B.C. and evidence that by 2000 B.C. a pottery culture had spread to the peninsula from China. Starting in about 1100 B.C., migration from China into the Korean Peninsula established the city of P’y4ngyang. By the fourth century B.C., a number of walled-town states had been noted in Korea by Chinese officials. The most illustrious site, known to historians as Old Chos4n, was located in what today is the southern part of northeastern China and northwestern Korea. Old Chos4n civilization was based on bronze culture and consisted of a political federation of walled towns.

Three Kingdoms: With the rise of the power and expansion of the Han empire in China (206 B.C.–A.D. 220), Old Chos4n declined. A new iron culture gradually emerged on the Korean Peninsula, and in the first three centuries A.D. a large number of walled-town states developed in southern Korea. Among them, the state of Paekche was the most important as it conquered its southern neighboring states and expanded northward to the area around present-day Seoul. To the north, near the Amokgang (Yalu), the state of Kogury4 had emerged by the first century A.D. and expanded in all directions up through 313 A.D. A third state—Silla—developed in the central part of the peninsula. These three states give name to the Three Kingdoms Period (first–seventh centuries A.D.). Eventually Silla, allied with China, defeated both Paekche and Kogury4 to unify the peninsula by 668. During the Three Kingdoms Period, Confucian statecraft and Buddhism were introduced to the Korean Peninsula and served as unifying factors. By 671 Silla had seized Chinese-held territories in the south and pushed the remnants of Kogury4 farther northward; Chinese commandaries (which dated back at least to the second century B.C.) had been driven off the peninsula by 676, thereby guaranteeing that the Korean people would develop independently, largely without outside influences.

Kory4 Dynasty: Silla’s indigenous civilization flourished. Its aristocracy, centered in the capital, Ky4ngju, located in southeastern Korea near the modern-day port of Pusan, was renowned for its high level of culture. Among its most notable artifacts is the world’s oldest example of woodblock printing, the Dharani sutra, dating back to 751. As Silla declined, a new state, known to historians as Later Kogury4, emerged in the central peninsula. When Wang K4n, the founder of the new state, assumed the throne in 918, he shortened the dynastic name from Kogury4 to Kory4, the word from which the modern name Korea emerged. In 930 Kory4 defeated the forces of Later Paekche (which also had emerged as Silla declined) and the remnants of Silla. The Kory4 dynasty (918–1392), with its capital at Kaes4ng, forged a tradition of aristocratic continuity that lasted well beyond the Kory4 dynasty into the modern era. The Kory4 elite admired the civilization that emerged from the Song dynasty China (618–1279), and an active exchange of trade goods and artistic styles took place during this period. In the thirteenth century, Kory4 was subjected to invasions by the Mongols. Once defeated, Kory4’s armies, using Korean ships, participated in the ill-fated Mongol invasions of Japan in 1274 and 1281. The Mongols continued to hold domains in Kory4 even after their defeat by China’s Ming dynasty (1368–1644), and the Kory4 court divided into pro-Mongol and pro-Ming factions.

Chos4n Dynasty: The pro-Ming faction at the Kory4 court was victorious, and its leader, Yi S4ng-gye, founded Korea’s longest dynasty, the Chos4n (1392–1910), with its capital at Seoul. Yi S4ng-gye initiated land reforms, declared state ownership of property, and built a new tax base. Although some traditional class structures were uniquely Korean, Chos4n society became deeply influenced by Confucianism; a new secular society developed, and a new Korean mass culture emerged. A phonetic-based alphabet—Han’gßl (Korean script)—was promulgated in 1446 at the direction of King Sejong (reigned 1418–50), who also fostered the extensive use of movable metal type for book publications 50 years before Gutenberg. Scholars persisted in the use of Chinese characters (Hanja), however, and Han’gßl did not come into general use until the early twentieth century. North Korea now uses the same system (which it calls Chos4n’gßl), with some variations, exclusively, whereas in the South, Hanja occasionally still are used separately and along with Han’gßl.

Chos4n was faced with major Japanese invasions and warfare between 1592 and 1598 that brought widespread devastation to the peninsula. A notable achievement in warfare occurred during this period when Admiral Yi Sun-shin and his fleet of ironclad “turtle boats” defeated Japanese naval forces. Although the Japanese were defeated by combined Korea and Ming forces and Chos4n began to recover, a new emerging force—the Manchu—invaded both Korea and China. The Manchu established a new dynasty in China—the Qing (1644–1911)—and established tributary relations with Chos4n. Chos4n then experienced a long period of peace. However, as China declined and Japan emerged as a modernizing regional power in the late nineteenth century, Seoul began reforms in an effort to keep the foreign powers at bay. Nevertheless, in 1876 Japan imposed an unequal treaty on the Chos4n court that opened three Korean ports to Japanese commerce and gave Japanese nationals extraterritorial rights. China’s influence over Korea came to a definitive end as a result of the Sino-Japanese War of 1894–95. At the same time, a large peasant rebellion—led by Tonghak (Eastern Learning) Movement advocates—broke out, and the Chos4n court invited in Chinese troops. By 1900 the Korean Peninsula had become the focus of an intense rivalry between the foreign powers then seeking to carve out spheres of influence in East Asia. Japan and Russia sought to divide their interests in Korea by dividing the kingdom in two at the thirty-eighth parallel. Following the Russo-Japanese War of 1904–05, in which Japan was victorious, Russia recognized Japan’s paramount rights in Korea. Unchallenged internationally, Japan turned Korea into its colony in 1910.

Japanese Occupation: The first three decades of Japanese occupation alternated between cycles of strict repression and periods of relative openness. In the first decade of occupation, Koreans were not allowed to publish newspapers or form political groups. Korean resentment of such treatment led in the spring of 1919 to a series of protests that became known as the March First Independence Movement. The colonial authorities responded with violence, killing an estimated 7,000 Koreans. In the aftermath of the protest movement, Japanese colonial policy underwent a period of liberalization, and a new “cultural policy” allowed Koreans to publish newspapers, organize labor unions, and partake in limited freedom of expression. These reforms come to a halt in the 1930s when Japan’s military leaders made Korea a staging ground for the second Sino-Japanese War (1937–45), and later World War II. Koreans were conscripted as laborers and later soldiers in the Japanese Imperial Army, and a period of unprecedented repression followed. Japan established assimilation policies forbidding use of the Korean language, shut down Korean-language newspapers, and built ShintÇ shrines throughout the country. Koreans were encouraged to take Japanese names, acknowledge the divinity of the emperor, and otherwise deny their own long and rich heritage. The “36 years” of occupation, as they came to be known, remain an obstacle in Korean-Japanese relations, and the subject of Korean collaboration with the occupying Japanese forces remains extremely sensitive.

Divided Nation and the Korean War: When Allied leaders discussed the fate of Korea during World War II at Cairo (December 1943) and Yalta (February 1945), they reached no conclusion about its postwar status beyond deciding that it should be allowed to gain freedom and independence “in due course,” and that an international trusteeship—vehemently opposed by most Koreans—might be necessary to facilitate such a transition. At the war’s end, the Korean Peninsula, although liberated from Japan, was once again occupied by foreign forces. The day of Japan’s surrender—August 15, 1945—became Korea’s liberation day. However, the United States and the Soviet Union had agreed to the division of the peninsula at the thirty-eighth parallel, with the Soviets assuming authority over the northern half and the United States over the southern half.

Japan’s colonial authority was replaced by the division of the Cold War, a division that would last far longer than the hated Japanese occupation. In the first years after the division, the communists built a formidable political and military structure in North Korea under the aegis of the Soviet command. The Republic of Korea (ROK, or South Korea) was established on August 15, 1948, in the South; on September 9, 1948, the Democratic People’s Republic of Korea (DPRK, or North Korea) was established in the North. This uneasy division erupted in conflict on June 25, 1950, when the North Koreans, under the leadership of Kim Il Sung, sent troops across the thirty-eighth parallel in what the South Koreans refer to as the “6–25 War.” The North Korean forces, larger and better equipped than their South Korean counterparts, advanced quickly, overtaking Seoul in three days. By early August, South Korean forces were confined in the southeastern corner of the peninsula to a territory 140 kilometers long and 90 kilometers wide. The rest of the territory was completely in the hands of the North Korean army. The United States, fearing that inaction in Korea would be interpreted as appeasement of communist aggression elsewhere in the world, was determined that South Korea should not be overwhelmed and asked the United Nations (UN) Security Council to intervene.

When General Douglas MacArthur, the commander of the UN forces in Korea, launched his amphibious attack and landed at Inch’4n on September 15, 1950, the course of the war changed abruptly. Within weeks, much of North Korea had been taken by U.S. and South Korean forces before China’s military entered the war in October, eventually enabling North Korea to restore its authority over its domain. The fighting lasted until July 27, 1953, when a cease-fire agreement was signed at P’anmunj4m. The war left indelible marks on the Korean Peninsula and the world surrounding it. The entire peninsula was reduced to rubble; casualties on both sides were enormous. The chances for peaceful unification had been remote even before 1950, but the war dashed all such hopes.

Postwar South Korea: In 1952 Syngman Rhee, who had assumed the presidency of South Korea in 1948 after election by the National Assembly, was elected president by popular vote. Rhee’s presidency was characterized by efforts to cling to power, and the 1950s were a time of economic and social hardship in South Korea. Rhee’s increasingly corrupt efforts to remain in office reached their nadir in the 1960 elections. The obvious malfeasance at work in that vote led to widespread protest, known today as the April 19 Student Revolution. Rhee was forced, at last, to step down. In the interim until new elections, political instability and the absence of a clear successor to Rhee, among other factors, laid the foundations for the military coup that followed. In 1961 a group of military officers loyal to Major General Park Chung Hee carried out a coup d’état. The years between 1961 and 1987 were characterized by increasing domestic political repression and power struggles, including the assassination of President Park in 1979 by the chief of the South Korean Central Intelligence Agency. Political leadership during this time was almost exclusively in the hands of the military and former military leaders. At the same time, by the 1970s the South Korean economy was experiencing a period of unprecedented growth. Although democratic growth was constrained, standards of living rose.

Rising prosperity did not quell democratic aspirations, however, and by the 1980s student protests against the prevailing regime had become endemic. These demonstrations gained a widespread following, and, bowing to pressure, the government held elections in 1987. These were the first free elections in 16 years. In the following election, in 1992, South Koreans voted into office Kim Young-sam, the nation’s first nonmilitary chief executive in 30 years. The 1990s and early years of the twenty-first century were a time of political stability, with a peaceful, democratic transition of power taking place. In 1997 Kim Dae-jung was elected president, followed by Roh Moo-hyun in 2002. Paradoxically, the South Korean economy in the late 1990s underwent a period of instability, from which it had still had not recovered entirely in 2004.

GEOGRAPHY

Location: The Republic of Korea occupies the southern half of the

Korean Peninsula on the northeastern corner of the Asian continent.

North Korea lies to the north, and Japan is located to the southeast,

across the Korea Strait.

Size: South Korea occupies nearly 45 percent of the land area of the

Korean Peninsula, or 98,190 square kilometers of land area and 290

square kilometers of water area.

Land Boundaries: The border with North Korea is marked by a

4-kilometer-wide Demilitarized Zone (DMZ), at the center of which

is the Military Demarcation Line. The DMZ extends 238 kilometers

over land and three kilometers over the sea.

Disputed Territory: A long-standing dispute with Japan continues concerning which nation exercises sovereignty over a group of tiny islands located off the east coast of South Korea. The South Korean government refers to these islands as Tokto (or Dokdo), but other sources refer to them variously as the Liancourt Rocks, the Hornet Rocks, or Takeshima (the name the Japanese colonial government used).

Length of Coastline: The total coastline measures 2,413 kilometers. The west coast is on Korea Bay and the Yellow Sea (sometimes referred to as the West Sea). The east coast is on what Koreans call the East Sea but which is recognized by the United Nations and the U.S. Board on Geographic Names as the Sea of Japan.

Maritime Claims: South Korea claims an exclusive economic zone of 200 nautical miles and a 12-nautical-mile territorial sea. As an extension of the concept of the land-bound Demilitarized Zone (DMZ) between South and North Korea, the Northern Limit Line serves as a maritime boundary established by the United Nations Command in 1954 to ensure access to islands controlled by South Korea north of the thirty-eighth parallel and to maintain a separation between naval forces.

Topography: Approximately 70 percent of the land area of South Korea is composed of mountains and hills. Low hills in the south and west lead to increasingly higher mountains in the north and east. The T’aebaek (“Spine of Korea”) range runs north-to-south along the east coast, while the other major range, the Sobaek in the southwest of the country, runs northeast-to-southwest. The highest mountain is Mount Hallasan, a volcanic cone located on Cheju Island off the southeastern coast of the peninsula, at 1,950 meters above sea level.

Principal Rivers: South Korea’s longest river is the Naktonggang (the suffix –gang means river in Korean), which is 525 kilometers long. The Han’gang, which runs through Seoul, is 514 kilometers long, and the Kumgang is 401 kilometers long. These rivers are navigable, and they played a major role in the development of port cities like Seoul. Roughly 70 percent of all rice fields in South Korea depend on rivers for irrigation.

Climate: The weather in South Korea is characterized by long, cold, dry winters and short, hot, humid summers that can bring late monsoon rains and flooding. Seoul’s January mean temperature is –3.5° C. July in Seoul averages 25° C. Cheju Island has warmer and milder weather than other parts of South Korea. Annual rainfall varies from year to year but usually averages more than 1,000 millimeters; two-thirds of precipitation falls between June and September. Droughts, particularly in the southwest, occur approximately once every eight years.

Natural Resources: South Korea possesses few mineral resources. There are small deposits of anthracite coal, uranium, tungsten, iron ore, limestone, kaolinite, and graphite. South Korea also has hydropower potential.

Land Use: In 2001 about 17 percent of South Korea’s land was classified as arable, and some 2 percent was planted to permanent crops. The remainder was classified as “other.”

Environmental Factors: With 8.4 tons of carbon dioxide emissions per capita, air pollution is a serious concern, particularly in major cities, because more than 80 percent of all South Koreans live in urban areas. Although far behind first-place China, South Korea’s much smaller population is the second largest consumer of ozone-depleting chlorofluorocarbons. City sewer systems are overtaxed. Other issues include water pollution from sewer discharge and industrial effluents, acid rain, drift net fishing, and wasteful packaging of consumer goods. Transboundary pollution concerns spurred the creation of a joint commission among South Korea, Japan, and China to address environmental problems.

Time Zone: South Korea has one time zone. It is nine hours ahead of Greenwich Mean Time.

SOCIETY

Population: In July 2004, South Korea’s population was estimated to be 48,598,175. The official growth rate estimate is 0.6 percent, and this rate is expected to decline to zero by 2028. In the twentieth century, there has been significant emigration to China (1.9 million) and the United States (1.5 million), and about 1 million Koreans live in Japan and the countries of the former Soviet Union. More than 80 percent of all South Koreans live in urban areas. Population density is very high, with approximately 480 persons per square kilometer.

Demography: South Korea’s age structure has changed significantly since the 1950s, driven largely by falling birthrates and rising life expectancies. According to a 2004 estimate, 20.4 percent of the population is less than 15 years of age, 71.4 percent is 15–64, and 8.2 percent of the population is aged 65 or older. By 2030 it is expected that more than 20 percent of the population will be 65 or older.

In the population, men slightly outnumber women, with 101 males for every 100 females. The social preference for male children, although less pronounced than in the past, remains. The widening disparity between the birthrates of males and females has occasioned expressions of concern from the South Korean government. The fertility rate is 1.6 children born for every woman, the birthrate is 12.3 births per 1,000, the death rate is 6.1 deaths per 1,000, and the infant mortality rate is 7.2 deaths per 1,000. In 2004 overall life expectancy was 75.6 years: 71.9 years for men and 79.5 years for women.

Ethnic Groups: With the exception of a very small minority of ethnic Chinese (about 20,000), the Korean population is homogeneous.

Language: Korean is the national language and is spoken in a variety of local dialects generally coinciding with provincial boundaries. The Seoul dialect is the basis for modern standard Korean. Written Korean uses Han’gßl, the Korean phonetic alphabet developed in the fifteenth century. The McCune-Reischauer System of romanization for Korean has been used widely since its development in 1939. However, in 2000 the Ministry of Culture and Tourism, in an effort to make the language more compatible with computer and Internet usage, promulgated the Revised Romanization System of Korean, which is used widely in South Korea today. Chinese characters (Hanja), once used exclusively by the literati, occasionally still are used. English is also widely taught in junior and high schools.

Religion: Just more than 50 percent of Koreans profess religious affiliation. That affiliation is spread among a great variety of traditions, including Buddhism (25 percent), Christianity (25 percent), Confucianism (2 percent), and shamanism. These numbers should be treated with some caution, however, as (with the exception of Christianity) there are few if any meaningful distinctions between believers and nonbelievers in Buddhism and Confucianism, which is more of a set of ethical values than a religion. The cultural impact of these movements is far more widespread than the number of formal adherents suggests. A variety of “new religions” have emerged since the mid-nineteenth century, including Ch’4ndogyo. A very small Muslim minority also exists.

Education and Literacy: Korean society historically has prized learning and the well educated, yet education was not widely available to all until after the Korean War. As late as 1945, less than 20 percent of Koreans had received formal education of any kind. The modern education system is based on a 1968 charter that identifies education as an important aspect of citizenship and defines the government’s role in providing all Korean children with access to education. South Korea has compulsory education through the ninth grade, with 95 percent of school-age children attending high school. Approximately 25 percent of all high-school students attend one of 350 public and private postsecondary institutions, the most prestigious of which are Seoul National, Yonsei, Koryo, and Ewha universities. Many observers regard students as the “national conscience” of South Korea, especially given their important role in democratic reform movements since 1960. The literacy rate is 98 percent.

Health: Although life expectancy has increased significantly since 1950, South Korea faces a number of important health-care issues. Foremost is the impact of environmental pollution and poor sanitation on an increasingly urbanized population. According to the Ministry of Health and Welfare, chronic diseases account for the majority of diseases in South Korea, a condition exacerbated by the health care system’s focus on treatment rather than prevention. The incidence of chronic disease in South Korea hovers around 24 percent. Approximately 33 percent of all adults smoke. The human immunodeficiency virus (HIV) rate of prevalence at the end of 2003 was less than 0.1 percent. In 2001 central government expenditures on health care accounted for about 6 percent of gross domestic product (GDP).

Welfare: Responsibility for maintaining and promoting national welfare and health programs falls to the Ministry of Health and Welfare. The present social welfare system administers the National Health Insurance System (NHIS), the National Pension Scheme, and a variety of other social welfare services such as programs for the disabled, the elderly, women, and children. Industrial injury compensation programs were begun in the early 1960s, and by 2000 they, along with unemployment insurance, were available to all workers, according to government sources. Health insurance programs have increased steadily in availability; in 2003, 30.7 million adult South Koreans were enrolled in the NHIS, as were 15.4 million dependents. A minimum wage, which is adjusted annually, was established in 1998, and in 2003 legislation authorized a five-day workweek. The incidence of work-related deaths and injuries in South Korea remains high by international standards.

ECONOMY

Overview: The South Korean market economy underwent a profound transformation in the last half of the twentieth century, one perhaps unmatched by any nation during that time. It emerged from the Korean War devastated and remained a poor nation well into the 1960s, when an unprecedented period of growth, modernization, and industrialization transformed the economic and physical landscape of South Korea. In a mere four decades, per capita income in South Korea grew 100-fold. At the same time, the country’s cities, where economic opportunities abounded, grew at an unprecedented rate. Once an isolated nation of farmers, South Korea is now a nation with the highest rate of Internet access, a leader in semiconductor production, and a global innovator in consumer electronics.

This growth also has its downside. The Asian financial crisis of the late 1990s exposed a variety of structural weaknesses in the South Korean economy. Foreign reserves were insufficient, foreign borrowing was extensive (and by the end of 1996, 58 percent of external debt was short-term), and corporate debt/equity ratios were extremely high. The surge in debt, a result in part of government policies that failed to rein in a corporate culture that favored expansion over profits, became a significant vulnerability. Several major bankruptcies spurred banks to tighten their lending policies, and the subsequent capital shortage further aggravated an already weakened private sector. More bankruptcies followed. Add to these factors the perception that the Ministry of Finance and Economy was bungling matters, and a crisis of confidence led foreign investors to pull out of South Korea, exacerbating the foreign reserve shortage. By the end of 1997, South Korea was in the midst of a full-fledged foreign exchange crisis, and in order to prevent a total economic collapse, it was forced to secure an emergency loan from the International Monetary Fund (IMF).

South Korea’s recovery from the crisis, at least in terms of gross domestic product (GDP) growth, was remarkable and to an extent helped hide still present, difficult microeconomic conditions. GDP, which shrank by 6.7 percent in 1998, grew by 10.9 percent in 1999. In August 2000, the IMF “graduated” South Korea from its restructuring program. The years 2001 through 2004 saw gradually declining GDP growth figures.

Gross Domestic Product (GDP)/Gross National Income (GNI): The GDP growth rate in 2004 was 5.8 percent, and it is expected to slow to 4.9 percent in 2005. According to estimates, in 2003 the services sector contributed 62.2 percent of GDP, the industrial sector 34.6 percent, and the agriculture sector 3.2 percent. GDP in 2003 was US$605.3 billion. According to the South Korean government, gross national income (formerly called gross national product) per capita in 2003 was US$12,600, up from US$11,500 in 2002 and US$9,400 in 1999.

Government Budget: In 2003 the government had revenues of US$135.5 billion and expenditures of US$128.7 billion, including capital expenditures of US$23.5 billion. In 2004 a modest budget surplus of 0.3 percent of gross domestic product (GDP) was expected. This would make the fifth consecutive year of surplus and highlight the health of the South Korean government’s finances.

Inflation: Weak domestic demand and the appreciation of the w4n (South Korea’s currency) kept inflation in 2004 at 3.6 percent. This trend of moderate and stable inflationary pressure will likely continue in 2005, when inflation is expected to decline to 2.5 percent.

Agriculture: The agricultural sector’s share of gross domestic product (GDP) in South Korea continues to decline, accounting for only 3.2 percent of GDP in 2003. Agriculture employs 8–12 percent of the labor force. Price instability, particularly associated with cheap imports, is an increasing source of internal and external political friction. The primary crop in South Korea is rice; 80 percent of farms cultivate it, and domestic production sufficient to supply the nation remains a political priority. Other major crops include barley, wheat, soybeans, and potatoes, although production has declined steadily. South Korean demand for these products is satisfied through imports. Livestock production has increased with consumer demand and prosperity and is the second largest subsector of the agricultural economy behind rice. Fruit and vegetable production continues to supply domestic needs.

Forestry: South Korea’s once-rich forests were ravaged in the twentieth century by unmanaged logging for timber and fuel during the Japanese occupation (1910–45) and by the Korean War (1950–53). Reforestation policies put in place since the Korean War have had a salutary effect, but the process takes time. Today 70 percent of South Korea’s forests are less than 30 years old and are therefore largely unproductive. Timber imports far outnumber exports.

Fishing: The depletion of fishery resources along coastal areas spurred the passage of the Fishery Act of 1997, which established federal oversight of offshore and deep-sea fishing. It also established limits on catches for eight species. In 2000 there were 95,890 fishing vessels, and total fisheries production reached US$3.6 billion, a slight decline from the previous year. The number of workers in the industry has declined since 1982. In 2000 some 82,000 households were involved in marine fishing, a drop of nearly 17 percent from the preceding year. Fish processing employs some 140,000 workers, 45.5 percent of whom are women.

Mining and Minerals: South Korea possesses few mineral resources. There are small deposits of anthracite coal, uranium, tungsten, iron ore, limestone, kaolinite, and graphite.

Industry and Manufacturing: Industry contributes nearly 35 percent of gross domestic product (GDP) and employs 19–20 percent of the labor force. Important subsectors of South Korea’s industrial and manufacturing base include computers and computer peripherals, telecommunications equipment, consumer electronics, automobiles, shipbuilding, semiconductors, petrochemicals, and steel production. Whereas the industrial production growth rate in 2000 and 2003 hovered between 5 and 6 percent, it appears that in 2004 it moved upward significantly and now approaches 13 percent for the year.

Energy: Korea has modest internal energy resources: small deposits of anthracite coal and uranium and hydropower. Yet South Korea is ranked twenty-fifth in the world in electricity consumption per capita, and nineteenth in the world in the broader field of energy consumption per capita. Globally, South Korea is the seventh largest oil consumer in the world, and the fifth largest net oil importer. In 2001 South Korea consumed 2.1 million barrels of oil a day, and petroleum accounted for 55 percent of the nation’s primary energy consumption. Coal, most of it imported, accounts for 21 percent of South Korea’s total energy requirements. Domestic energy production in 2001 totaled only 5.2 million tons of oil equivalent (TOE), or 2.7 percent out of a total primary energy supply of 198.4 million TOE. Electricity demand, which is met through a combination of thermal, nuclear, and hydroelectric capacity, is expected to rise at an annual rate of 4 percent per year through 2015. South Korea is a signatory of the Kyoto Protocol of the United Nations Framework on Climate Change as a “non-Annex I state.” As part of the broader effort to reduce carbon emissions called for by the Kyoto Protocol, 12 new nuclear plants are planned to go online in South Korea before 2015.

Services: The services sector accounts for about 62 percent of South Korea’s gross domestic product (GDP) and employs 68–72 percent of the labor force. Major sources of growth are financial services, tourism, and retail sales.

Banking and Finance: In the wake of the 1997 financial crisis, and in concert with restructuring called for by the International Monetary Fund, South Korea embarked on a variety of banking and finance reforms. There is, however, some debate whether these have been implemented to the fullest extent. Foremost among the reforms was the acquisition of sufficient foreign reserves, the reform of the corporate and financial sectors, and a variety of structural adjustments. Monetary policy was tightened, with interest rates reaching a high of 20 percent; the public sector was trimmed, with the government budget held to a 3.8 percent rate of growth; minimum standards were established for banks, and those that failed to meet them were closed; investigations were launched into the management of non-bank financial institutions; the Nonperforming Asset Resolution Fund was established to purchase US$12.3 billion in bad loans; and the Financial Supervisory Commission was established. In the corporate sector, stricter auditing and bookkeeping guidelines were established, the rights of minority shareholders were bolstered, and corporate cross-payment guarantees were banned. Commercial banking is essentially nationalized, and privatization of state-owned banks only began in the late 1990s.

The implementation of these reforms under President Kim Dae-jung is widely credited for South Korea’s relatively quick recovery from the Asian financial crisis. Today the benchmark overnight rate in South Korea is 3.5 percent. South Korean banks are making an effort to implement the Basel II framework of the Bank for International Settlements. Foreign reserves, which at one point during the crisis fell to US$8.9 billion, now exceed liabilities at US$174.5 billion, making South Korea the fourth largest holder of foreign reserves in the world.

Tourism: Tourism has grown steadily since 1970, when approximately 170,000 people visited South Korea. In 2002, the most recent year for which figures are available, some 5.3 million visitors traveled to the country, without doubt drawn in part by the Fédération Internationale de Football Association (FIFA) World Cup that South Korea co-hosted with Japan. It was the first time the event was hosted in Asia, and an accumulated global television audience of 42 billion watched the games, providing major exposure for the nation. Short-term foreign visitors to South Korea are permitted to enter with no visa according to the principles of reciprocity or priority of national interest. In 2002 visitors from Japan accounted for 43 percent of all tourists to South Korea. In 2001 visitors from China were the second largest group, reflecting the growing closeness of relations between the two nations.

Labor: The labor force in South Korea in 2004 was 22.8 million individuals. Although there is some slight variation in statistics, the majority of South Koreans are employed in the services sector (68–72 percent), while a much smaller number work in industry (19–20 percent), and only 8–12 percent are employed in agriculture. Unemployment in 2003 was recorded at 3.4 percent. The minimum wage (which is reviewed annually) in 2003 was US$2.09 per hour, US$16.73 per day, or US$472.17 per month; companies with fewer than 10 employees are exempted from minimum wage regulations. The Ministry of Health and Welfare estimates that some 1.4 million persons (or 2.9 percent of the population) live below the poverty level, and another 3.2 million persons are classified as living in “potential extreme poverty.” Collective bargaining is practiced extensively, even among unions that are not recognized by the government. According to the Ministry of Labor, there were 6,506 unions in 2003, representing 1.6 million workers, or 11.6 percent of all employed workers. The government has come under criticism for failing to recognize new trade unions in the public sector, and for arresting and imprisoning trade unionists who engage in strikes under the charge of “obstruction of business.” In 2003 there were 319 strikes and 49 lockouts involving some 137,000 workers and resulting in the loss of some 1.3 million workdays. The majority of unions in South Korea are enterprise-based. Nonetheless, there are 44 industrial trade unions in two national federations: the Federation of Korean Trade Unions and the Korean Confederation of Trade Unions. About 50 percent of South Korean women are economically active, and the 1999 Equal Employment Act was amended to prohibit sexual discrimination in the private sector.

Foreign Economic Relations: South Korea joined the World Trade Organization in 1995 and the Organisation for Economic Co-operation and Development in 1996. Trade and by extension all foreign economic relations are key elements of South Korean politics and foreign relations in general. Merchandise exports in the early 1970s were valued at only 10 percent of gross domestic product (GDP); by 2001, they were equal to 37.7 percent of GDP. South Korea’s main economic partners are China, the European Union, Japan, Saudi Arabia, and the United States. Free-trade negotiations with Japan are expected to conclude with an agreement by the end of 2005.

Imports: Imports in 2003 were valued at US$178.8 billion. Major imports include crude oil, food, machinery and transport equipment, chemicals, and base metals and articles thereof. In 2003 goods from Japan accounted for 20.1 percent of all imports, followed by goods from the United States (13.9 percent), China (12.3 percent), the European Union (10.6 percent), and Saudi Arabia (5.1 percent).

Exports: Exports in 2003 were valued at US$193.8 billion. Major exports include semiconductors, wireless telecommunications equipment, motor vehicles, computers, steel, ships, petrochemicals, and textiles. The major market for South Korean exports is China (including Hong Kong), which accounted for 20.7 percent of all exports in 2003. The other important markets for South Korean goods were the United States (20.2 percent), European Union (12.8 percent), and Japan 9.3 percent.

Trade Balance: In 2002 South Korea had a trade surplus of US$14.2 billion, an increase of 5.9 percent over the previous year. In 2003 that surplus grew to US$15 billion.

Balance of Payments: In 2003 South Korea had a current account balance of US$12.3 billion. From 1998 to 2002, the current account balance as a percentage of gross domestic product (GDP) averaged 4.9 percent.

External Debt: In 2003 external debt was estimated at US$130.3 billion.

Foreign Investment: Foreign investment in 2001 accounted for 10 percent of gross domestic product (GDP); in 2002 it totaled US$84.6 billion. The United States is the largest foreign investor in South Korea, accounting for nearly 50 percent of the total in 2002. Japan, the Netherlands, Germany, Hong Kong, the United Kingdom, and France round out the top seven, respectively. American investments are heavily concentrated in services, while Japanese investors focus largely on manufacturing. Concerns about corruption, political stability, and unfavorable trade practices continue to limit the scope and extent of foreign investment.

Foreign Aid: South Korea, as a member of the Organisation for Economic Co-operation and Development, has an annual budget for Official Development Assistance. In 2002 that amount was US$278.8 million, up from US$265 million the previous year.

Currency and Exchange Rate: The unit of currency in South Korea is the w4n (KRW). As of May 1, 2005, the frequently fluctuating interbank exchange rate was US$1 = 997.36 w4n.

Fiscal Year: Calendar year.

TRANSPORTATION AND TELECOMMUNICATIONS

Transportation System Overview: Although South Korea has a fairly extensive network of highways and efficient subways in both Seoul and Pusan, most observers believe the transportation system is currently operating well above capacity. Vehicular traffic, particularly in urban areas, is notoriously bad. Expansions of both the highway and subway systems are underway. Train and bus service is widely available both in urban and rural areas.

Roads: In 2002, the most recent year for which government figures are available, South Korea had 96,037 kilometers of roadway, 76.7 percent of which was paved. There were 2,778 kilometers of paved expressways. Expansion of the expressway system throughout the nation is underway. In 2001 expressways were renumbered in a fashion similar to the interstate highway system in the United States. North-south routes have odd numbers, and east-west routes have even numbers. South Korea’s first expressway, the Ky4ngbu Expressway, is Route 1. Route numbers 70 through 99 are reserved in the event of Korean unification.

Railroads: In 2004 the state-run Korean National Railroad (KNR) had 3,388 kilometers of 1.435-meter gauge rail (2,113 kilometers of single track and 1,274 kilometers of double track), of which 661 kilometers were electrified. Established in 1963, and under the jurisdiction of the Ministry of Construction and Transportation (MOCT), the KNR in 2004 operated 20,000 trains in South Korea, including diesel and electric locomotives and railcars, passenger coaches, and freight cars. South Korean rail density (length/area) is only one-half of Japan’s and a quarter of Germany’s. About 20 percent of locomotives and freight cars exceed the normal service life of 20 years, and outdated facilities and signal systems need updating. In response, the MOCT established a National Inter-Modal Transportation Plan, whose ambitious goals include increasing the rail lines to nearly 5,000 kilometers by 2019.

Ports: The major ports are Chinhae, Inch’4n, Kßnsan, Masan, Mokp’o, P’ohang, Pusan, Tonghae-hang, Ulsan, and Y4su. Various steamship lines provide passenger service to Korea. South Korea’s merchant fleet comprises 601 ships of 1,000 gross registered tons or more. By type, they include 125 bulk carriers, 196 cargo ships, 88 chemical tankers, 71 container ships, 20 liquefied gas carriers, 5 passenger ships, 22 passenger/cargo ships, 51 petroleum tankers, 15 refrigerated cargo carriers, 5 roll on/roll off ships, and 3 vehicle carriers.

Inland Waterways: South Korea has 1,068 kilometers of inland waterways restricted to small craft.

Civil Aviation and Airports: South Korea has eight international airports. The largest is Inch’4n (Incheon) International Airport in Inch’4n, 49 kilometers west of Seoul and served by expressway and, under construction in 2005, rail service. It began operations in 2001 (replacing Seoul’s Kimp’o International Airport). In 2005, 62 national and foreign airlines served Inch’4n. Other international airports are located at Kimhae, Cheju, Ch’4ngju, Kimp’o, Yangyang, Taegu, and Kwangju. Kimp’o, Kimhae, and Cheju operate direct flights to and from Tokyo, Fukuoka, Nagoya, and Æsaka in Japan. Altogether, South Korea has 88 airports with paved runways and 91 airports with unpaved runways, as well as 206 heliports. South Korea is connected by air to every major capital in the world, either through direct flights or by connecting flights from major international airports in the Asia-Pacific region. South Korea’s major airlines are Korean Air (KAL) with a fleet of 117 passenger and cargo planes, and Asiana Airlines, with a fleet of 61 passenger and cargo planes.

Pipelines: In 2004 South Korea had 1,433 kilometers of gas and 827 kilometers of refined products pipelines. Plans are underway to build a pipeline that would supply South Korea and China with natural gas from the region of Eastern Siberia.

Telecommunications: South Korea had 22.8 million landline telephones and 33,591,800 cellular phones in use in 2003. According to 2002 estimates, the country had 42 million radios. South Korea leads all nations in broadband access and in 2003 had 29.2 million Internet users and 11 Internet service providers. In the late 1990s, South Koreans had access to some 121 television broadcast stations and 55.9 million television sets.