The economic miracle of South Korea: from a devastated country to a global leader (continued)

South Korea carried out one of the most striking transformations of the 20th century, turning from a poor country destroyed by war into one of the leaders of the world economy. The key to success was an export-oriented model of development, centralized state planning, a focus on industrialization, support of chaebols (Samsung, Hyundai, LG), investments in education and science. Park Chung-hee’s authoritarian regime allowed rapid economic modernization, strategic five-year plans and a focus on technological breakthroughs.

Education has become a national idea that has given Korea a technological advantage: strict discipline, digitization, the cult of engineering and state support have made it one of the world’s leading semiconductor producers. In response to challenges from China and the US, Seoul is investing in AI, diversifying exports and expanding strategic alliances, particularly with Vietnam. All this has turned Korea into an example of modernization without natural resources – only thanks to human capital, intelligence and a decisive state strategy.

Trade diplomacy and international integration

While many countries hesitated to open their markets to the world, South Korea did so aggressively and systematically. Free trade has become not only an economic tool, but a lever for national survival. With neither great resources nor a strategic transit position, Korea built its own economic geography through agreements. And it was the first among Asian states to do so.

In 2011, South Korea concluded free trade agreement with the EU—and it was a breakthrough: the first agreement of this level between the eurozone and an Asian country. A year later, an agreement with the USA (KORUS FTA) was signed, which expanded Korean exports to the United States. Hyundai and Kia cars, Samsung smartphones, and LG home appliances have become familiar to American consumers — not least thanks to the abolition of tariffs and the easing of technical regulations. Thanks to the agreement with the US, Korea’s exports increased by two-thirds during the first 10 years of its operation.

It was in 2015 signed another fateful agreement – with China. Thus, Seoul gained access to the largest consumer market, but at the same time found itself in a zone of geopolitical pressure. Trade with China soared: by the 2020s, Beijing had already become Korea’s main trading partner. But every trade breakthrough comes with a political price: in 2016, China imposed unofficial sanctions against Korean companies after the deployment of the American THAAD anti-missile system, forcing Seoul to diversify even more.

So not only Korea expanded agreements with ASEAN, in particular with Vietnam, which became the second production center for Samsung after China, but also signed agreements with Canada, Australia, Chile, Peru, India, Turkey, and New Zealand. In total, there were more than 20 active deals — and each opened a new market segment, a new niche for Korean business. It is because of these multi-vector FTAs ​​that Korea was able to strengthen exports even in periods of global instability.

However, the foreign economic strategy in Korea is always a balancing act between Washington and Beijing. The US is a security ally, China is an economic giant. To support one means to offend the other. South Korea, unlike Japan or Taiwan, chose a more flexible course. It tries to avoid hard alliances, especially in the conditions of the US-China technological war. Yes, Korea has not yet joined Chip 4 — the anti-Chinese alliance of chipmakers, in which the US wants to see Japan, Taiwan and Korea itself. Because SK Hynix and Samsung have factories in China, and cutting ties too sharply is dangerous to the national interest.

At the same time, Korea supports joint military exercises with the United States and Japan, participates in international sanctions against North Korea, and is involved in global human rights policy. It is a delicate game: economic cooperation with China is political solidarity with the West. While Korea manages to balance this. But more and more often experts warn: geopolitical pressure is growing, and maintaining neutrality will be increasingly difficult.

While other countries are thinking about how to launch innovations, South Korea is simply investing. A lot and systematically. In 2023, she spent on scientific research and development (R&D) 119.74 trillion won, or 4.81% of GDP — one of the highest figures in the world. For comparison: in Germany, this indicator fluctuates at the level of 3.1%, in the USA – 3.5%, and in Ukraine – less than 0.5%. In Korea, it is almost 5% for science, engineering and technology. And about 4/5 of these funds is coming not from the state, but from the private sector: giants like Samsung, SK Hynix, LG. It is this kind of private-public partnership that allowed Korea to become an innovative Asian hub.

The government is not just a spectator in this system. He is a conductor. South Korea has been active since the 1990s built technology parks, in particular the flagship Pangyo Technovalley near Seoul – the Korean “Silicon Valley”, where dozens of startups work side by side with the R&D departments of large companies. Here are not just offices, there is a complete infrastructure: universities, laboratories, accelerators, banking sites. This cluster has become a magnet for biotech companies working on personalized medicine, AI, and genetics.

The state plays a special role in subsidizing innovations: preferential loans, grants, tax discounts are given not just like that, but under a clear development plan and expected profitability. Since last year, the government started a new wave of investment in biotech — 400 billion won is aimed at the development of digital biomedicine, including genome analysis, the production of new drugs, and digital platforms for medical data. This is part of a large program that should make the country a leader in the field of bioinnovations by 2030.

And what about IT and telecom? Korea is far ahead here. She was the first country in the world to introduce CDMA technology, one of the first to adopt LTE-A, and the first to adopt 5G. This is not an accident, but the result of a planned policy. Samsung, LG U+, KT Telecom — all these companies participated in national communication development programs. The government financed the research and the private sector deployed the infrastructure. As a result, Korea today has the fastest Internet in the world and the highest level of mobile phone penetration.

Korea’s approach is a synthesis: strategic state participation, giant private sector investments, technology parks, subsidies, educational programs, international alliances. It is not surprising that South Korea has repeatedly become #1 in the world in terms of innovation. And this is not a fashionable slogan, but a strategy that works.

Culture and soft power of the “Land of morning freshness”

When talking about the soft power of the 21st century, the “Land of morning freshness” that managed to to transform culture into a full-fledged export product. The success of K-pop, the craze for Korean dramas, the global boom in cosmetics and interest in kimchi and ramen cuisine are not just coincidences. This is a state strategy that has been in the making for decades. What started as VHS series in China in the 1990s has grown into a multi-billion dollar industry in the 2020s, generating more revenue for Korea than home appliance exports or shipbuilding.

In 2021, the export of cultural content of South Korea reached $12.45 billion, which exceeded revenues from home electronics exports. But what is most impressive is not the number, but the multiplier effect: one BTS or BLACKPINK music video stimulates sales of dozens of related products — from cosmetics to clothes, from tourism to gadgets. Yes, BLACKPINK became not only a musical phenomenon, but also the face of world fashion houses — Dior, Chanel, Celine, Saint Laurent. And drama stars, in between filming, appear in Samsung commercials, go on tour with Korean cuisine and launch their own cosmetics lines.

But behind the scenes of this cultural wave is not a chaotic element, but state policy. Since the beginning of the 2000s, the South Korean government has created the Ministry of Culture, Sports and Tourism, which systematically finances production of music, serials, literature, design. The state compensates part of the production costs, organizes international exhibitions, and provides subsidies for the translation of Korean novels. In the 2020s, Korea created its own model of supporting creative industries, which became a reference for other countries.

A separate dimension is cultural diplomacy. More than 30 cultural centers of South Korea in different countries of the world hold days of Korean cuisine, film screenings, and design exhibitions. The goal is simple: to interest, attract, touch. It works — after the success of Netflix’s The Squid Game, there was a surge of interest in the Korean language on Google searches around the world, and sales of white sneakers similar to those worn by the characters soared on Amazon.

The secret of the profitability of South Korea’s cultural export lies in a unique combination of state strategy, commercial instinct and deep emotional work with the audience. It is an integrated model where dramas sell cosmetics, music videos promote fashion, and showbiz stars are national brands. K-pop today is not just music, but a business model that works globally. And, it seems, has no analogues.

South Korea on the Edge: How the Country Responds to Demographic Crisis, Economic Slowdown, and Future Challenges

South Korea once amazed the world with its dynamic growth, but today it has to balance on the precipice of new challenges. Demographic crisis, aging population, economic slowdown and growing public debt are rapidly becoming a burden.

The most acute challenge is the rapid decline in the birth rate. Last year, the country’s fertility rate fell to a record low of 0.68 children per woman, officially making Korea the country with the lowest birth rate in the world. This means not just a shortage of labor in the future, but a systemic threat to the pension system, health care, and tax revenues. Even now, more than 20% of the population is over 65 years old: Korea has turned into a “super-aging society”.

At the same time, the economy is losing its dynamism. Growth rates, once above 5%, are now stable at 2-2.5%, and public debt has approached 55% of GDP. For a country that has long prided itself on fiscal restraint, this is an alarming signal. Governments are increasingly forced to raise additional budgets to support consumption, small businesses and disaster recovery.

However, Korea does not give up. In April she announced about an unprecedented support package for the semiconductor industry — 33 trillion won, or more than $23 billion. This is not just an investment in technology – it is a response to a geopolitical challenge from China and Taiwan, which are rapidly strengthening their position in the microchip market. The plan includes soft loans, subsidies for research and construction of new factories.

Another tool is support for domestic consumption. In April, the government agreed an additional budget of 12 trillion won ($8.45 billion), part of which will go to support small businesses affected by inflation and natural disasters. This budget should be an injection into the real economy, which still depends on exports, the main but not always stable driver of growth.

A separate focus is attracting foreign investments. Last year, Korea eased rules for foreign financial institutions, allowing them to participate in currency transactions on a par with Korean banks. This is part of the market liberalization strategy aimed at strengthening the national currency and reducing dependence on external shocks.

But the issue of demography remains the most painful. To compensate for the loss of labor, Korea is increasing quotas for foreign workers: from 172,000 in 2023 to more than 260,000 in 2024. But immigration is only a temporary relief. Without deep social changes — housing, kindergartens, work for women, redistribution of the tax burden — to cope it will not succeed with the demographic pit.

South Korea 2030: How the country is rebooting itself through innovation, bioeconomy and AI

South Korea knows how to play ahead. When others are just starting to talk about the future, Seoul is already investing billions in it. In the 2020s, the country faces real challenges: slowing growth, demographic decline, and global instability. Korea clearly understands: the traditional industrial model that ensured its rise in the last century is exhausting itself. Therefore, it is rearming the economy for a new reality: innovations, clean technologies, bioeconomy, AI.

Last April, the South Korean government announced an ambitious investment plan in the field of artificial intelligence — 9.4 trillion won (approximately $6.9 billion) by 2027. These funds will be used to create our own AI chips, develop a national data repository, and support AI startups. The goal is to occupy 10% of the world market of system semiconductors by 2030. This is a response to the US-China technology war, and an attempt to maintain an edge in an industry where Korea has traditionally dominated.

At the same time, Seoul is betting on bio-industry. This year in January in Korea created The National Biocommittee is a structure under the President that coordinates the entire biosector. The government plans to unite more than 20 bioclusters across the country, and by 2027 — to train 110,000 new specialists in the field of biohealth care. Bioeconomy is a new front on which Korea wants to compete with the EU and the USA.

And the third pillar of the future is the green transition. It is planned to close ten coal-fired power plants, which will be replaced by solar, hydrogen and wind generation. This is part of the plan to achieve carbon neutrality by 2050. South Korea is not just modernizing energy, but is creating a new market where the competition is not fuel, but efficiency, innovation, and technology.

But even this is not enough – that’s why Korea creates a mega package of support worth $34 billion for strategic industries: microchips, “green” cars, biopharmaceuticals. These are not survival grants, but breakthrough investments. The government offers preferential financing, tax reductions, accelerated product registration and logistical support to companies ready to go global.

All these are not separate initiatives, but a new strategy. South Korea no longer wants to be just a “big factory of the East”. She wants to be a generator of ideas, patents, breakthroughs. Quality instead of quantity, creation instead of copying. And this is its chance to stay at the top of the global economy.

Ukraine after the war: the lesson of South Korea as a strategy of breakthrough, not survival

Post-war Ukraine can learn a number of deep and systematic lessons from the experience of South Korea — not as blind copying, but as strategic inspiration. The history of Korea is an example of how a country without resources, devastated by war and surrounded by powerful neighbors, was able to to transform their weaknesses to advantages through intelligence, discipline and long-term government vision. For Ukraine, which has also found itself in an existential struggle and faces the challenge of reconstruction, this example is extremely telling.

The “Land of Morning Freshness” built development around a clear economic strategy — five-year plans, orientation to export, a gradual transition from simple to complex. Ukraine also needs a long-term strategic vision not only of “how to restore the destroyed”, but “how to build a new one”: with clear guidelines, industry priorities and a focus on the future, not the past.

Ukraine has agriculture, metallurgy, IT, but this is not enough. South Korea started with simple export goods and gradually moved up to complex products with high added value. For Ukraine, the lesson is clear: the economy should not depend only on grain, ore or foreign aid. Systematic development of the export potential is needed, with the support of engineering schools, local production, assembly and high-tech exports.

Korea was not a liberal economy, on the contrary, it was the state that coordinated development, monitored efficiency, supported the strong and weeded out the weak. Ukraine will not be able to recover in chaos; what is needed is a strong state with a competent institutional structure that sets the pace, does not interfere, but does not passively observe.

Samsung, Hyundai, LG were not just corporations – they became symbols of national breakthrough. Ukraine also has potential leaders: in the food industry, IT, mechanical engineering. But they need trust from the state, protection from raiding, fair competition and access to international markets. The formation of a powerful core of national business is the backbone of the economy.

Korea has bet on people. Instead of cheap labor — quality education, mass training of engineers, support for scientific research. For Ukraine, this is a matter of survival: without an educational breakthrough, there will be no technology, no security, no economy. Now is the time to massively invest in science, technical education, university autonomy and research centers.

South Korea has constantly changed strategies — from light industry to shipbuilding, from heavy to high-tech products. Today, she is revising the course again: investing in AI, robotics, ecological economy. Ukraine must learn strategic flexibility: adapt to global trends, not just react to them.

The main thing that South Korea has achieved is technological self-sufficiency. Ukraine, which in recent years has become an importer of everything from medicine to electronics, must rethink its place. Assembly, development, intellectual property, startups — all this should become a national priority, with protection and preferential treatment.

Korea has not only built an army – it has built an economy that ensures its subjectivity in the world. Ukraine also has a chance: to turn post-war reconstruction into a platform for the creation of a new national identity, in which economic strength is the basis of political independence.

South Korea’s lesson for Ukraine is not only about numbers and growth rates. It is about the will to change, systematicity, betting on human potential and the ability to turn defeats into starting positions for a breakthrough. Among the ruins, but with ambition.

Tetyana Viktorova