The Barriers to Selecting Optimal Economic Policy in South Korea

Abstract

Four of the largest conglomerates in Sout h Korea are Samsung Group, Hyundai-KIA Automotive Group, LG Group and SK Telecom. In 2009, the joint market value of the assets these conglomerates owned amounted to aro und half of the South Korean GDP (Wang 2010). Ostensibly, the South Korean economy is dominated by the co nglomerates. Samsung and LG are the two major players in Korea’s electronics industry; Hy undai and KIA are the two major players in the automotive industry. The export dependency (Tot al Exports/GDP) of South Korea is 44.9% and its import dependency (Total Imports/GDP) is 38% (CIA 2010). This indicates that the South Korean economy is highly dependent on global trade as well as on the conglomerates. It has signed a Free Trade Agreement (FTA) with the European Union and will ratify FTAs with some of its other trading partners such as China, United States, Japan and Australia (YONHAP News Agency 2010a). It is our view that such changes in trade policy are supported by the conglomerates, which have considerable sway over the govern ment, due to their significant contributions to the economy. The purpose of this paper is to analyse the source and the nature of the impediments the government faces in implementing policies that enable freer trade in South Korea. We do this from the perspective of President Lee My un-bak, who we characterise as a key veto player, as he draws political support from groups that have conflicting agendas.