The Growth of the Korean Economy and the Foreign Capital

  • Noriyoshi Oguchi


The Korean economy has grown very rapidly during the last two decades. The GNP increased by a factor of seven between 1970 and 1989. From 1970 to 1978, the average annual growth rate was 9.9 percent. Although the Korean economy had suffered a set back after the second energy crisis, the growth rate recovered in the late 1980’s. Throughout the period, exports increased faster than GNP. As a result, the share of exports in GNP increased from 15 per cent in 1970 to 42 percent in 1987. At the same time, imports also increased very rapidly, resulting in a perpetual trade deficit for most of the period. The deficits in the current account were covered by surplus in the capital account. Import of foreign capital helped the development of manufacturing industry, but it also resulted in a relatively large foreign debt. The burden of servicing this debt became a problem during the negative growth period after the second energy crisis. In this paper we will evaluate the role of foreign capital in the development of the Korean economy after 1970. We will also analyze the effects of direct foreign investment (DFI) on the Korean economy. The amount of DFI was relatively small compared to the volume of foreign loans. DFI, however, has larger impacts on the receiving economy. Its direct effects are obvious: New employments, new production activities, increase in exports imports, etc.


Direct Foreign Investment Production Function Capital Stock Foreign Capital Foreign Debt 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. [1]
    Grinoles, E. and J. Bhagwati (1976) ”Foreign Capital, Savings, and Dependence,” Review of Economics and StatisticsGoogle Scholar
  2. [2]
    Healey, D. T. (1973) ”Foreign Capital and Exports in Economic Development: The Experience of 8 Asian Countries,” Economic RecordsGoogle Scholar
  3. [3]
    Hong, K. C. (1988) Debt Projection Model, Ph.D. Dissertation, Institute of Socio-Economic Planning, University of Tsnknba.Google Scholar
  4. [4]
    Kojima, K. (1973) ”A Macroeconomic Approach to Foreign Direct Investment,” Hitotsubashi Journal of Economics, vol. 16Google Scholar
  5. [5]
    Kojima, K. (1985) ”Japanese and American Investment in Asia: A Comparative Analysis,” Hitotsubashi Journal of Economics, vol.26Google Scholar
  6. [6]
    Komiya, R. (1969) ”Direct Investment and Industrial Policy,” in Niida, H. and A. Ono eds., Industrial Organization In Japan, Iwanami, TokyoGoogle Scholar
  7. [7]
    Korean Credit Rating Corporation (1987) The National Economic Effects of Foreign Investment and the Management Analysis of the Foreign Firms, Seoul, Korea (in Korean)Google Scholar
  8. [8]
    Oguchi, N. and T. Fukuchi (1989) ”Economic Effects of the Japanese Direct Investment to Thailand,” Discussion Paper No. 273, Kyoto Institute of Economic Research, Kyoto UniversityGoogle Scholar
  9. [9]
    Ramstetter, E. D. (1988) ”The Effects of Direct Foreign Investment on Taiwan: A Macroeconometric Investigation,” Paper Presented at the First Meeting of East Asian Economic Association, KyotoGoogle Scholar
  10. [10]
    Ranis, G. and C. Schive (1975) ”Direct Foreign Investment in Taiwan’s Economic Development,” in Galeson, W. ed., Foreign Trade and Investment: Economic Growth in the Newly Industrializing Countries, Univ. of Wisconsin Press, MadisonGoogle Scholar
  11. [11]
    Sekiguchi, S. (1977) ”Direct Investment into Developing Countries,” The Journal of Japan Economic Research, No.6Google Scholar

Copyright information

© Springer-Verlag Tokyo 1994

Authors and Affiliations

  • Noriyoshi Oguchi
    • 1
  1. 1.School of CommerceSenshu UniversityTokyoJapan

Personalised recommendations