One of the most dynamic countries in the world, South Korea has emerged from a chaotic history, and has rightfully ascended the ladder to become a world power. Bordering North Korea in the south and separated from China and Japan by the Sea of Japan, Yellow Sea and Korea Strait, South Korea is an active participant in what is one of Asia’s most historically volatile areas. Clothed in green, verdant mountains dot its landscape, and the country has shown remarkable resilience by shuttering its stricken past to become one of Asia’s most stable democracies. Its citizens enjoy one of the highest levels of political freedom and social rights – a stark contrast to the rigid and totalitarian regime of its neighbor North Korea. South Korea’s transition from poverty to riches is one of modern civilization’s most inspirational stories. Symbolic of the country’s growth is its national flower – the mugunghwa or the rose of Sharon. The rose of Sharon is unique as it is one of the most tenacious of flowers, able to withstand the vagaries of nature. In Korean, mugung means immortality – and the rose of Sharon is a vibrant motif for a flowering nation, reflecting well the determination, perseverance and endurance of its people.

History

Foreign rule divides nation

Koreans trace their roots a long way, with human habitation of the Korean peninsula dating back 500,000 years. Long centuries of dynastic rule by various kings were followed by Japanese colonization in 1910. Japan’s surrender in World War II liberated a country that had been chafing under its occupation for many decades.

Liberation in 1945 however, did not mean freedom from the influence of foreign forces. Cold War rivals, the U.S, and the Soviet Union, divided the peninsula at the 38th parallel, with the U.S.-backed South and the Soviet Union-controlled North. It was a division that continues to have more repercussions than the hated Japanese occupation. North Korea’s President Kim ll Sung launched an attack on South Korea in 1950, which culminated in a bitter war. South Korea was all but lost under the invading communist forces, until UN intervention ended North Korean hopes in 1953. Strangely, the peace treaty was never ratified by South Korea, and the two countries remain, technically, at war.

Post-war South Korea underwent several decades of political hardship under autocratic rulers. The most notorious of these was Major General Park Chung Hee whose repressive rule ironically coincided with the country’s spiraling economic growth. Increasing protests from the populace forced the military regime to hold democratic elections in 1987, resulting in a period of relatively stable governance in the 1990s. Lee Myung-bak assumed office in 2008, replacing Roh Moo-hyun.

South Korea functions as a republic with powers shared between the president, the legislature and the courts. Governing the republic’s structure is the Constitution of Korea, which was first drafted in 1948.

Supreme power rests with the President who is elected for a five-year term by direct popular vote. Administratively, the country is divided into nine provinces and seven metropolitan cities. Current President Lee Myung-bak, who won the December 2007 elections, is the leader of the conservative Grand National Party.

Culture

China influences cultural heritage

The traditional Hanbok attire worn in South Korea today is patterned after the Confucian-oriented Joseon Dynasty.

With a population that is one of the most homogenous in the world, South Koreans share a common cultural and linguistic heritage. Korea has been strongly influenced by Chinese culture, and elements of Buddhism and Confucianism find their artistic expression in traditional Korean art forms in sculpture, painting and ceramics.

Family remains an important unit of an individual’s life and Korean cuisine is slowly gaining global recognition with the now ubiquitous kimchi, a familiar favorite of the western palate. Korean festivals such as Chuseok and New Year’s Day are an occasion to feast, and people dress in traditional attire called the hanbok.

Economy

Explosive economic growth and dramatic fall

South Korea’s economic transformation from poverty to one of Asia’s biggest economies remains one of the enduring stories of the 20^th century, dubbed the ‘Miracle on the Hanggang River.’ An isolated nation of farmers now leads the world in Internet access, is a global innovator in consumer electronics, and is now home to some of the biggest automotive, electronic, and shipbuilding companies. Per capita GNP, only $100 in 1963, exceeded $16,000 in 2005. How was this accomplished?

Wrecked in spirit, and wounded economically by the Japanese occupation, World War II, and the Korean War of the 1950s, South Korea literally rose from the ashes. Subsisting initially on aid from the U.S, the South Korean government substantially encouraged manufacturing, leading to phenomenal export-driven growth.

Although political strife was rampant during South Korea’s formative post-war years, the country embarked on an economic revival program through a series of five-year plans, which promoted industrialization. The government directly intervened in the economy by offering strong incentives to businesses, regulating foreign exchange, and implementing highly centralized fiscal policies. The result was impressive – South Korea’s gross domestic product (GDP) expanded by more than 9% yearly between the mid-1960s and the mid-1990s.

Initially an exporter of mainly shoes and textiles, South Korea began to be a major producer of automobiles, fabrics, telecommunication and sound equipment, metal goods, electronics, chemicals and steel. Major export destinations now include China, the U.S., Japan, Hong Kong and Taiwan. The country imports industrial machinery, petroleum and its derivatives, and transportation equipment, among others, from chief trading partners such as the U.S., Hong Kong, Japan, Singapore and Germany. Industry contributes nearly 35% of GDP and employs 27% of the labor force. With this primarily-industry driven economy, agriculture accounts for just 8% to 12% of the labor force, while services account for around 65%. South Korea is also one of the world’s leading fishing countries with a fleet of more than 650 boats, apart from being one of the world’s largest shipbuilders with several Korean companies dominating the global market.

Traditionally not rich in energy resources, South Korea has been trying to reduce its dependence on imported oil. Investing heavily on building alternative energy sources, nuclear plants now meet around 40% of the country’s electricity requirements, with this figure expected to reach 60% in the next three decades.

By the 1990s, economists were referring to this OECD-member as one of the four Asian tigers, along with Hong Kong, Singapore, and Taiwan, known for their rapid growth and increasingly high standard of living. The fall, however, was just around the corner – the Asian economic crisis of 1997 hit South Korea hard.

Crucially, the crisis helped to identify certain structural weaknesses in the economy. Foreign reserves were insufficient, foreign borrowing was extensive (by the end of 1996, 58% of external debt was short-term), and corporate debt/equity ratios were extremely high. Many of the country’s biggest conglomerates, known as chaebol, went bankrupt. Encouraged by both government and banks, the chaebol  had borrowed heavily to help finance high-risk foreign investments. Korea’s foreign reserves were severely depleted, and to prevent a total collapse of the economy, the government obtained one of the biggest emergency loans from the International Monetary Fund (IMF) in 1997.

An extensive restructuring of the corporate and banking sector took place after the crisis. By mid-2001, the government had re-paid all the emergency IMF loans. President Kim Dae-jung’s reforms helped the country maintain growth rates of 10% in 1999 and 9% in 2000. Despite a global slowdown, which contributed to a plunge of 3.3% in 2001, economic performance improved to 4.6% in 2004, increasing to 5% in 2006. South Korea is now the seventh-largest trading partner of the U.S. and is the 11th-largest economy in the world.

Future bright though worries surface

A trillion-dollar economy in 2004, South Korea’s progress in the 21st century is solid, yet a little uncertainty looms. Economic growth remains robust and is one of the highest in the OECD region but domestic demand is sluggish, suggesting the need for more structural reforms. A rapidly aging population (it is estimated that by 2030, more than 20% of the population will be 65 or older) and increasingly difficult labor regulations are causing economic headaches. The fertility rate remains low at 1.6 children for every woman and overall life expectancy is 77.23 years.

With a new President who has the nickname Bulldozer, the transition from the calmer waters steered by Roh Moo-hyun will remain a test for South Korea. One of Lee’s favored projects is the building of a canal stretching across the length of the country. Although economists have denounced the plan as lunacy, criticism has never deterred this former chief executive of one of South Korea’s biggest construction companies. It remains to be seen how the country fares under his presidency.

Contradictions exist in this high-income country where inflation is currently well within manageable levels. But Seoul, with its glitz, glamour and gadgetry, is also the third most expensive city in the world based on a recent survey by a leading research organization. This index measures the cost of living across more than 200 different factors including housing costs, food and other commodities. The strong rise of the Won against the dollar and high tariffs abet an economy where consumption often exceeds income.

Although South Korea has integrated itself into the world economy after the 1997 crash, certain structural concerns remain, such as the lack of regulatory transparency, which led to the downfall of many a chaebol. For a country that relies heavily on exports, the rising appreciation of the Won against the dollar will cause further unease.

There are reasons though to be optimistic about the country’s future prospects. A recent Goldman Sachs report predicted that South Korea has the potential to become the world’s third richest country by 2025, and 25 years later eventually reach second position behind the U.S. The government continues to remain committed to reform and may continue to implement financial and corporate restructuring while advocating flexible macroeconomic policies conducive to growth. GDP per capita has been steadily rising – and is now $25,000.

Relations with nuclear-powered North Korea have always been fractious, although former president Roh’s ‘Sunshine Policy,’ which encourages greater cooperation, has stemmed the flow of ill feeling between the two nations. The two Koreas now hope to pursue greater cooperation, and a stable relationship with its key neighbor provides South Korea with a huge surge of confidence.

South Korea’s meteoric rise is akin to the restoration of the Cheonggyecheon River, once totally covered by a vast motorway in 1968. Thirty-seven years later, the huge masses of concrete were demolished; tons of water poured in, and a river and park were magically restored to life. In a way, that transformation symbolizes South Korea’s growth. From autocracy to democracy, from war to peace, and from poverty to riches, this nation has seen it all. South Korea has well and truly arrived on the world stage.