Economic Development Plan
¡ÛDifferent from 'Planned Economy' of Socialist Countries
¡ÛA combination of government-led economic development and private efforts based on market economy
¡ÛFocused on strangies for scarce capital resources allocation for production of goods and services which will lead to 'self-sufficient' economy
¡ÛServed as a political tool for mobilizing and directing economic activites towards achieving quantitative growth targets such as Gross GNP, Per Capita Income, and Total Exports
¡ÛFlexible implementtion of the Plan adapting to constantly changing world and domestic economic environments

Comparison of Economic Indices
  Between 1962 and 1969
¡ÛAnnual Average Growth Rate from 4% during 1953~61 to 9.8% during 962~69
-Agricultural and Fishery: 6.0%
-Mining and Manufacturing: 17.3%
-Social Capital and Service: 11.1%
¡ÛTotal Exporst: from $55 Milion in 1962 to 4.8% in 1969
¡ÛUnemployment Rate: from 9.0% in 1962 to 4.8% in 1969
¡ÛChange in Industrial Composition
-Agricultureal and Fishery: from 44% in 1962 to 27.9% in 1969
-Mining and Manufacturing: from 16% to 21.7%

Restoration Efforts(1948~60)
 Problems at Hand
¡ÛLack of Human Capital
-Lack of public and business managerial experience
-Engineers and Technicians
¡ÛLack of Industrial Capital and Natural Resources
-Most of the capital in a form of land
-South limited to Light Industries
¡ÛTotal Destruction of Production Facilities during Koream War
-Destruction of the Gyeong-in  Manufacturing District
¡ÛNational Defence, Currency without gold standard
¡ÛUS Economic Aid mostly focused on relief works
(consumptions) rather than investment

Restoration Efforts(1948~60)
 Policy Measures
¡ÛAgriculture-Manufacturing balanced growth approach to promote social and economic stability
¡ÛHeavily Investing on Educational System (20% of Annual Budget)
-Training government officials and engineers abroad
-Liberalization of Private Educational Institutions
¡ÛLand Reform to Transform land capital to Industrial Capital
¡ÛUse of Counterpart Fund based on US Economic Aid for Investments on Building Production Facilities
-Government inverstments and loans: 41.4% in 1951, 68.4% in 1957

Restoration Efforts(1948~60)
 Policy Measutes
¡ÛAgreement on import of surplus Agricultural Products from US(PL-480)
¡ÛMost Effective Use of Technical Assistance from US
¡ÛRebuilding Basic Infrastructures
-Railroad trabsportation (import of Diesel Engines)
-Building power plants
Building Manufacturing Facilities for Textiles, Steel, Carbide, Ceramics, Cement, Plate Glass, Fertilizers, in addition to others.
¡Ûcreation of Industrial Bank of Korea and membership in the IMF aand IBRD

 Restoration Efforts(1948~60)
 Policy Measures
¡ÛAuctioning of Government-Vested Properties inclusing Banks
¡ÛKorea-US Mutual Defense Assistance Agreement
¡ÛUS Economic Grant-type Aid of $200 Milion from 1953
¡ÛUNKRA Economic Aid
¡ÛAnnouncement of the White Paper of Economic Restoration in July 1958
¡ÛPositive Real GNP Growth Rate of 12% 1957
¡ÛGrowing Number of College Graduates

 Transition of Political Power(1960~62)
¡ÛPolicy Failure
-Discontent arising from Land Reform Act
-Heavy reliance on Economic grant-type aid and the use of such more on consumptions than Investments
-Slow economic growth & increasing unemloyment, poverty, and low wages
¡ÛChange of US Economic Aid Policy in a form of Long term Loans rather than Free Aid
¡ÛCorruptions and Unfair Practices
-Unfairness and corruptions in auction process
-Improper use of deposites of privatized banks by owners
-Excessive margins imposed by middlemen and distribution industry
-Firms monopolizing goods from imported agricultural aid

Transiton of Political Power(1960~62)
¡ÛAttempted manipulation of presidential election leading to revolution led by students on April 19, 1960
¡ÛSubsequently, Democratic Party Government resumed Power in August 1960
¡ÛDemocracy in crisis due to political and social instability and reunification movements led by radicals, undermining national security
¡ÛNew government plans to change the economic development grotwth approach still focusing on import substitution industry.

 Transiton of Political Power(1960~62)
¡ÛMilitary Coup on May 16, 1961 led by Young Military Officers
¡ÛEstablished the Military Revolution Commission, assuming absolute power of all three-branched of government.
¡ÛEnacted 'Korea Bank Act' to regain the control of banks
¡ÛEstablishing the Economic Planning Board in July 1961
¡ÛUtilized strong measures to deal with corruptions and unfair practices
¡ÛEmphasized Economic Growth for Escaping Poverty and the Leading Role of the Government in Economic Development

 The First Five-Year Economic Development Plan
¡ÛEconomic Development Plan developed by the Democratic Party Government succeeded
¡ÛUnbalanced Economic Growth Model, setting targets/goals of economic achievements
¡ÛDiffer from the previous plan in two perspectives:
-Set higher economic growth rate as a target: 7.1%
-Focus on labor-intensive light industry which has relatively higher turnover rates of assets
-Still focuses on establishing 'self-sufficient' economy through reducing the dependency on foreign aids and increasing utilization of domestic assets, setting the ratio of domestic assets 72.2% and foreign assets 27.8%
¡ÛReflects the efforts to secure financial assets to overcome problem of limited resources

 Dealing with Limited Resources
¡ÛDecreasing US Economic Aid
-Peaked in 1957
-Annual average of $88 million between 1954~57
-Annual average of $38 million between 1958~1960
-Move rom gant-type aid to long-term loans
¡ÛCurrency Reform on June 9, 1962
-Secure and freeze finalcial assets of high income class and utilize it for the necessary investments
-Failed due to unrealistic speculation on amount of private holdings
-Political pressure from the US government to de-freeze accounts
¡ÛRe-established the foreign Relations with Japanese Government beginning in 1962, finalized on June 22, 1965
-Provision of $300 million grant-type aid over 10 years
-Provision of $200 million government loans over 10 years: 3.5%, deferred payment for 7 years, payback  over 20 years
-Provision of $300 million private commercial loans

 Shift in Strategy(1964)
 Problems at Hand
¡ÛLack of domestic financial resources and assets limit economic growth
¡ÛIncreased money supply leads to inflation: Expansion Fiscal Policy
¡ÛSeverly cold weather negatively affects agricultural production
¡ÛSocial Disorder from 4.19 and 5.16
¡ÛProtective Trade Policy to promote import-substitution industry
-Fixed dual exchange rates below the market rate
-Low interest rates to promote investment, resulting in negative real interest rates
-Limiting imports, Positive importable Goods List System, Import Quota
-High tariffs
-Export Subsidies, Export-import Link System, Compensation Trade System, Preferred interest rates for exporting firms
¡ÛEconomic growth goal setting and the influence of military culture of goal-driven efforts too ambitious

  Shift in Strategy(1964~67)
 Policy Measures
¡ÛA strategic move from promoting import-substitution industry towards export-oriented industry
¡ÛAbandoning overly protective economic policy towards relatively more market-oriented policy
¡ÛSingle floating exchange rate system
¡ÛIncrease of interest rates
¡ÛAbolishment of import Export Link System and Compensation Trade System
¡ÛChange to negative importable goods list system

Shift in Strategy(1964~67)
 Policy Measures
¡ÛReduction of Tariffs
¡ÛDeveloped a list of export specialization goods
¡ÛEnhancing support for private export companies by monthly meetings of the Expansionary Council of Export Promotion
¡ÛEstablishing the National Tax Service Agency
¡ÛCreation of Incentive System for Export Industry
-50% tax reduction of corporate tax and for corporate income generated from export-related business activities
-No tariffs for importing raw materials used in producing export goods
-Special interest rates and repayment structure for export-related production activites
-Celebration and National Recognition of individuals and firms achieving extraordinary accomplishments in exports

 The Second Plan(1967~71)
¡ÛAverage annual economic growth rate of 8.5% and per capita, GNP growth rate of 5.6% during the perid of the first plan
¡ÛAverage annual Investment rate of 15.5%, of which 60% supported by foreign investments
¡ÛReflects pervious shifts in strategic focus towards export-oriented industries
¡ÛAchieved an average annual economic growth rate of 9.7% during the period of second plan, showing investment rate of 26.4%
¡ÛProblems of structural trade deficit due to focus on import of raw materials and production of labor-intensive export goods: As export grows, import grows automatically.

The Second Plan (1967~71)
¡ÛProblems of increasing foreign debt and over-investments on a few selective industries
¡ÛDevelopment of conglpmerates and increasing domestic monopolies
¡ÛUnbalanced regional economic developments, speeding up of urganization
¡ÛRising issues of environmental concerns
¡ÛSending troops to the Vietnam War helped tremendously in terms of economic growth of Korea
¡ÛCreation of Pohang Steels Co. and Ulsan Petroleum Chemical Industrial Complex apart from the second plan
¡ÛBuilding Seoul-Pusan Expressways not in the second plan

Conclusion
¡ÛA Combination of government-led economic development and private efforts based on market economy
¡ÛFocused on strategies for scarce capital resources allocation for production of goods and services
¡ÛServed as a political tool for mobilizing and directing economic activities towards achieving quantitative growth targets such as Gross GNP,Per Capital Income, and Total Exports
¡ÛFlexible Implementation of the Plan adapting to constantly changing world and domestic economic environments
¡ÛPolicy tools most effective in achieving  economic growth comes from various incentives towards an export industry and constant troubleshooting efforts by the government.

Chronic of Major Events(1945~1971)
¡ÛAug 15, 1945: Gained Independence and Beginning of US Military Administration
¡ÛAug 15, 1948: Beginning of the First Republic of Korea
¡ÛJune 25, 1950: Koea War
¡ÛJuly 27, 1953: Agreement of Armistice
¡Û1953~1958: Restoration of Korea Economy based on Economic Assistance/Aid from US
¡ÛJuly 1959: White Paper on Economic Restoration
¡ÛMarch 15, 1960: Presidential Election Won by incumbent President Lee
¡ÛApril 19, 1960: Student-led-Revolution
¡ÛAugust 13, 1960: Begining of the Second Republic of Korea
¡ÛFebruary 1961: Developed Outlines of Economic Development Plan by Democratic Party
¡ÛMay 16, 1961: Military-led-Revolution
¡ÛJuly 1961: Creation of t he Economic Planning Board(EPB)

Chronicle of Major Events(1945~1971)
¡ÛJanuary 1962: Begins Implementation of the First Economic Development Plan Focusing on Replacements of imported Goods industry
¡ÛMay 1962: Enact the 'Korea Bank Act'
¡ÛJune 1962: Currency Reform
¡ÛDecember 17, 1963: Beginning of the Third Republic of Korea and Empowering the Head of the EPB by Elevating its Status as Vice Prime Minister
¡ÛMay 1964: Liberalization of Market Plicy Focusing on Export-Driven Industry
¡ÛMay 1965: Decision to Send Troops to Vietnam War
¡ÛApril 1967: Announcement of the Plan for Building Expressway between Seoul and Pusan
¡ÛFebruary 1968: Begins Construction of the Seoul-Pusan Expressway
¡ÛApril 1968: Begins Construction of Subsidiary Facilities for Pohang Steels Co.
¡ÛApril 1970: Begins Construction of Steels Mill for Pohang Steels Co.(Begins Operation on July 1973)
¡ÛJuly 7, 1970: Opening of the Seoul-Pusan Expressway
¡ÛOctober 1970: Begins Construction of the Ulsan Petroleum and Chemical Industrial Complex