Korea.

Table of contents......Page 2
Basic statistics of Korea......Page 9
Assessment and recommendations......Page 11
A recovery led by private consumption......Page 25
Figure 1. Contributions to growth......Page 26
Figure 2. Growth of bank lending......Page 27
Table 1. The use of credit cards......Page 28
Figure 3. Share prices and private consumption......Page 29
Figure 5. Household financial assets and liabilities......Page 30
The recovery in construction investment and rising real estate prices......Page 31
Table 3. Economic growth......Page 32
Figure 6. Developments in the real estate market......Page 33
Table 4. Performance indicators for the manufacturing sector......Page 34
Figure 7. Business sentiment......Page 35
Table 5. Financial distress in the corporate sector......Page 36
Figure 8. Competitiveness indicators......Page 37
Box 1. The information and communications technology sector......Page 38
Figure 9. Developments in the information and communications technology sector......Page 39
Table 6. The balance of payments......Page 40
Figure 10. Korea’s net asset position and foreign exchange reserves......Page 41
The labour market and inflation trends......Page 42
Table 7. Labour market developments......Page 43
Figure 11. Labour market trends......Page 44
Figure 12. Consumer price trends......Page 45
Outlook for 2003 and 2004......Page 46
Table 8. Short-term prospects......Page 48
Medium-term growth perspective......Page 49
Table 9. Korea’s potential growth rate......Page 50
Figure 13. Interest rates......Page 51
Monetary and credit conditions......Page 52
Figure 14. Inflation targets and outcomes......Page 53
Figure 15. Real interest rates......Page 54
Figure 16. Growth of monetary aggregates......Page 55
The monetary policy framework......Page 56
Table 10. Inflation targeting in the OECD countries......Page 57
Table 11. Independence of central banks......Page 59
Exchange rate policy......Page 60
Figure 18. The exchange rate......Page 61
Did fiscal policy support the economic recovery?......Page 62
Table 12. Consolidated government budget......Page 63
Table 13. The 1998 privatisation programme......Page 64
The impact on public debt......Page 66
Table 15. Gross government debt and guarantees......Page 67
A neutral fiscal policy stance in 2002......Page 68
Table 16. Central government expenditures......Page 69
Fiscal plans for 2003 and beyond......Page 70
Sustainable retirement incomes......Page 71
Table 17. Performance indicators: sustainable retirement income......Page 73
Figure 20. Distribution of the income level of elderly households......Page 74
Figure 22. Projected evolution of the National Pension Scheme......Page 75
Assessment......Page 76
Box 2. Economic co-operation between North and South Korea......Page 78
III. Reforming the public expenditure system......Page 81
Figure 23. Public spending in international comparison......Page 82
Figure 24. Trends in general government outlays......Page 83
Table 18. General government spending by economic category......Page 84
Figure 25. Composition of publicly funded social expenditure......Page 85
Table 19. Social expenditures in OECD countries......Page 86
Spending pressures over the medium and longer term......Page 87
Figure 26. Education and healthcare expenditure in OECD countries......Page 88
Table 21. Main components of primary government spending by function......Page 89
Table 22. Government spending on the social safety net......Page 90
Overview of the budgetary system: the institutional set-up......Page 91
Table 23. Structure of the consolidated budget......Page 92
Box 3. The budget process in Korea......Page 94
Addressing the weaknesses in the budgetary system......Page 95
Figure 28. Government spending by type of account......Page 96
Box 4. Promoting efficiency in public infrastructure investment......Page 98
Table 24. Tax expenditures by purpose......Page 99
Introducing incentives and accountability for performance or results......Page 100
Introducing competition and market mechanisms in publicly funded services......Page 102
Figure 29. General government investment in OECD countries......Page 103
Table 25. Comparison of public and private high schools......Page 105
Addressing the governance problems of public corporations and the wider public sector......Page 106
Box 5. Controlling spending in healthcare......Page 108
Enhancing the effectiveness of spending by sub-national governments......Page 109
Figure 30. Share of local governments in overall expenditure and taxes......Page 110
Table 27. Financial independence of local governments......Page 111
Box 6. Local government funding......Page 112
Table 28. Intergovernmental fiscal transfers......Page 113
Ensuring fiscal sustainability......Page 114
Making the budgetary system more comprehensive and transparent......Page 115
Moving toward more flexible and results-focused public management......Page 116
Enhancing the role of market mechanisms in publicly funded services......Page 117
Making decentralisation more effective......Page 118
Box 7. Summary of recommendations......Page 119
Figure 31. Relative income levels in Korea and the OECD......Page 121
Box 8. Overview of progress in structural reform......Page 122
Restructuring the corporate sector......Page 129
Table 29. The large business groups......Page 130
Developing a sound and market-oriented financial system......Page 131
Table 30. Indicators of bank profitability......Page 132
Table 31. The financial-sector restructuring programme......Page 133
Table 32. The government’s ownership share of commercial banks......Page 134
The labour market......Page 135
Table 33. The minimum wage......Page 136
Box 9. The declining proportion of regular workers......Page 137
Table 34. Non-regular workers in Korea......Page 138
Table 35. Training programmes for the unemployed......Page 140
Table 36. Coverage of the Employment Insurance System......Page 141
Lowering barriers to international trade......Page 142
Figure 32. Trade flows in Northeast Asia......Page 144
Table 38. Commercial presence of foreign financial institutions in Korea......Page 145
Figure 33. Producer support estimates and transfers to agriculture......Page 147
Table 39. Farm size......Page 148
Encouraging inflows of foreign direct investment......Page 146
Figure 34. Foreign direct investment inflows......Page 149
Figure 35. Stock of inward forward direct investment position......Page 150
The land market......Page 152
Figure 36. Price trends in the real estate market......Page 153
Table 40. Government policies to stabilise the real estate market......Page 155
Improving the education system......Page 156
Table 41. Enrolment and advancement rates......Page 157
Figure 38. Public spending on education......Page 158
Figure 39. The ratio of students to teaching staff......Page 159
Improving the research and development framework......Page 161
Table 42. R&D expenditures......Page 162
Encouraging a dynamic small and medium-sized enterprise and venture business sector......Page 164
Table 43. Programmes to assist small and medium-sized enterprises......Page 165
Table 44. Credit guarantees for small and medium-sized enterprises......Page 166
Figure 40. Venture capital......Page 167
Figure 41. Korean venture capital investment by sector......Page 168
Table 45. Venture businesses......Page 169
Promoting competition in the telecommunications sector......Page 170
Promoting competition in the electricity industry......Page 171
Assessment of progress in structural reform......Page 172
Air pollution......Page 173
Box 10. The integration of environmental concerns into government policy......Page 174
Figure 42. Performance indicators: air pollution......Page 175
Table 46. Performance indicators: air pollution......Page 176
Figure 43. Air pollutant concentrations in major cities of OECD countries......Page 177
Figure 44. Air pollution inspections and violation rates......Page 179
Waste management......Page 180
Figure 45. Evolution of waste treatment......Page 182
Table 47. Performance indicators: waste......Page 183
Table 48. Waste treatment......Page 185
Figure 46. Recycling costs in Korea......Page 186
Notes......Page 188
Bibliography......Page 199
Table A.1. Different measures of the fiscal stance......Page 205
Table A.2. Consolidated government budget by component......Page 206
Table A.3. The Clean Market Project......Page 208
Annex III. Calendar of main economic events......Page 209