Volvo Case South Korea

1. What was South Korea's political ideology prior to 1990? What caused the changes in ideology in the 1990's? Explain briefly South Korea's ideology from 1990's onwards. Which country was South Korea's role model?

South Korea's history is marked by alternating periods of democratic and autocratic rule. Civilian governments are conventionally numbered from the First Republic of Syngman Rhee to the contemporary Sixth Republic.

Prior to 1990:

Despite the economic growth and results in diplomacy, the government, having gained power by coup d'etat, was essentially a military regime. Public support and trust was low when the promises for democratic justice never materialized. In the 1985 National Assembly elections, opposition parties together won more votes than the government party, clearly indicating that the public wanted a change. Many started to sympathize with the protesting students. The Gwangju Massacre was never forgotten and in January 1987, when a protesting Seoul National University student died under police interrogation, public fury was immense. In April 1987, President Chun Doo-hwan made a declaration in an attempt to overpower the opposition that measures would be taken to protect the current constitution at the end of his term, instead of contemplating constitutional reform that would call for direct election of the president. This announcement consolidated the people, with more than a million students and citizens participating in anti-government protests all over the nation in June 1987 in the June Democracy Movement.

In 1987, Roh Tae-woo, one of Chun's colleagues in the 1979 coup, was elected president by popular vote. With the Sixth Republic, the country has gradually stabilized into a liberal democracy.

Post 1990:

In 1992, Kim Young-sam was elected president. He was the country's first civilian president in 30 years.

In 1997, the nation suffered a severe financial crisis, from which it has now fully recovered. South Korea has also democratized its political processes. This was the first transfer of the government between parties by peaceful means. Kim Dae-jung pursued a "Sunshine Policy" to reconcile with North Korea, culminating in the summit with North Korean leader Kim Jong-il, for which Kim Dae-Jung was awarded the Nobel Peace Prize in 2000. However, the efficacy of the Sunshine Policy was brought into question amid allegations of corruption.

After regulatory and economic reforms, the economy has bounced back, with the country's economy marking growth and apparently recovering from the global recession.The administration has also pursued to improve diplomatic relations with active summit talks: the United States; Korea-China-Japan Summits; and the ASEAN-ROK Commemorative Summit to strengthen ties with other Asian countries.

Japan as a role model of South Korea:

The Japanese government played an even more active role in developing Korea than it had played in developing the Japanese economy in the late nineteenth century. Many programs drafted in Korea in the 1920s and 1930s originated in policies drafted in Japan during the Meiji period (1868-1912). The Japanese government helped to mobilize resources for development and provided entrepreneurial leadership for these new enterprises. Colonial economic growth was initiated through powerful government efforts to expand the economic infrastructure, to increase investment in human capital through health and education, and to raise productivity.

In some respects, South Korean patterns of development after the early 1960s closely followed the methodology introduced by the Japanese fifty years earlier--industrialization from above using a strong bureaucracy that formulated and implemented economic policies. Many of the developments that took place in Chosen, the Japanese name for Korea during the period of colonization, had also occurred in pre-World War II Japan; they were implementation of a strong education system and the spread of literacy; the rise of a strong, authoritarian government that combined civilian and military administration to govern the state with strict discipline; the fostering and implementation of comprehensive economic programs by the state through its control of the huge national bureaucracy; the close collaboration between government and business leaders; and the development of industries by the major Japanese zaibatsu (commercial conglomerates).

2. What was the impact of impact of inbound FDI into South Korea as a result of its liberalization in 1990? Why did Volvo acquire Samsung's Construction Equipment division (CED) in February 1998?

In the late 80s, the United States in bilateral negotiations with South Korea resulted in financial liberalization. Other external forces, including the Group of Seven governments, international financial institutions and multinational companies were also active in promoting the opening of South Korea's financial markets. Domestically, free economy and free market ideas gradually gained the upper hand. Since the 90's first democratically elected President Kim Young-sam took office, South Korea's policy to protect domestic industries from the system for the strategic shift to promote globalization of the economy, South Korea's financial system has changed. In order to make South Korea's globalization Strategy more institutionalized, South Korea in 1993, applied for and became OECD members in 1996. In order to become a member OECD, South Korea agreed to gradually open its financial market, investors in developed countries. South Korean government gradually relaxed its grip on foreign capital inflows, especially short-term credit control. The traditional government-guaranteed by the inertia of thinking the impact of deregulation led to excessive borrowing, foreign banks without government credit guarantees, the case of loans to large enterprises, short-term external debt increased dramatically. In a regulatory vacuum attached to the large consortia of non-bank financial institutions a large number of short-term loans in terms of foreign borrowing. From the largest of the 30 large enterprise groups in the financing structure, the proportion of short-term borrowing in 1994 raised from 47.7% to 63.3% in 1996. In the 1997 third quarter, South Korea already had short-term debt 323 percent reserve currency. Moreover, with financial liberalization and deregulation the South Korean government formed an active industrial policy and investment supervision