South Korea

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Although South Korea's rating declined only slightly from 7.7 in 1995 to 7.3 in 1997, its ranking fell from 34th in 1995 to 47th in 1997. Reasons for this decline are the successful efforts of other countries pushing forward economic development and freedom.

Korea is well known for its economic growth. However, for a sustainable future development, the Korean government must deregulate the density and supremacy of affiliated trusts (Chaebol) in order to foster flexibility, competition, and efficient allocation of investments.

For the last several decades, governmental consumption and spending on transfers and subsidies have been increasing but remain within a modest range. Particular strengths are the monetary policy, freedom to use alternative currencies and a well-established legal structure. The credibility of its monetary policies has been improved through curbing annual money growth and reducing inflation.

Korea has a large functional foreign-trade sector but there is a relatively high Mean Tariff Rate. The standard deviation of tariff rates indicates a prevailing protectionism toward domestic industries. In the recent decades there have been no significant efforts to liberalize the banking sector. Like Japan, private savings held as deposits in government-owned financial institutions are very large.

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Last Modified: Monday, January 10, 2000