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Oxford Academic. Google Scholar. Junya Nishino. Cite Citation. Permissions Icon Permissions. Abstract Although historical disputes have periodically upset Japan—South Korea relations for decades, the deterioration of ties after was unprecedented. Issue Section:.
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Don't have an account? Sign in via your Institution Sign in. Purchase Subscription prices and ordering Short-term Access To purchase short term access, please sign in to your Oxford Academic account above. This article is also available for rental through DeepDyve. But it is not too late for Japan to get its act together. After all, in recent history it has performed two miracles—one following the Meiji Restoration in the nineteenth century and the other following World War 2. Its monetary and fiscal stimulus arrows have achieved little. Japan is now leading the charge to keep the TPP alive with its 11 remaining members.
But it is unclear if this will happen. Abe and Trump have since agreed to establish a new framework for economic dialog, which could lead to a bilateral free trade agreement. But much more bold reform will be necessary to revitalize the Japanese economy. In conclusion, it is difficult to see anything other than a real open crisis, rather than continually creeping decline, moving this cautious and conservative country into action.
Heather Cho, vice-president of Korea Air, provoked a storm of controversy when she delayed the takeoff of a Korean Air flight in December , over her dissatisfaction with the service of macadamia nuts. And one-third of the population was left homeless. President Park was no believer in free markets or democracy. On the contrary, he was a ruthless dictator who came to power in following a military coup.
They were offered access to cheap finance and foreign technology, protection from imports and foreign investment, export subsidies, tax breaks, cheap labor and other favors, if they would develop industries like fertilizers, cement, chemicals, oil refining and textiles. Anticompetitive behavior like cartels, collusion and price-fixing was also tolerated. And corruption was widespread, as it still is today. Those who live by the sword all too often die by the sword, and President Park was assassinated in The chaebol had gone an international borrowing spree, ignoring the risks of short-term, dollar-denominated debt.
When international lenders then lost confidence in the Asian-miracle hype of the time, and withdrew their capital, Korea was left in financial crisis. Korea recovered very quickly. Reforms imposed by the IMF , notably for corporate governance, opening to FDI and deregulation laid the foundation for a return to strong economic growth. But once the crisis passed, the chaebol vested interests regrouped and reasserted their influence over national policymaking. But Samsung is not the only one. Automobile company Hyundai is ranked 68th.
But they have been successful in upgrading the Korean economy from a producer of low-end manufactures to high-tech electronics and automobiles. Like Japan, Korea has a lopsided economy, where service sector productivity is less than half that of the manufacturing sector, and small enterprises are much less productive than larger ones. In other words, Korea faces a raft of challenges to lift its potential economic growth rate, and complete its catch up to world leaders like the US and Germany—and also to prepare the country for the possibility of having to suddenly absorb North Korea.
For one, Korea has the fastest aging population among the advanced OECD countries, as the fertility rate has plummeted from over six children per woman in to 1. In contrast to Japan, Korea has at least had the wisdom to open up significantly to immigration.
East and Southeast Asia
One area where Korea performs even worse than Japan is in its treatment of women. Anyone who doubts the ability of Korean women need only look at the Ladies Professional Golf Association rankings which are dominated by Korean lady golfers. Korea also needs to transform itself from a copycat nation to a creative and innovative economy to climb further up the development ladder. Korea has indeed great potential to become an innovation nation. It has invested greatly in information technology, and is now ranked top of the world in terms of ICT development, way ahead of 10th placed Japan.
But Korean companies are facing stiff competition from Chinese and other emerging economy companies, as well as from advanced countries. As the OECD highlights, Korea needs to strengthen international collaboration, the role of universities, venture capital, and openness to domestic and international competition to improve the foundations for innovation.
And like Japan, school and university students are too focused on rote-learning, memorization and passing exams, rather than critical thinking, creativity and analytical skills. And even when new entrants do succeed, they are often acquired in takeovers by chaebol. There is much that should be done to expose the chaebol to more healthy international and domestic competition by eliminating trade and investment barriers.
Over the years, there has been a series of chaebol scandals related to various financial crimes. While prosecutions and court cases follow, they invariably lead to official pardons, thanks to the corrupt and cozy ties between the chaebol and government. The most recent corruption scandal involved Samsung chief Lee Jae-yong, who was sentenced to five years in prison in August Overall, it is widely acknowledged that the Korean economy needs a more level-playing field, and that the chaebol should be brought to heel.
Various governments have made some efforts to do so under the banner of economic democratization, but to little effect. Given their economic dominance, it is easy for the chaebol to scaremonger about the possible adverse effects of any reforms. In May , Mr Moon Jae-in was elected president to replace President Park Geun-hye who was impeached because of corruption and abuse of power.
A trade war will only hasten China’s structural reforms
President Moon faces an enormous set of challenges, in addition to those outlined above. First, it is necessary to restore stability and order to a deeply polarized nation which was wracked by scandal for over six months. Second, he needs to deal with the North Korean crisis on his doorstep. The new Korean administration also faces geopolitical fallout from its high dependence on the US and Chinese export markets. The US has also informed the Korean government that it wants to renegotiate their free trade agreement to remove more barriers to US business. But as the Asian Development Bank has argued, given the opposition on both sides, there is a serious risk that the free trade agreement could be annulled, despite the undeniable benefits that both sides have enjoyed.
This vast list of challenges may seem daunting, and indeed they are. The Chinese economy of today is riddled with a collection of conundrums. The Chinese Communist government would like to open up the economy to more market forces, but at the first sign of inevitable volatility, its knee-jerk reaction is to impose anti-market controls. It would also like innovation to become the new driver of economic growth, but repression of voices of dissent, who are often the most innovative, has only been ramped up under President Xi Jinping.
It is proud of having a strong and effective state, but cannot manage seemingly basic issues like food safety. And very few other countries have benefited as much from the post-war system of multilateral cooperation, and yet China is now regularly flouting and challenging this system. The Chinese Communist government gradually opened up its state-owned and centrally planned economy from The main elements were opening up to foreign investment and trade, permitting private enterprise and privatizing many SOEs.
At the same time, the government kept an important stable of SOEs, especially in the energy, telecommunications and banking sectors. These SOEs benefit from government protection and assistance, some of which is designed to help China improve its technological capacity. There has been much debate over the role of these SOEs, especially how independent that might be of government control. Their relative share in the economy has declined in tandem with the development of the private sector, and they lag the private sector in terms of productivity and efficiency.
Indeed, the close link between SOEs and politics is evident by the fact that the Communist Party appoints senior SOE executives, whose career paths usually involve time in the government administration. The Chinese Communist Party does not relish the development of other sources of power.
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The value of the Renminbi RMB was kept artificially low to help exports and discourage imports. This generated balance of payments surpluses and resulted in a massive accumulation of foreign exchange reserves. This reserve accumulation was very costly to Chinese citizens who were deprived of access to imports. It also meant that there was less pressure on the Chinese industry to become more competitive and productive.
US President Donald Trump has called China a currency manipulator, because he believes that it is still artificially undervaluing the exchange rate. In fact, Trump is several years late in his accusation. In recent times, China has been intervening to prevent its exchange rate from falling for fear of the instability that might cause. When the US was struck down by the financial crisis in , triumphalism was the reaction of Chinese leaders.
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They interpreted this as a sign of the decline of the US, and the ascendancy of Asia. This period also saw the beginning of a new Chinese assertiveness in international relations and against America and Japan, in particular. But the Chinese government also panicked. The Chinese economy had long been dependent on exports to the US and other Western markets, and there was fear of the adverse impact on the economy.
So the Chinese government launched a massive stimulus package, by pushing state-owned banks to lend money to SOEs and local governments. Many local government infrastructure projects are not capable of generating financial returns to enable debt repayment. Another consequence of the stimulus package is industrial overcapacity which has reached astronomical proportions across a wide range of industries like steel, aluminum, cement, chemicals, refining, flat glass, shipbuilding, and paper and paperboard.
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