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The Development Of South Korea

Decent Essays

South Korea was a developmental state that created an environment for the chaebols to thrive in. Ever since the reign of Park Chung Hee, the government has created macroeconomic policies in order to allocate resources that favour some industries. The government’s strategic use of subsidies and the manipulation of prices and wages create conditions advantageous to the development of domestic industries especially in the manufacturing sector. (Hundt, 2014). This created the suitable environment for chaebols to monopolize the domestic economy. The government was also instrumental in helping the chaebols to bounce back after their collapse and near bankruptcy during the 1997 AFC. The government pushed for structural reforms for the chaebols and then President Kin Dae Jung introduced eight policy goals under the guidance of the International Monetary Fund. The policies goals were: (1) increase managerial transparency; (2) pressure corporations to focus on core businesses and divest themselves of unrelated enterprises; (3) improve financial health; (4) end loan guarantees among affiliates; and (5) increase accountability of chaebol leaders for their performances. Three more policy goals were added in 1999: (1) prevent industrial capital from dominating finance, (2) discourage circular investment between chaebol affiliates, and (3) prohibit nepotistic transfer of management or ownership to family heirs. The changes prescribed were to help South Korea move towards a more liberal and

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