turn has meant more women in the workforce in higher paying jobs – over 41% of women are now in some form of employment.

9. Social Mobility: 3.0

Social mobility is waning in Korea, with research showing that it is becoming increasingly difficult for wage earners to rise to higher income levels. The main reason is the increasing number of contract or part-time workers, who only see marginal rises in incomes.

Kang Shin-wook, a researcher at the Korea Institute for Health and Social Affairs, studied around 3,000 urban households between 1990 and 2008 and found that fewer and fewer low- to middle-income households are rising to higher wage brackets, while a growing number of middle- to upper-class urban households saw their status in the income pyramid drop.

“The End of Social Mobility?”

10. Freedom from Outside Control: 4.5

Control on military – U.S. Force Korea alliance

In February 2007, U.S. Defense Secretary Robert Gates and South Korean Minister of National Defense Kim Jang-soo reaffirmed that the U.S. Force Korea (USFK), the combined U.S. air, ground, and naval forces, will transfer its wartime command authority to South Korea by 2012. But in September 2010, amid Seoul's concerns over North Korea's provocations, the two countries decided to delay the transition until 2015. The two have agreed on a slow drawdown in the number of U.S. troops, as well as a redeployment of American forces away from populated areas close to the northern border. The United States handed control of some military bases over to South Korea in 2004, and decreased its troop numbers from 37,000 in 2004 to 28,500 by 2008. South Korea is also included under the U.S. "nuclear umbrella," or "extended deterrence."

11. Foreign Currency Transactions: 5.0

All foreign exchange transactions are governed by the “Korean Foreign Exchange Law” and the “Korean Real Name Law”. All banks are required to follow rules with Korean won. Currency Exchange: The rules for outflow of Korean won (KRW) are quite strict because the Korean government monitors and controls the outflow of KRW very carefully. Each person is only allowed to exchange up to and including $10,000 USD (or equivalent) of KRW per sojourn in Korea. To exchange more than this, you must designate the bank branch as your primary foreign exchange transaction bank and submit proof of the source of income.

12. Border Control: 5.0

The 4km (2.5 mile) wide Demilitarised Zone (DMZ) separating North and South Korea is already the most heavily fortified border in the world. Hundreds of thousands of troops patrol the frontier, which has been closed since the Korean War ended in 1953. Security has been tightened around the Tongil Bridge near the inter-Korean border as tension between the two sides have escalated with the North’s declaration of an “all-out confrontational posture.” South Korea’s military and police have been placed on high alert. ;

13. Currency: 5.0

In terms of Korean currency, only notes supplied by the Bank of Korea are accepted and given monetary authority. Since its inception, the Bank of Korea has regularly changed the the form of physical currency. However, it remains that older forms no longer produced by the Bank are still acceptable in regular use. The unified use of currency from a single source has not facilitated any confusion in business or any other monetary transaction

Bank of Korea, Currency in Circulation Bank of Korea, Article 47 ; Maps of World ;

14. Cultural, Language Homogeneity: 5.0

South Koreans have a distinct and homogeneous identity that is influenced by Confucian beliefs. The homogeneity of their society encourages them to show strong support for local products. They tend to prefer to use products that are made in Korea. They have a strong sense of patriotism and they are proud of their Korean identity.

This localized mentality that Koreans have, have caused some drawbacks. There exist a language barrier between Koreans and the rest of the world. This can be seen from the fact that Korean web is segregated from the rest of the world as most of their portals and social media platforms (e.g. Cyworld, Daum, etc.) are in Korean only.

15. Political Effectiveness: 3.0

The South Korean government will support hard-working immigrant workers in Korean industries to obtain legal permanent residency. To build an advanced nation is a common aspiration of the Korean people. Korea wants to become a global powerhouse not just in economy and technology, but also in institutions, culture and even sports. Like other small and medium powers with a great ambition in international political economy, Korea has to overcome some major hurdles on its road to becoming an advanced society, the biggest of which remains the division of the nation. With an unresolved North Korean nuclear issue and continuation of the state of war on the Korean Peninsula, the potential of the great Korean nation cannot be fully developed.

16. Institutional Stability: 3.5

The Constitution of the Republic of Korea determines the structure of the South Korean government. The Constitution has been revised several times since its first promulgation in 1948 (for details, see History of South Korea), yet retains many broad characteristics. The country has always had a presidential system with a relatively independent chief executive, with the exception of the short-lived Second Republic of South Korea. A careful system of checks and balances maintains the stability of the three-branches of government. For instance, the executive and the legislature both have a say in appointing the judges of the Constitutional Court. Likewise, when the legislature passes a resolution of impeachment, the judiciary makes the final decision.

17. Honest Government: 4.5

Korea needs to reinforce anti-corruption rules for the corporate sector, such as reproducing a version of the Sarbanes-Oxley Act of the U.S., the Korean chapter of a leading global anti-corruption NGO. The organization cited corporate sector corruption as one of the biggest hindrances to sustainable economic development. Bribes, political lobbying and price-fixing and other disruptive practices have led to costly consequences worldwide. "We urge the government's active assistance of corporations that display leadership in ethical management. In turn, corporations should stay away from bribes and practice clean management," a spokesperson for TI-Korea said.

Korea Urged to Enforce Anti-Corruption Law Strictly

18. Common Laws: 4.0

Korea was a feudal society and had King's official supreme powers until after the Korean War, when elements of a legal system were introduced by the United States, as they did in Japan by influencing the writing of the Constitution.

The judicial system of South Korea is composed of the Supreme Court of South Korea, the Constitutional Court of South Korea, six High Courts, 13 District Courts, and several courts of specialized jurisdiction, such as the Family Court and Administrative Court. In addition, branches of District Courts may be established, as well as Municipal Courts. South Korean courts are organized and empowered in chapters V and VI of the Constitution of the Republic of Korea. There is no system of juries in the judicial system of South Korea, although since feb 2nd 2008 a limited system of juries has been adopted for criminal cases and environmental cases, and all questions of law and fact are decided by judges.

19. Central Bank:4.5

An orderly withdrawal of the current excess liquidity should be pre-planned by major central banks. Central bank of Korea plans Monetary easing with capital inflows and exchange-rate volatility for emerging economies. They have made efforts for reserve management. The “prudent and coordinated” management of global liquidity and enhanced surveillance of capital flows could aid global growth by shielding developing economies from potential shocks related to volatility in capital flows.

“Bank of Korea Urges ‘Orderly’ Exit From Global Monetary Easing” <>

20. Domestic Budget Management: 5.0

South Korea reported a government budget deficit equivalent to 1.1 percent of the Gross Domestic Product (GDP) in 2010. Government Budget is an itemized accounting of the payments received by government (taxes and other fees) and the payments made by government (purchases and transfer payments). A budget deficit occurs when an government spends more money than it takes in. The opposite of a budget deficit is a budget surplus. This page includes: South Korea Government Budget chart, historical data and news.

21. Government Debt: 4.0

The percentage of General government gross debt of GDP of South Korea was 12.15% in 2009, and it decreased to -0.95% in 2010. South Korea’s debt ranked 101th country as 23.7% of GDP among 132 countries. The economy would see slower growth due to the declining pace of increases in capital and labor input, whereas government spending would surge to cover financial debts at public companies and public pension schemes, it said.

“S.Korea central bank report warns of surge in government debt” - ; South Korea Public Debt

22. Economic Statistics: 3.0

As a representative statistic government organization, the Economic Statistics Bureau of KOSTAT has 5 divisions and 1 team. The Bureau establishes and carries out basic plans for economic statistics, plans and conducts the Mining and Manufacturing Survey, analyzes the current trends of industrial activities, the Current Service Industry, the Consumer Price Survey, and estimates and analyzes Gross Regional Domestic Product and Expenditure. Many government departments and non-profit organizations are accurate observers as well, however, Korea has not developed plentiful data of economic statistics pool compared to their GDP level.

KOSTAT(Statistics Korea) -

23. Protection of Public Health and Safety: 2.5

The main causes of death traditionally have been respiratory diseases--tuberculosis, bronchitis, and pneumonia--followed by gastrointestinal illnesses. However, the incidence and fatality of both types of illness declined during the 1970s and 1980s. Diseases typical of developed, industrialized countries--cancer, heart, liver, and kidney ailments, diabetes, and strokes--were rapidly becoming the primary causes of death. According to Global Health Observatory Data Repository, Deaths due to tuberculosis among HIV-negative people (per 100 000 population) was 5.40 [5.10-5.60], Incidence of tuberculosis (per 100 000 population per year) was 97.0 [85.0-110], and Number of infant deaths (thousands) was 2 in 2010.

Public Health and Welfare - ; World Health Organization ->

24. High Wage Policies: 2.5

The South Korean government plans to reinforce the minimum wage policy for those who work as security guards starting next year.

Security guards in Seoul typically work an average of 16 hours a day, and earn slightly less than one million Korean won (US$900) a month - which is less than minimum wage of 4,320 won (US$3).

However, starting next year, the government said they will all have to be paid the minimum wage, and some security guards are worried about being laid off.

25. Environmental Protection: 4.0

President Lee Myung-bak in August 2008 at a national address announced “low carbon green growth” as their new goal for long term development. South Korea has tried to tackle climate change and enhance energy security, create new engines of growth through investment in environmental sectors such as low carbon energy sources and develop ecological infrastructure. South Korea government has been investing hugely in eco-friendly technologies in the name of Green New Deal which aims to create 900,000 jobs. South Korea has been highly motivated by the approach called environmental economy which integrates the socio-economic development and environmental protection which assumes the management of the environment according the market principle.

“South Korea’s Policy of Low Carbon Green Growth: A New Strategy for Sustainable Development?”

26. Strong Army: 4.5

According to CIA, South Korea has military spending of $25.4 bilion, and ranked 6th largest army in the world. The military expenditure as a percentage of GDP of South Korea was 2.80% in 2009, which is higher than China 2.20% and Japan 1.0%. Defense expenditure of South Korea was higher than other two countries. These statistic data prove that South Korea has stronger army than other countries in Asia.

The Korean Military Balance ->

27. Foreign Trade Impact: 3.0

South Korea's dependence on foreign trade is approaching the highest level since it peaked amid the global financial crisis in 2008. Its exports and imports accounted for 110.1 percent of its gross domestic product (GDP) in the first quarter, the highest since its trade to GDP ratio peaked at 114.6 percent in the fourth quarter of 2008. A higher trade-to-GDP ratio means a country is more likely to be affected by changes in the global market than those with lower ratios. In 2009, the country's trade-to-GDP ratio reached 95.9 percent while that of Japan reached only 24.8 percent, the United States 25.1 percent and China 49.1 percent.

South Korea's foreign trade dependency ratio shoots up to pre-crisis level ->

28. Protection of Foreign Currency Earning Enterprises: 4.5

South Korean experts on the Korean companies and foreign currency bonds issued heat appears because there are three explanations: First, the international market interest rates continued to decline, the South Korean companies overseas to lower interest rates to achieve the purpose of the financing.

The second is to improve South Korea’s sovereign credit ratings to promote Korean companies to issue foreign currency bonds. The enterprises in Korea swaps market financing, the cost is relatively expensive. Overseas U.S. dollar financing converted into won more favorable than in South Korea Won financing.

29. Management of foreign currency budget: 3.5

To enhance the soundness of the foreign exchange sector, the Bank strives to maintain Korea's external debts at an appropriate level through monitoring inflows and outflows of foreign exchange and inspects and oversees the foreign exchange transactions of banks. The Bank also enters into currency swap agreements with other central banks to ensure ready access to foreign currencies when markets are disorderly.

The Bank holds and manages the nation's foreign reserves at an appropriate level so that they serve as a safeguard in emergencies. The Bank invests the reserves mainly in safe and liquid foreign financial assets and strives to improve their profitability insofar as this does not detract from their safety.

Bank of Korea ->

30. Layers of Collective Action: 2.0

It is still legal in South Korea for the security forces to carry out arbitrary arrests and detention, and for the government to suppress free association, expression and assembly, for workers and other dissidents. Provisions of South Korea's labor laws, the Trade Union Law, the Labor Dispute Adjustment Act, and the Public Servants Act, suppress basic labor rights. These include the internationally guaranteed protection for freedom of association, freedom of expression and peaceful assembly, as well as the right to engage in collective bargaining and peaceful collective ac


31. Pro Business Climate: 2.5

A great number of old people start their own businesses with their enterprise leadership. The problem is that these attempts have a very low success rate. Many older people fail in business when they jump on certain bandwagons like coffee shops or convenience stores without making proper preparations. According to a recent report by KB Research, Korea's coffee shop market is worth W2.8 trillion (US$1=W1,141) this year, more than double what it was in 2006, but the number of coffee shops nationwide increased six-fold from 1,500 to 9,400 over the period, diminishing returns for all but the most competitive.

Huge Numbers of Older People Open Small Businesses ->

32. Government Enterprises: 4.0

South Korea government had 319 of state-owned companies in 2008. They planned to merge and sell 41 of those companies to make them more competitive. To spur economic growth, they have tried to privatize state-owned firms expecting to improve economic efficiency. Recently, the Ministry of Land, Transport and Maritime Affairs announced that they will privatize a new Korea Train Xpress line.

“South Korean Government to Sell State-Owned Companies” -> “Open bidding plan for new KTX line unveiled” ->

33. International Security Agreements: 5.0

South Korea has committed alliances from Korean War with the U.S. and Japan. Our alliances have protected our relationship for over 50 years, and it has provided economic prosperity to South Korean government. Thos international security agreements for army force among countries have been enhancing both countries’ development with mutual defense capabilities: U.S.–South Korea Status of Forces Agreement, SOFA agreement between Korea and United States, etc.

The Security Situation on the Korean Peninsula ->

34. Protection of Domestic Enterprises From Government Mandated Costs: 3.0

Due to the high tariffs applied on automobiles, automobile market is relatively closed than other countries. The Korean government’s trade barrier on automotives potentially blocks auto imports. For example, they audited the taxes of import car owners and manipulated its currency to protect its domestic automakers. They also have had non-tariff barriers such as ban on car imports from Japan between1989-1993.

S. Korean Trade Barriers to Auto Imports ->


All the information and conclusions in each country analysis are solely the responsibility of the individual student and have not been verified, corrected, checked for copyright infringement or evaluated in any way by MIEPA or Mike P. McKeever. You are solely responsible for the results of any use you make of the information and conclusions in these studies. Use them at your own risk as interesting supplemental information only instead of seasoned judgements about the policy factors contained herein. Each student has granted permission for his or her work to be displayed here under his or her own name or wishes to remain anonymous and have either created a pen name or used no name at all; if you wish to contact them for any reason, forward your request to MIEPA and the student will be notified of your interest.

To learn more about other countries, click to other files here:

Return to MIEPA's Home Page


Return to MIEPA's Home Page list of country studies

Introduction and Policy Recommendations

Winning Essays: There Are Alternatives Project (TAA)

Essay: Balanced Trade: Toward the Future of Economics

Moral Economics


Web address:


To contact MIEPA, please send an email to this email address:

Please place the acronym MIEPA in the subject line.