The high cost of oil has slowed the South Korean 'economic miracle' and added to the economic problems of the people of the country.
The high cost of oil has slowed the South Korean 'economic miracle' and added to the economic problems of the people of the country. Wages in South Korea are the lowest in Asia and any inflation is acutely felt by the people. The huge increases in the price of oil have also slowed the struggle toward economic independence and better conditions for workers.
South Korea, like Japan, has few mineral resources with the exception of some low-grade coal. It has no hydro-electric potential. It has been developing its economy by importing natural resources, manufacturing goods with cheap labour, and exporting finished products. The results have been incredible. The economy grew at an annual rate of 9.2-percent from 1962, when President ???rk Chung-Hee took power, to 1972 with an astounding 16.9 percent growth-rate in 1973. The government wanted to maintain an annual growth of 10.???-percent until 1981.
But this rapid growth has crated a major problem for South Korea. To finance expansion it borrows heavily. Its current debt of 3,000 million dollars (GBP 7,200 million). Servicing it takes fifteen percent of the foreign exchange earnings and this will grow as South Korea continues to borrow to expand its industrial base.
The growth rate in the last quarter of 1973 was severely affected by spiralling oil ???osts. South Korea gets all its oil from the Middle East. The cost of crude oil imports is expected to rise from 300 million dollars (130 million Sterling) last year to 1,000 million dollars (445 million Sterling) this year. In addition, the cost of most raw materials has climbed as other countries struggle to finance oil purchases. Further, higher oil costs mean many nations will have less money to spend on the finished products produced by south Korea.
The result is inflation in South Korea where the average wage of a worker in manufacturing industries is GBP 16 a month for a ten-hour day, six days a week, In the textile industry, which employs 27-percent of the labourers in the country, the average wage for a 60-hour week is between GBP 5 and GBP 10 a month. On Wednesday (11 February) train fares went up fifteen percent. This means many people will no longer be able to take trains and will try to ride already overcrowded buses. in addition, the price of food has gone up. Taxes on imported goods increased from 40 to 200 percent.
In emergency counter-measures, the government has eliminated income tax for all people earning less than 50,000 won (55 Sterling) a month; increased the price paid by the government to rice farmers; set up fund to finance small businesses; and drastically slowed the planned economic growth for 1974.
But the wholesale price index rose 9.1 percent form January to November last year and the consumers in South Korea are just now feeling the burnt of the increase. The government may have to take more drastic steps to prevent even greater poverty among the working class of the country.