Topic: Sustainable Economic Policy
Country: South Korea
Delegate Name: Claire Netemeyer
School: Forest Hills Eastern High School
Topic page: background guide and all position papers All South Korea position papers GLIMUN 2015 committees
Within the last decade, many nations have encountered a series of economic problems, the worst being the financial crisis of 2008. Although many Asian countries felt the repercussions of the economic crisis, the Republic of Korea was severely hit. By the end of November 2008, the Korean won had depreciated by 25.4% in dollar terms while the stock price collapsed by 27.2 %. To counter the ramifications of the crisis, Korea took a series of financial actions.
The Korean government began by cutting taxes and increasing fiscal spending. Government spending has a greater effect on the economy than raising taxes; high tax rates discourage work, entrepreneurship and savings. Decreased savings lead to less money in banks, which jeopardizes economic sustainability. The Korean tax cuts and increased fiscal spending led to the appreciation of the Korean Won and the increase of the Korea Composite Stock Price Index (KOSPI) by 61.4%. Since the economic downfall of 2008, the Republic of Korea has shown tremendous growth. Korea has learned valuable lessons from their economic turmoil; in fact, they have a significant history of it prior to the 2008 crisis.
In 1997, the Republic of Korea suffered from a serious economic crisis that left the nation in a condition that resembled the Great Depression in the United States. On the brink of economic failure, the nation turned to the International Monetary Fund for help. The bailout package closed banks and industrial companies; numerous workers were laid off. It even prompted citizens to donate their gold to the national treasury. The United States intervened and encouraged the IMF to enter a new round of negotiations, and led G-7 countries to roll over their short-term credits to Korea. This strategy along with implementation of financial and corporate reform programs such as the Non-Performing Asset Resolution Fund directed Korea to economic success.
The Non-Performing Asset Resolution Fund was created in November 1997 with the intentions of clearing bad loans from the accounts of financial institutions. By April 1998, the Financial Supervisory Commission was established with the purpose of integrating supervisory and regulatory mechanism over the banking, securities and insurance sector. By 1999, the nation’s GDP had increased by 2,298.48 USD. The path to economic success was initially gradual. However, the Republic of Korea is now a G-20 country and has the fourteenth highest GDP in the world. As a member of the OECD, the Republic of Korea aims to help developing nations by promoting economic sustainability. With the many economic lessons Korea has learned, the nation advocates the development of financial supervisory programs and loose fiscal policy in order to support sustainable economic development.
