Economic Survey of Korea

160 Pages·03.903 MB·English

by  coll.

OECD Economic Surveys O
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KOREA D
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Economic growth picked up in 2017, but reforms are needed to sustain Korea’s convergence toward the n
o OECD Economic Surveys
income levels in the most advanced countries. Its labour productivity is only half of that in the top half of m
OECD countries, refl ecting problems in the service sector. In addition, productivity in small and medium-sized ic
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enterprises (SMEs) in manufacturing is only one-third of that in large fi rms. The segmentation of the labour u
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market between regular and non-regular workers has resulted in one of the highest levels of wage inequality v
e KOREA
among OECD countries. The employment rate of women is relatively low and the gender wage gap is the largest y
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in the OECD. Korea faces the most rapid population ageing in the OECD area, which is projected to drive up
government social spending from 10% of GDP to 26% by 2060. This Economic Survey of Korea assesses
the country’s recent macroeconomic performance and prospects. It also offers recommendations on how to
achieve the government’s objective of a paradigm shift from growth led by business groups (chaebols) to a
greater role for SMEs and innovative start-ups through wide-ranging reforms to enhance competition, improve
corporate governance, promote entrepreneurship and upgrade SME policies. This should be accompanied by
labour market reforms to increase employment of women, youth and older persons and to break down dualism
to achieve more inclusive growth. V JUNE 2018
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SPECIAL FEATURES: REFORMING THE LARGE BUSINESS GROUPS; ENHANCING DYNAMISM IN SMES m
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Consult this publication on line at http://dx.doi.org/10.1787/eco_surveys-kor-2018-en. R
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Volume 2018/12 ISSN 0376-6438
2018 SUBSCRIPTION
June 2018
(18 ISSUES)
ISBN 978-92-64-30081-1 J
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10 2018 13 1 P n
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OECD Economic Surveys:
Korea
2018
Thisdocument,aswellasanydataandmapincludedherein,arewithoutprejudicetothe
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Pleasecitethispublicationas:
OECD(2018),OECDEconomicSurveys:Korea2018,OECDPublishing,Paris.
http://dx.doi.org/10.1787/eco_surveys-kor-2018-en
ISBN978-92-64-30081-1(print)
ISBN978-92-64-30082-8(PDF)
ISBN978-92-64-30104-7(HTML)
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Series:OECDEconomicSurveys
ISSN0376-6438(print)
ISSN1609-7513(online)
OECDEconomicSurveys:Korea
ISSN1995-364X(print)
ISSN1999-0707(online)
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TABLEOFCONTENTS
Table of contents
BasicstatisticsofKorea,2016................................................ 9
Executivesummary......................................................... 11
Keypolicyinsights.......................................................... 17
Recentmacroeconomicdevelopmentsandshort-termprospects .............. 20
Fiscalandfinancialpoliciestopromotestabilityandwell-being............... 26
Addressinglonger-runchallengestowell-being............................. 41
Assessmentofthegovernment’seconomicstrategy ......................... 58
Recommendationstoaddresskeypolicychallenges............................. 59
Bibliography............................................................ 59
AnnexA1.Economicco-operationwithNorthKorea.......................... 62
AnnexA2.Fiscalsustainabilityinthefaceofrapidpopulationageing........... 66
AnnexA3.Progressinstructuralreform .................................... 69
Thematic chapters
Chapter1.Reformingthelargebusinessgroupstopromoteproductivity
andinclusioninKorea .................................................. 73
Thehistoricalcontext:theoriginsandcontributionsofthelargebusinessgroups .. 76
Thecurrentroleandcharacteristicsofthelargebusinessgroups.............. 80
Theproblemsandrisksassociatedwiththelargebusinessgroups............. 86
Evolutionofthepolicyframeworktocontrolthebusinessgroups.............. 92
Policydirectionstoreformthebusinessgroups ............................. 97
Recommendationstoreformthelargebusinessgroupstopromoteproductivity
andinclusion .......................................................... 110
Bibliography............................................................ 111
Chapter2.EnhancingdynamisminSMEsandentrepreneurship.................. 115
OverviewofSMEsinKorea ............................................... 118
EnhancingproductivityofSMEsthroughinnovation......................... 123
CopingwithlabourshortagesinSMEs ..................................... 129
EnhancingSMEproductivitybystrengtheninglinkageswithglobalmarkets .... 132
AnecosystemtopromotedynamicSMEs................................... 136
Promotingentrepreneurshiptoincreasethenumberofstart-ups.............. 139
PoliciestoimprovefinancingofSMEsandstart-ups ......................... 145
RecommendationstoenhancedynamisminSMEsandentrepreneurship............ 152
Bibliography............................................................ 153
OECDECONOMICSURVEYS:KOREA©OECD2018 3
TABLEOFCONTENTS
Boxes
1.1. AcomparisonofKoreanandJapanesebusinessgroups ................... 77
1.2. Thegapbetweenownershipandcontrolinthebusinessgroups............ 82
1.3. KoreaCommissionforCorporatePartnershippoliciestopromoteshared
growth............................................................. 94
1.4. Israel’sapproachtodealingwithlargebusinessgroups ................... 98
1.5. Korea’scorporategovernanceframework ............................... 102
2.1. InitiativeslaunchedbythenewgovernmenttopromoteSMEsandstart-ups.. 118
2.2. Astatisticaloverviewoflargefirms,mid-sizedfirmsandSMEsinKorea .... 119
2.3. Globalstart-ups ..................................................... 136
2.4. Agovernmentplantocreateanecosystemtonurtureinnovativestart-ups.. 140
2.5. Korea’sTechIncubatorProgrammeforStartupsisbasedonIsrael’s
programme......................................................... 151
Tables
1. Korea’stopexportmarketsandproducts ............................... 23
2. Macroeconomicindicatorsandprojections.............................. 25
3. PossibleshockstotheKoreaneconomy................................. 26
4. GovernmentspendinginKoreaisrelativelylargeineconomicaffairs....... 28
5. Pastrecommendationsonfiscalpolicy ................................. 29
6. The2017-21FiscalManagementPlan................................... 29
7. Spendingprioritiesareshiftingfromeconomicaffairstosocialwelfare..... 30
8. TheemploymentrateinKoreaisrising................................. 42
9. Pastrecommendationstoincreaselabourforceparticipation.............. 43
10. Non-regularworkersaccountforaboutathirdofemployeesandearn
muchless .......................................................... 48
11. Non-regularworkersreceivelesssocialinsuranceandcompany-based
benefits ............................................................ 49
12. Pastrecommendationstobreakdownlabourmarketdualism ............. 49
13. Pastrecommendationstoextendemploymentandreducepoverty
amongtheelderly ................................................... 51
14. Pastrecommendationstopromotegreengrowthandimprove
theenvironment .................................................... 56
A1.1. ComparisonofNorthandSouthKoreain2016........................... 63
A2.1. Assumptionsofthebaselineprojection................................. 67
1.1. Numberoflargebusinessgroups ...................................... 80
1.2. Listedfirmsplayakeyroleinthelargebusinessgroups .................. 82
1.3. InsideownershipishighinKorea’slargebusinessgroups................. 84
1.4. Diversificationofthebusinessgroups.................................. 87
1.5. Themarketpositionoffirmsaffiliatedwiththelargebusinessgroups
in2015............................................................. 88
1.6. Keyregulationsimposedonthelargebusinessgroups.................... 93
1.7. EvolutionoftheSharedGrowthIndex .................................. 94
1.8. ThenumberofcaseshandledbytheKoreaFairTradeCommission ......... 100
1.9. ThequalityofcorporategovernanceinKoreadoesnotcomparefavourably
inAsia ............................................................. 103
1.10. Backgroundofoutsidedirectors ....................................... 106
4 OECDECONOMICSURVEYS:KOREA©OECD2018
TABLEOFCONTENTS
2.1. Acomparisonoflargefirms,mid-sizedfirmsandSMEs................... 120
2.2. SMEs’shareofmanufacturingvalueaddedisedgingup .................. 121
2.3. SMEs,especiallymicro-firms,accountformostofemploymentgains....... 122
2.4. SMEsarefocusedprimarilyondomesticmarkets ........................ 132
2.5. TherearealargenumberofeconomicregulationsonSMEs................ 137
2.6. Governmentsupportforfemaleentrepreneursislow..................... 143
2.7. Thepublic-sector’sshareofventurecapitalinvestmentisfalling
butstillhigh ........................................................ 148
2.8. AcomparisonofIsrael’sTIprogrammewithKoreanincubatorprogrammes... 151
Figures
1. Korea’spercapitaincomeisconvergingtothemostadvancedcountries .... 18
2. Wageinequalityhasincreasedduringthepasttwodecades............... 19
3. Outputgrowthhasbeenledbytheconstructionsector ................... 21
4. Exportgrowthisledbykeyindustries,notablysemiconductors............ 22
5. Consumerpriceinflationhaspickedupwhilehousingpricesarerelatively
steady.............................................................. 23
6. Korea’scurrentaccountsurplusisexplainedbytrendsinthe
saving-investmentbalance............................................ 24
7. Governmentspending,employmentanddebtarelowinKorea ............ 27
8. PublicsocialspendinginKoreaisrisingrapidlyfromalowbase ........... 28
9. Citizensatisfactionwiththeeducationsystemandtheschoolsisrelatively
lowinKorea ........................................................ 31
10. Spendingbythepublicpensionsystemisprojectedtoriserapidly ......... 32
11. CorporateincometaxratesintheOECDareaarefallingwhilerevenue
hasstabilised ....................................................... 33
12. Thevalue-addedtaxinKoreageneratesrelativelylittlerevenue,
reflectingitslowrate................................................. 34
13. Korea’scycleofmonetaryeasinghasended............................. 35
14. Thewonhasbeenrelativelystableduringthepastfewyears .............. 36
15. Foreignexchangereservesarethreetimeshigherthanshort-termforeign
debt ............................................................... 36
16. HighhouseholddebtisaconcerninKorea.............................. 38
17. Evolutionofmacro-financialvulnerabilities............................. 39
18. Minimumwageasapercentageofthemedianwagein2016............... 40
19. Well-beingindicatorssuggestroomforimprovementinKorea............. 41
20. Labourincomeinequalityispositivelycorrelatedwithproductivity
disparitiesbetweenfirms............................................. 42
21. Trendsinmaternityandparentalleave................................. 43
22. Koreanwomenfacelowwagesandholdfewmanagerialpositions ......... 44
23. Koreahaslowproductivityandhighlabourinputs....................... 45
24. Korea’spopulationageingwillbethefastestintheOECD,leading
toashrinkinglabourforce............................................ 46
25. Koreahaswidewagedispersionandahighshareoflow-wageworkers..... 48
26. Womenareconcentratedinlow-payingnon-regularjobs.................. 49
27. Relativepovertyratesforpersonsover50areveryhighinKorea ........... 51
OECDECONOMICSURVEYS:KOREA©OECD2018 5
TABLEOFCONTENTS
28. Theeducationandskillgapbetweenyoungerandolderworkersislarge
inKorea............................................................ 52
29. Thefirst-tierpensionbenefitinKoreaisverylowwhilethecoverage
ishigh ............................................................. 54
30. Greengrowthindicators:Korea........................................ 55
31. AirpollutionisincreasinginKorea..................................... 57
A1.1. TheNorthKoreaneconomygrewrapidlyin2016,despiteinternational
sanctions........................................................... 62
A1.2. Inter-KoreantradefellsharplyfollowingtheclosureoftheGaesung
IndustrialComplex .................................................. 63
A1.3. TrendsinNorthKoreantrade.......................................... 64
A2.1. Populationageingrapidlyerodesthegovernment’snetfinancialposition ... 68
1.1. Theshareofthelargebusinessgroupsisedgingdown.................... 74
1.2. Theprice-earningsratioofKoreanfirmsisrelativelylow.................. 75
1.3. Internationalcomparisonofbusinessgroups’shareofstockmarket
capitalisation ....................................................... 77
1.4. Thenumberoffirmsaffiliatedwiththetop30businessgroupshasrisen
steadily ............................................................ 78
1.5. Intra-groupshareholdingintheSamsunggroupin1997 .................. 79
1.6. Thelargestbusinessgroupsareincreasinglydominant ................... 81
1.7. Ownershipandcontrolinbusinessgroups.............................. 83
1.8. Insideownershiphasbeentrendingup................................. 84
1.9. Intra-grouptradingissubstantialformanyfirmsinthelargebusiness
groups ............................................................. 84
1.10. Theshareoffinancialfirmsinthelargebusinessgroupshasrisen ......... 85
1.11. Thereisawidevariationintheprofitabilityoffirmsaffiliated
withthegroups ..................................................... 86
1.12. Thevalueaddedofthetop50companies ............................... 88
1.13. Themarketsharesofthebusinessgroupsbyindustry.................... 89
1.14. Companyprofitabilityisinfluencedbyintra-grouptrading ................ 90
1.15. Companyprofitabilityisinfluencedbythestructureofownership.......... 91
1.16. Koreahasscopetoliberaliseproductmarketregulationandbarriers
totradeandinvestment.............................................. 99
1.17. Theshareandnumberofoutsidedirectorsisrisinggradually.............. 102
1.18. Factorsinfluencingtheprobabilityofoutsidedirectorsbeingreplaced ...... 105
2.1. Korea’soutputandexportgrowthhaveslowedsharply ................... 116
2.2. Labourincomeinequalityispositivelycorrelatedwithproductivity
disparitiesbetweenfirms............................................. 117
2.3. TheshareofemploymentinSMEsinKoreaisthehighestintheOECD...... 119
2.4. GovernmentcreditguaranteesforSMEsinKoreaareexceptionallyhigh .... 121
2.5. LabourproductivityinSMEsinmanufacturingislow..................... 122
2.6. TheICTsectorislargeinKorea,andconcentratedinmanufacturing........ 123
2.7. TheproportionofinnovativefirmsamongSMEsinKoreamatches
theOECDaverage.................................................... 124
2.8. Koreanfirmslagsignificantlyintheiruseofkeydigitaltechnologies ....... 125
2.9. Theshareofcapitalsunkinnon-viablefirms............................ 126
2.10. TheexitrateofcompaniesisverylowinKorea .......................... 127
6 OECDECONOMICSURVEYS:KOREA©OECD2018
TABLEOFCONTENTS
2.11. KorearanksslightlybelowaverageintheOECD’sindicatorofinsolvency
regimes ............................................................ 127
2.12. R&DspendingandgovernmentsupportforR&Dareexceptionallyhigh
inKorea............................................................ 128
2.13. Koreanfirmsarelessconnectedtoglobalinnovationnetworks ............ 129
2.14. Korea’syouthemploymentrateisbelowtheOECDaverageandthenumber
ofNEETsishigh..................................................... 130
2.15. ThecontributionofservicestoexportsisrelativelylowinKorea ........... 133
2.16. Koreashouldreducebarrierstotradeinkeyservices ..................... 134
2.17. ServicesectorproductivityislowinKorea .............................. 135
2.18. KoreaR&DinservicesisthelowestintheOECD ......................... 135
2.19. Koreaisranked21stinthe2018GlobalEntrepreneurshipIndex............ 140
2.20. ThegendergapintheentrepreneurshiprateinKoreaishigh.............. 142
2.21. Femaleentrepreneursareconcentratedincertainindustries .............. 143
2.22. Korea’sentrepreneurshiprateforyouthisfarbelowtheOECDaverage...... 144
2.23. TheinterestratespreadbetweenlargefirmsandSMEshasfallen .......... 146
2.24. VenturecapitalinKoreaisamongthehighestintheOECD................ 148
2.25. TherecoveryofinvestmentfundsthroughM&AsisstilllowinKorea ....... 149
2.26. Investmentbyangelinvestorshasreboundedbutremainsbelowearlier
peaks .............................................................. 150
2.27. TheoperatingprocessofTIPS ......................................... 152
OECDECONOMICSURVEYS:KOREA©OECD2018 7
ThisSurveyispublishedontheresponsibilityoftheEconomicandDevelopment
ReviewCommittee(EDRC)oftheOECD,whichischargedwiththeexaminationofthe
economicsituationofmembercountries.
TheeconomicsituationandpoliciesofKoreawerereviewedbytheCommitteeon
14March2018.Thedraftreportwasthenrevisedinthelightofthediscussionsand
givenfinalapprovalastheagreedreportofthewholeCommitteeon24May2018.
TheSecretariat’sdraftreportwaspreparedfortheCommitteebyRandallS.Jones,
Jae Wan Lee and Haruki Seitani under the supervision of Vincent Koen. Research
assistance was provided by Lutécia Daniel. Secretarial assistance was provided by
SisseNielsenandMercedesBurgos.
ThepreviousSurveyofKoreawasissuedinMay2016.
InformationaboutthelatestaswellaspreviousSurveysandmoreinformation
abouthowSurveysarepreparedisavailableatwww.oecd.org/eco/surveys.
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