The Role of Foreign Capital in the Korean Economy: A Driving Force of Economic Development or Financial Crisis?

Abstract:     
This paper examines the role of foreign capital in the economic development process of the Korean economy since the early 1960s until 2000. The paper, first, review the history of foreign capital inflow into Korea, along with the evolution of the government policies on inducing foreign capital, in order to discern its distinctive trend by pattern and type; second, it looks into an increasing role of FDI as a channel of productive foreign capital inducement and technology transfer, providing evidence of enhancing the market mechanism and opening up the Korean economy; and third, it examines the historical perspective of the past and recent financial/economic crisis in Korea, emphasizing the two-edged (good and evil) nature of foreign capital in the process of economic development. The paper concludes with some lessons and policy implications.

Number of Pages in PDF File: 25

Keywords: foreign capital. Korea, economic development

JEL Classification: F43, F32, 053

working papers series