Korea was one of the poorest countries in world after experiencing two wars. World War II and Korean war (1950 ~ 1953). The country even experienced a food shortage so that it had to heavily rely on the foreign aid. Yearly per capita consumption was a mere $88 as late as 1965. However, since 1965, Korea has been transformed from its underdeveloped agricultural economy to a leading Newly Industrializing Country. Between 1965 and 1981, its gross national product GNP multiplied twenty times from $3 billion to $63 billion and per capita GNP increased sixteen times from $88 to $1,554.

There have been many explanations for Korea's successful story. Among those, the strong role of government would be probably the most important one. At the same time, this would be also responsible for current recession.

After Koran war, the government in fact had no sense of direction and also due to the unstable political situation, the country didn't have specific economic policy until 1961 when military government came to power and established the major institution guiding its economic planning called Economic Planing Board (EPB). This government set economic development as th

In addition to inflow of foreign capital, the government faced allocation of capital with using its financial system. Before the military government in 1961, the loan decisions of commercial banks were heavily influenced by political interference (Haggard, 26). Well, in fact the loan decisions in Korea mostly were affected by political interference rather than bank themselves until recent time, but during the 1948 ~ 1961 period, the rent generated by low interest rate was used for its political activities rather than economic growth.

Since the mid 1960s, the military government used regulated finance as one of tool to create rent and achieve exports expansion. What it did were nationalizing commercial banks and amending the Bank of Korea so that it can control financial systems directly. In general, the Bank of Korea, in its role as the country's central bank, determines the allocation of loans, interest rate level and the supply of money but the decision making in these area is controlled by the Minister of Finance. In other words, it was government's responsibility generating monetary and fiscal policy, not by the central bank.

Haggard, Stephan, et al. The politics of Finance in Developing Countries. London:

This plan was formulated after Korea became a member of the United Nations and emphasized the role of private sector in preparation and implementation of the plan.

The Second Five-Year Plan (1967 -1971)

Blinder, Alan S.. The Economics of Finance. Washington D.C.: the Brooking institution,

The Third Five-Year Plan ( 1972 -1976)

In addition, the financial reform contributed to a massive inflow of foreign loans due to the existence of gap between domestic and international interest rate and since the Korea Development Bank guaranteed to pay back to foreign lender, the inflow of the loans were accelerated.

Some common words found in the essay are:
Development Bank, Seventh Republic, Five-Year Plan, Countries Korea, Government's Policy, Five Plan, Actually Daewoo, Board EPB, Minister Finance, Industrializing Country, economic growth, exchange rate, five plan, heavy industries, domestic savings, export expansion, korean economy, economic development, five-year plan, military government, heavy chemical industries, output price level, change trade policy, major change trade, military government power,
Approximate Word count = 2877
Approximate Pages = 12 (250 words per page double spaced)