Current status and restructuring of major industries in Korea

Abstract

After the economic crisis struck the Korean economy in late 1997, restructuring has been a prevailing issue. Even before the crisis, Korea had confronted an over capacity problem in its major industries. Hence the deep recession and concurrent tight economic policies worsened the nation's already weakened situation in 1998 as shown by numerous corporate bankruptcies. In the wake of the crisis, inter and intra industry restructuring was introduced, mostly activated by the new policy measures adopted by the Korean government. In one particular case, the government is directly intervening in the restructuring process through what have been termed "big deals." These big deals entail business swaps among the conglomerates in order for them to concentrate on their core competencies. Since the fourth quarter of 1998, the Korean economy began showing signs of recovery. The bankruptcy rate declined considerably and the capacity utilization rate has increased. In 1999, consumption and production have been on the rise, and investment is also increasing. These positive features of economic revitalization demonstrate that the restructuring process has helped put the Korean economy back on track, although some major and minor obstacles to economic growth must still be remedied. Thanks to the economic restructuring, GDP has grown at the rate of 10.7 percent last year. However, The Korea Institute for Industrial Economics and Trade (KIET) forecasts a decline to 8.7 percent this year and to 6.2 percent in 2001. This paper describes the current state of major industries in Korea and explains the background and process of restructuring among these industries.