Transcript 슬라이드 1 - СЭЗДС

“Mongolian Socio-economic Situation and Emerging Issues”
Commemoration International Conference for the 90th Anniversary of
Institute of Finance and Economics, Ulaanbaatar Mongolia, 6-7 May, 2014
Comparative Study of Economic Development of
Korea and Mongolia for the Take Off of
Mongolian Economy:
focused on economic miracle and Dutch disease
6 May 2014
Shim Ui Sup Myongji University, Korea
Delgersambuu Munkhtsetseg Institute of Finance and Economics
◁CONTENTS▷
Ⅰ. Initial conditions for economic development
Ⅱ. Development strategy
Ⅲ. Economic miracle and its result
Ⅳ. Factors of economic miracle
Ⅴ. Cooperation frontier for mutual prosperity
I. Initial conditions for economic development
Korean tragedy of a nation
• Demilitarised Zone (DMZ).
• South Korea describes the war as a “tragedy of a nation”, but they are
“Brothers.”
• Koreans dream reunification with the belief of "dream comes true".
• The fog of war is still exist, their desire to see a unified Korea is
unmistakable.
• Korea's development accomplished in hard way
Economic conditions of the early 1960s
• War-torn & divided with $89 in1961(101st out of 125 countries)
• Vicious Cycle of low savings and low growth
• Economic take-off with outward-looking development
strategy(1960~80)
I. Initial conditions for economic development
• Korean society in pre-developmental stage
I. Initial conditions for economic development
Why Korea?
•
•
•
•
•
•
Transition very rare
Simultaneous economic and political development
Economists (EPB)
Technocrats (military service)
Shared growth (Labor and capital)
Catch up Japan(colonial experience)
• Security(cold war front line with USA)
I. Initial conditions for economic development
Turning
•
Initiating the transition, the Start of Growth in the 1960s
• Heavy and Chemical Industry Promotion in the 1970s
• Rationalization and Liberalization in the 1980s
• Democratization (1987)
• Globalization in the 1990s
• Financial crisis (1997) and post-crisis reform
• Global Economic Crisis 2008
• New Challenges and Opportunities (rise or fall)
I. Initial conditions for economic development
Korea as a natural state
• 1950s: Rhee regime not very different from most natural states
throughout developing world.
- Clientelism and personal exchange
- Rents based on connections
• Economic policy as an instrument of politics and coalitions
- Foreign exchange
- Import licenses
- Grain
• Heavy dependence on American aid
• Yet unstable
I. Initial conditions for economic development
Initiating Korea’s transition, 1961-1979
• Park and military takeover, 1961
• Establishes the developmental state
• Transformation of policy from personal to impersonal basis
- Move toward economic independence based on export-led growth
- Macroeconomic stability
- Shared growth
• Systematic and simultaneous transformation of polity and economy
(doorstep)
• New system of coordinated incentives
I. Initial conditions for economic development
SWOT of Mongolian Economy for Korea
Strength/Opportunity
Weakness/Threat
-
abundant natural resources (cupper 2nd,
fluorspar 3rd, coal 4th, molybdenum 11th etc)
- high dependence on natural resources
-
neighboring giant market(China, Russia)
- land-locked(no sea line)
-
good manpower, political interest
- high inflation and wage
-
abundant demand for SOC and construction
Project
- weak transportation infrastructure and
lower urbanization
-
100 tsn Korean understanding Mongolian
- Small population size(less than 3mln)
-
equidistance diplomacy for Korea(S-N Korean
and Mongolia, triangular cooperation)
-
source: 김형주, p.21
neighboring conflict (border dispute
with China and Russia)
II. Development strategy
1. Korea’s economic strategy as a developing country
• unbalanced growth
dual society, export oriented, Chaebol & SME,
urban & rural, SOC investment, labor and business
• outward or inward
• economic development plan
• Korea's outward mind
• dispatched worker, Vietnam war, construction worker, sailor etc
• proper investment in infrastructure development can lead to long-term
growth.
2. Basic philosophy of the 5-year plan: five principles!
• Korean economic development should be achieved through industrialization
• Economic development should be achieved under government control
and leadership.
• Although firms should be owned and managed privately, the government could
implement private decisions in the case of major investments (a variant of
authoritarian capitalism)
• To finance investments, foreign capital inflows should be induced
• Growth should have a higher priority than redressing imbalances in income
distribution and unevenness in industrial development across geographical
regions
3. Strategic vision of the government for economic development
• Poverty was regarded as the seed bed of social conflict & instability
• Korean government faced challenging tasks of meeting BHN and maintaining
national security
4. Outward-looking Development Strategy
Policy shift from "Import Substitution" to "Export Promotion" in the early 1960s
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•
•
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Export-promotion policy focused on labor-intensive industries in view of
abundant and well educated labor force
Strong export promotion led to rapid export growth of 40% per year between
1964-80
In particular, focus on labor-intensive exports in the 1960s led to large
employment opportunities
Unemployment rate continued to decline steadily as employment
opportunities outgrew the labor force
5. Working mechanism of outward-looking development strategy
6. Korea’s comprehensive and concrete industrial development strategy
since 1960s
7. Incentives for firms
• Economic policy making in service of economic growth
- Cooperation of business and government.
• Exports
- Loans, credit, licenses, refund import taxes
- Profit opportunities
- Tournaments
- Impersonality
• General trade company, Absence of SBC, 綜合商社,
- Several restructurings
8. Incentives for Bureaucrats
• Meritocratic/impersonal vs natural states/personal
• But not independent of politics
• Rewards for performance
– Minister shuffling
– Monthly meetings
• Relative absence of bureaucratic corruption?
– Most natural states, such as India, Mexico
• EPB polices budgets
• Pensions
• Deliberative councils
10. Citizen Incentives
• Repressive regime
– Absence of political rights (e.g. association)
– No democracy
• Yet a range of impersonal benefits
– Education
– Infrastructure (e.g., rural roads to markets)
– Security.
• Shared growth
– Open access to jobs in an expanding economy and the bureaucracy.
– Rising wages (8%/year from 1970-1988)
• Contrast with natural state
11. Government / coalition incentives
• To make this system work, government (and coalition leaders) had to
have incentives to support system of impersonal exchange.
– What prevented reneging, especially in crises (e.g., early modern
Europe, Latin America, Africa)?
• The security dilemma: threat of communism.
– Perceptions in 1950s and 60s
– On-going threat from North Korea and China.
• Credible commitment: [Differentiates from other natural states]
– Reneging would destroy system creating independence and security
– Maintain incentives for firms, meritocractic bureaucracy, and citizens.
12 Changing industrial structure: from agriculture to manufacturing /
from light industry to heavy and chemical industry
Changes in Export Commodity Profile
III. Economic miracle and its result
Korea’s Economy
1. Economic miracle
A period of rapid economic growth that exceeds expectations.
Economic miracles
2. Positive effects
South Korea; transformed from an aid recipient into a donor country
within the span of a single generation.
National growth rates, East Asia, 1960~2002
III. Economic miracle and its result
(1) Growth trend
III. Economic miracle and its result
(2) Economic performance in Korea
III. Economic miracle and its result
(3) Macroeconomic and structural patterns of Korea 1963-86
Measure
Annual inflation rate a
Annual real GNP growth rate
Manufacturing product
Share in GNP
Agriculture b
Manufacturing c
Other
Share in employment
Agriculture b
Manufacturing c
Other
Exports as share of GNP
Taxes as share of GNP
Investment as share of GNP
Foreign saving as share of GNP
1963-73
1974-80
1981-86
16.6
9.7
19.7
21.9
7.2
14.1
6.0
8.7
10.0
35.2
15.7
49.1
20.9
28.0
51.1
15.6
33.1
51.3
54.5
12.6
32.8
14.5
11.8
22.0
8.3
41.2
21.5
37.2
30.6
16.8
30.4
7.2
28.6
23.5
47.9
38.6
19.2
30.2
4.3
Source: Bank of Korea, Economic Statistics Yearbook, various issues.
a. GDP deflator. b. Includes forestry and fishing. c. Includes mining.
III. Economic miracle and its result
(4) Gross domestic product by industrial origin (factor cost, 1970 prices)
Share of GDP(%)
1953-
1960-
1973-
‘55
‘62
‘75
Annual average growth rate(%)
1953/55
1960/62
to
to
1960/62
1973/75
1953/55 to
1973/75
Primary Total
.513
.452
.258
2.5
3.9
3.6
Manufacturing Total
.081
.127
.346
10.8
17.9
15.3
Services Total
.405
.405
.396
3.9
9.0
7.1
1.000
1.000
1.000
3.9
9.1
7.3
Gross domestic product
Sources: BOK, National Income in Korea. 1975, pp. 144-145; and BOK, Final Estimate of Gross National Product for 1975, Sept. 1976,
p.15.
III. Economic miracle and its result
(5) Export and import trend in Korea
III. Economic miracle and its result
(6) Reducing poverty
Absolute poverty declined steeply from 48% in 1961 to less than 10% entering
1980s.
<Absolute Poverty(%) : 1965-1993 >
III. Economic miracle and its result
3. Swift crisis resolution and economic recovery
III. Economic miracle and its result
4. Negative effects
1) Pitfalls of the Government-led Economic Development
III. Economic miracle and its result
2) Economic Reform and Financial Crisis of 1997
★ Isn’ it a miracle?
III. Economic miracle and its result
3) Side effects of economic growth
①
•
•
•
Happiness index
According to UN's the world happiness report 2013,
Korea's happiness index rated number 41 in the world.
Received low score in social unification like fairness, social solidarity.
② Suicide rate
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③
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It's the Korea that records suicide rate number one position among
the OECD members.
Our nation's suicide rate is 33.3 people per 100 thousand people.
Mental problems, physical problems and economic issues are
main causes of suicide
Estimated population
Our nation's birthrate is 1.3 children per woman.
It ranked 225th in the world which is very low level.
(In Korea, it spends 262 million and 44 thousand Won to raise one kid.)
Also, entering an aging society makes rapid progress.
In 2026, it's going to enter super high aged society.
As a result, potential of growth is getting lower because of
decreasing the number of economically active people.
III. Economic miracle and its result
④ Social inequality
• Korea has been cited as one of successful countries with relatively low income
inequality and rapid growth
• It seems that all people are wealthy as the economy develops,
• but the most wealth is biased to the super rich.
• But the concentration of wealth in several levels of society.
• The income gap has further widened.
• Bipolarization; present ‘Occupy Wall Street ‘
1 : 99
past
golden rule/Pareto Distribution 78:22≒ 8 : 2
⑤
•
•
•
•
•
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The degree of dependence upon foreign trade
Korea's degree of dependence upon foreign trade is very high.
If the degree of dependence upon foreign trade is extremely high,
it's impacted easily to the international economy.
Korea's degree of dependence upon foreign trade is 94.5%,
ranked 36th in the world.
when the world economy crisis occurs, contagion effect blows Korea easily.
III. Economic miracle and its result
⑥ income differential
.
• Korea is the country which exacerbated income bipolarization.
• Working poor, house poor, land poor,
⑦ Consequentialism, Mammonism, Lookism, Workholics
Concentrationism, Balibalism, I-can-do-ism
* It appears several side effects by rapid economic development.
* The number of plastic surgery ranked number one in the world.
III. Economic miracle and its result
5. Korea’s DD of overseas construction in the Middle East
Effects of overseas construction on national economy
Boom period (1978∼82), Before boom(1975∼77) post boom(1983∼86)
1) Positive effects : Balance of payments, national income, employment
(1) Total effects
(3)
B.P.
(4)
(2) Direct effects
(5)
Income Employment
(6)
(7)
B.P.
Income
(8) Employment
1975～77
29.96
3.61
0.78
25.87
2.14
0.20
1978～82
53.52
6.63
3.08
45.87
3.92
0.94
1983～86
28.62
2.90
1.80
23.09
1.69
0.76
III. Economic miracle and its result
2) Negative effects
• de-industrialization effect
• Price and wage effect
de-industrialization effect
Price/Inflation
(1)manufacture (2)trade
Wage
(3) relative (4) manu- (5)constructio
price
facture
n
(6)
relative
wage
1975∼77
24.69
-2.53
-7.2
58.34
10.08
8.02
1978∼82
10.62
1.78
4.10
41.86
10.08
1.52
1983∼86
12.37
-2.63
-4.23
9.03
4.63*
1.04
주:(1) 제조업생산지수 대 전년증가율. 기간중 분석은 제조업생산지수의 3개년 이동평균증가율; (2) 수입단가 지수/
수출단가 지수, 1980=100; (3)수입 재 물가지수/ 수출 재 물가 지수, 1980=100; (2),(3),(4),(5)의 아래 부분은
기간중 년 평균 증가율임; (6) 해외건설근로자 월급 여 액/국내건설근로자 월 급여액; * 1983∼85년간 평균치임
자료: 심의섭, 한국의 해외건설, 명지대학교 출판부, 2007. 8.20: 158.
III. Economic miracle and its result
•Mongolia economy, Bogdkgairkhan economic miracle
1. Growth of Mongolia: mid-term projection 2011
Mongolia can do, building on reform steps it has already taken, to avoid a “resource trap”.
It argues that
(i) cash transfers to the general population should be linked directly to the performance of
(ii) the underlying mining assets to create a domestic constituency for good governance in the
mining sector;
(ii) social spending should be de-linked from resource revenues, better targeted and fully
incorporated into the budget;
(iii) macroeconomic volatility could be reduced by operationalising the fiscal stabilisation
fund, issuing GDP-indexed debt instruments, and through financial sector reforms; and
(iv) major infrastructure and industrial development projects should seek private sector coinvestments to ensure that public money is well spent.
2011* 2012* 2013* 2014*
GROWTH OF REAL GDP /PERCENT, YOY/
19.4
19.9
14.8
15.4
AGRICULTURE
7.8
5.0
3.6
3.7
INDUSTRY
11.3
36.6
21.6
23.0
SERVICE
8.9
9.3
13.5
12.7
. Estimations as of October 2011
. For next decade: annual average growth rate to be approximately 14% pa
III. Economic miracle and its result
2. Features of “Dutch disease”
. Large real appreciation in the currency,
. an increase in spending,
. an increase in the price of non-traded goods,
relative to traded goods, such as services and
real estate
. a resulting shift of labor and other resources out
of non-export sector
. a decrease in the non-mining export industry
III. Economic miracle and its result
Part III quoted largely from Ch. Khashchuluun, The Challenge of Dutch Disease, Structural Change,
and Economic Diversification National Development and innovation committee Government
Agency of Mongolia, 2011.10.21
III. Economic miracle and its result
III. Economic miracle and its result
III. Economic miracle and its result
Policies and actions for economic diversification
Good practices of mining revenue management and successful
economic diversification
Success countries
- Chile, Finland, Australia, Canada and others
Actions for economic diversification
- Creating resources revenue funds,
- Financing education,
- Innovation, R&D,
- Industry, Agriculture.
III. Economic miracle and its result
International practice: Desired outcomes (developed
resource-producing countries as an example)
• Transparency, advanced institution development,
• High level of human development,
• Strong linkages between the resource sector and
the rest of the economy,
• Property rights are well defined, the rule of law
prevails, and the judiciary system is independent,
• Policies are usually underpinned by a broad social
consensus, long-term perspectives, and prudent
economic management
III. Economic miracle and its result
Policies and actions for economic diversification
Strengths and Weakness of Mongolia
Strengths
• Proper age structure of the population;
• Abundant mineral resources;
• Rich historical heritage and traditional;
• Unique natural ecosystems and vast lands;
• Unique nomadic lifestyle ,
Weakness
• Small population, limited labor forces, particularly shortage of highly
• qualified engineers, technical workers,
• Low level of scientific and technological development,
• Limited and unreliable energy supply, poor development of
infrastructure,
• Land locked location,
• Limited financial resources,
• Lower index of business environment and institution
III. Economic miracle and its result
Macroeconomic stability
. Managing the revenue: Stabilization fund
. Controlling inflation and improving productivity
. Fight property boom through expansion of housing
(particularly affordable housing)
. Reduction of government budget deficit, balanced
budget policy
. Political stability
Human development
. Training of young professionals: engineers, skilled
labor
. Reform of education (pre-school, school, vocational
training, higher education)
. Improving national healthcare system, services and
supply of services
III. Economic miracle and its result
Policies for diversification.
• Heavy and chemical industry:
. industry for basic metal and non-ferrous metals,
. Industry for coal, chemical and oil
• Competitive light industry:
. Industry for meat, sea buckthorn, wheat
. Industry for wool, cashmere, and leather products,
• Tourism, crop, small and medium sized enterprises etc.
• Infrastructure to support those industries
III. Economic miracle and its result
Actions
. To develop infrastructure to reduce
transportation/energy costs
. To improve business environment to reduce
business costs
. To develop financial market /to reduce
investment/transaction cost
. To create funds for entrepreneurs
. To facilitate trade and transit transportation
. To support coordination of university and industry,
R&D,
. To promote education, health
III. Economic miracle and its result
Macroeconomic conditions for sustainable growth:
better management of resources.
Monetary policy to continue combat inflation
. Gradual decrease in government budget deficit and move to
balanced budget in future starting from now
. Financial stabilization fund from 2010, now equal to 3% of GDP
. Human Development fund restructuring: dealing seriously with
pension funds and national health insurance, gradually move to
SWF structure
. End of direct cash distribution program from mid 2012
. Legal measure to stop more money promises beginning from next
Parliament elections of 2012
. Development bank set up to sponsor improvement in
competitiveness and diversification
. Expected increase of public investment into infrastructure
. Much stringent ecological control
III. Economic miracle and its result
Growth key: Political stability
. creation of unique political system, flexible to withstand
growth conflicts
. Parliamentary system adopted in 1992, first in Central Asia.
. Social consensus on main development issues through
decentralized balance of power
IV. Factors of economic miracle
Korea’s Economy
1. Macroeconomic Performance
Korea and LDCs, Selected Periods, 1967-85
Percent per year
Measure
Africa
Asia
Europe
a
Middle
East
Latin
America
Korea
Inflation
1967-76
8.5
9.4
9.0
8.7
24.5
7.2
1977-85
17.2
7.9
25.1
14.1
77.6
11.1
1967-76
5.0
5.2
6.0
9.3
5.9
10.3
1977-85
1.9
6.5
3.1
0.7
2.6
6.4
Real GDP growth
Sources: International Monetary Fund, World Economic Outlook, various issues, and EPB, Major Statistics of Korean
Economy, various issues. Averages of country growth rates are weighted by the average U.S. dollar value of GDPs over the
preceding three years. a. Developing countries in Europe, that is, Southern Europe including Portugal, Spain, Greece, and
Yugoslavia.
IV. Factors of economic miracle
2. Baumol's catching-up hypothesis
Per capita
real GDP growth rate,
1960-81 (%)
1960 per capita income (000 of
1970 "int'l" dollars)
IV. Factors of economic miracle
3. Sources of Economic Growth in Korea, 1963-82
Percent per year
Measure
1963-72
1972-82
Real GDP
8.2
8.0
Total factor input
4.2
5.6
Labor
3.1
3.5
Capital
1.1
2.1
Output per unit of input
4.0
2.4
Sources: Korea Development Institute, Quarterly Economic Review (Seoul: KDI, 1986), p. 33; and K. S. Kim and
J. K. Park, Sources of Economic Growth in Korea: 1963-1982 (Seoul: KDI, 1985), pp. 61-62.
IV. Factors of economic miracle
4. Main factors for economic development of Korea
IV. Factors of economic miracle
5. 10 Tips for Economic Development based on Korean Experiences
IV. Factors of economic miracle
6. Case : Construction Boom
Factors of Middle East success
• Lower wage: The wage level in Korea is only about 25 percent of that
in Japan and about 10 percent of those in Western countries like
Sweden.
• Higher productivity: Korean companies gained a competitive edge by
employing an all Korean labor force, in contrast to western
companies that imported managers and cadres of skilled workers and
hired the rest locally.
• Government support: To encourage Korean contractors, the Korean
government provides them with low-cost loans, loan guarantees, and
five-year tax exemptions on earnings from exports of construction
materials and equipments.
Lessons from Korea's Experience
• Equal opportunity (dissolution of traditional hierarchical social status
system )
• Competition, performance-based government support
• Broad access to education and raising technical know-how
• Growth with job-creation, initially led by labor intensive export
promotion
• Promoting spirit of self-help: Saemael movement
IV. Factors of economic miracle
Mongolia's economy
Growth factors
•
Natural resources boom
•
Mining as a primary pillar of economic growth
- 30% of GDP, 80% of exports
- Multi-billion projects starting in 2009
- Just 2 projects (OT, TT) include investment of 10 billion dollars,
large than size of GDP
- Many more private investment projects
- Largest world companies coming to cooperate: Rio Tinto,
Goldman Sachs, Deutsche Bank, Peabody, Xstrata, Vale, Temasek,
CIC, etc
V. Cooperation frontier for mutual prosperity
1. Mongol-Solongos Partnership . . .
•
•
•
Dreams come true!
Mongol empire stretched from . . . to . . ,
Area covering 33,000,000 sq km(12,741,000 sq mi), (22% of Earth's
land) , Population 100 million people
V. Cooperation frontier for mutual prosperity
2. Mongolia’s Agenda 21
(Mongolian Government Report for UNDP, 2012)
Grand Blue Print for Mongolia Development
“Mongolia’s Agenda 21 does not only represent the nation’s will
for freedom and a wealthy life in the coming century, it also
commits to the goal for the Government and people to work
together for a better life”
environmental disadvantages for economic development in
Mongolia five factors such as climate, desert, scare population,
nomadic life and colonial experiences were discussed in this
paper
V. Cooperation frontier for mutual prosperity
3. Why Korea?
Traditional Sadon country
Cultural DNA
Neutral for the Solongos reunification
3rd neighbor policy
• Mongolia's 'Third Neighbor' Foreign Policy
• Russia and China, third neighbor countries play a crucial role
in Mongolia development
• gate way to ocean and Eurasia,
• Beyond Manpower, marriage relatives, anti-China in Africa,
GCC
V. Cooperation frontier for mutual prosperity
4. What Korea?
• Resource cooperation
• Technology cooperation
• Sharing economic development experiences
• Market cooperation for bilateral cooperation
• Mongolian infra for Korea's land bridge/inner Asia
and East European market
• Korean infra cooperation for Mongolia Ocean
V. Cooperation frontier for mutual prosperity
5. How Korea?
•
•
Strategic FTA
Silk road/Eurasia railway/TMGR, Tuman River development,
reunification
•
Capability building, KSP(Knowledge Sharing Program)
•
•
•
•
Tourism FTA
Korea's ODA and EDCF
Accumulation of knowledge and capabilities
Effective transformation relies on specific capabilities ranging
from skills and policies to effectively deploy domestic and
external resources, policies, and programmes to transform natural
resources, as well as strategies to harness the opportunitities in a
globalized knowledge economy.
V. Cooperation frontier for mutual prosperity
6. Beginning of Korea's FTA talk
V. Cooperation frontier for mutual prosperity
7. Economic grand bloc with FTA
V. Cooperation frontier for mutual prosperity
8. Foreign trade of Mongolia
Unit: mln. USD
V. Cooperation frontier for mutual prosperity
9. The share of the Korea in Mongolia's foreign trade
V. Cooperation frontier for mutual prosperity
10. Mongolia and Korea FTA
Strategic, vertical and long-run
•
•
•
•
As for Mongolia, it is significant to establish the FTA with South Korea. In
particular, South Korea is geographically the close and is one of the
countries that consume the largest amount of natural resources such as
copper and coal in the world market among the developed countries.
Our competence in export can be improved and the transport cost can
be reduced through a strategy to attract Korean investments and latest
technology to Mongolia.
If we assume that there will not appear major change in the structure of
the Mongolian export, in other words, there would be slight benefits
from mineral products and the raw materials. So, it is important to
negotiate on an agreement to reduce the customs tariff of a product
with value added that is feasible to be exported to Korea.
One of the main difficulties from expanding the trade with Korea is
definitely the transport costs, and it is crucial to collaborate with Korea
on solving this problem. Especially, we have to work on the support of
Korea and its trade partners in regard to the proposal of group of
landlocked countries to include application of national treatment in a
transit transport in the WTO.
БАЯРЛАЛАА
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