RESTRICTED REP RTSDESK[ WLTHTM4 IV i . I~A H____________i___ This report was prepared for use within Ihe Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION CURRENT ECONOMIC POSITION AND PROSPECTS OF rrT-T17' n 7 T)TTD T Tf' 1' TZf-lD L- A I L 1J.:.1 xx~JN U L).LJI'% %.,X ±.L I A-ril 19 1961 F'' OR Department o Operations Far East UTRE Y EYT, A LTS %.ju nm =,L-< .- 1 nwu J4ý- 10 U. S. $1.00 Won 130 Won 1, 000 = U.S. $7.69 Won 1, 000, 000, 000 = U. S. $7, 692, 308 TABLE OF CONTNTS Page No. BAVIC DATA 1 . .AY .ND CONCI..TNS.. . . 1--11 I. The Political and Social Background......... . . . . 1 TT Tbe Tnnnmrnic o++in, ---- ~cn ce.el.m-e..t-, l93to mid-1/ .1. . . .. . .3 Thc Five -Year Economic -Dvelorin+M I al. 1AoA -IM III. The Current Economic Position. . ........... . . . 7 National Income........... ...... . . . . 7 Recent Trends in Output....... ...... . . . . 7 1. Agriculture and Fisherius . . . . . . . . . . . . . . ( 2. Panufacturing . . . . . . . . . . . . . . . . . . . .9 3. Mining........... ....... . . . . .. I. Other Activities. . ............ . . . 11 1V. The Use of Resources and the Financial Situation . . . . . . 12 The Allocation of Resources...... . . . . . . . . . . 12 1. The Overall Picture . . . . . . . . . . . . . . . . . 12 2. The Pattern of Investment . ... . . . . . . . . . . . 13 The internal Financial Situation . ......... . . .27 1. Honey Su-ply and Prices.......... . . . . . ..7 2. Public Finance................. . . .. 18 3. Credit to the Private Sector..... . . . . . . . . 20 The External Financial Situation.......... . . . . 21 V. The Conclusions............... . . . . . . . . . 25 STATISTICAL A?PENDIX (see following page) STATISTICAL APPELNDIX External Public Debt Outstanding Estimated Contractual Service Payments on External Public Debt Outstanding Table Ho. I Gross National ExNenditures l a Saving and Investment IT Industrial Oririn of Gross National Product III Composition of Gross Fixed Capital Formation TV Prociction of Main Aarinultiral Cron.q V Index of Industrial Production VT Analvsis of F-.r±tnr. AffectinG the nrNy SuinnV VII Price Indices VTTT Conolidated rovernment. Revenueainl Exndrel VTII a Financing of Deficit TX Private Credit f'rom nankine Tn+.i+ti onQ X Balance of Payments YT Eternl qeat XII a Composition of Imports XIII Comnosi+inn n A TMpt XCIII Composition of Exports BASIC DATA Area 38,020 sq. miles of which cultivated 7,790 sq. miles Population (1960 census) 25.0 million Annual Growth 2.5 - 2.8% Gross National Product (1962, billion won) 279.8 Annual rate of growth (1961-1962) 2.9% Per capita income US$575 Total Available Resources (1962, billion won) 313.8 Contribution of net capital inflow 8.6% Gross fixed capital formation 12.3% Government Finances (billion won) 1958 1960 1961 Total revenue 19, 32.2 31.6 Curent expenditre 27R 19 7 LO,- of which defense (12.4) (14.3) (16.6) C U- y n nno nnn+ rl-fjnj n' i Capital expenditure 13.4 10.2 17.0 71- - r A,-+40-1AR--in1 7 57 U.S. Aid 17.0 13.3 21.3 DalanC E uf ra-ymnentS kUD milion) 1>o 10 19601 1962 (est.) Exports a sales to u.N. Forces 7L. 95.) 1U.6 137 Imports 377.6 342.6 310.1 430 of which U.S. aid imports (311.0) (246.3) (196.8) (225) Other current transactions (net) 17.7 4.4 15.7 35 Current account balance -285. -242.7 -173.8 -258 Public grants 316.3 243.1 22.2 20 Other capital movements - 3.2 -1.8 3 Net increase (-) in assets -31.8 -1.5 -47.0 50 Errors and omissions 0.5 -2..1 -1.6 - Money Supply (1957 = 100) 1960 1961 1962 151 215 253 Iholesale Price Index (1957 = 100) 1960 1961 1962 10 726 142 Summary and Conclusions in The democratic party Government under John H1. Chang, which succeeded Syngman Rhee in July 1960, proved ineffective because of internal dissensions and was overthrown by a military coup d'etat in May 1961. The new Government quickly consolidated its position and vigorously pursued its declared political aims which were to punish criminal profiteers, stamp out corruption and cleanse the political life of the country before restoring democratic Government. In December 1962 a new Constitution, giving more power to the President and less to the Constituent Assembly was promulgated and approved at a referendum. Elections for President and Parliament in 1963 have been announced. ii. The Government announced that it would pursue an expansionary economic policy in order to revive the economy which had languished under the strict policy of monetary stability of the previous Government. It proposed substantially to increase agricultural incomes by a comprehensive system of suDort prices Darticularly for grains. It published an ambitious 5-year Development Plan which envisaged the investment of won 320 billion (USa.o million) in th. nr.riod. Tt nnnoune that. as an essential ingredient of its drive to eradicate corruption, civil and military behind these economic proposals was the continued receipt of U.S. aid of about TSq?290 mjilionnyer. i~ ~ h rJ,1i GoCnotS vigorous far~m polic had make effetn agricultural prosperity. Its price support policy has resulted in higher P- - +1,- - - - -± -LL - -i -L~ L U -U -L ~ - J - - -4 - -4 -- -Prom the 1962 harvest is 60%' above the 1960 price. Agricultural usury has been eliminated by- refunding usurious debtsi andu ret:plcing[1 utemi by co-opetit-ve: credit at reasonable rates. iv. Under the stimulus of large government spending accompanied by increased bank crediu and the provision of ample finance for imports of materials for processing, the manufacturing industry gradually became more active until by the fourth quarter of 19o2 it was working at nearly full capacity. The rise in output in 1962 was accompanied. by a rise of about one third in the value of imports. In mining, the drive to increase coal output was successful, it rose 301o during 1961/62. v. The 5-year Development Plan proposes expenditures far beyond the capacity of the economy to sustain, notwithstanding the assumption that foreign finance for 58% of investment outlays (won 185 billion; US$1,425 million) will be forthcoming; the plan proposes to hold domestic consumption rigorously in check so that domestic savings will provide the remainder. The plan will undoubtedly have to be drastically cut down but it is probable that before the necessary careful reappraisal of possibilities is undertaken and completed many projects will have been started which would find no place in a well-balanced smaller plan within the capacity of the economy to carry out. Desides being much too ambitious, the plan is seriously deficient in other respects. vi, Government's financial operations are a reflection of its economic policies. In 1960, the year before the Government came into power there was - ii - an overall surplus of won 2.6 billion. After crediting U.S. aid, in 1961 there was a deficit of won 6.3 billion; for 1962 the deficit will probably prove to have been over won 10 billion, and the prospects are that the deficit for 1963 will be even larger. In thre; years current expenditures have increased by over 60%, but recurrent tax revenues by only 20o. Almost the whole of these deficits have been, or will have to be, financed by bank credit. vii. Government's expansionary policy caused a widening gap between total demand and current resources which was reflected in the increase in the money supply which rose by over 70% between April 1961 and December 1962. Duririg these two years net domestic credit almost doubled. Overall. wholesale prices increased by 17% in 1961 and by a further 16% in 1962. viii. Except for increased rice exports in 1962 from the 1961 bumper crop, exDorts have staqnated: buovant Hpmnnd ann high nrices in the domestic market nade them unattractive. Increased imports and reduced U.S. aid have refu1ted in a serions dImini+nn of feign exchange reserves which stood at US$120 million at the end of 1962. If sufficient im-norts, to kpn manufacturing going at full capacity in -OPi are nm1++0A( and all other foreign exchange commitments are duly met, the Korean foreign excang ree. e will prbal b_ aprochn exhaustiA.on b0efLo re the Midkdle U of 1964. The hoped-for financial settlement with Japan may provide some Pnnrr'-.rn -,- - .- _- ,, + - cojmrcULV iuiuvvmdbuldUb UU "UVU1Th ur1e IrliLaTlOuary trend are urgently necessary to restore stability to the economy. The tun Aiu.y L)Un-11 1,U uLIUw some concern, out iT appears coubt- ful that the measures so far proposed will avert the danger of increasing inf latioary pessures and fu seriously depleting foreign exctange reserves in 1963. CURRENT ECONOM1IC POSITION AND PROSPECTS OF THE REPUBLIC OF KOREA I. The Political and Social Background 1. External political factors have influenced Korea's economic situa- tion, policies and course of development to an unusual extent. Thirty-five years of Japanese rule which ended in 1945 brought the country many of the features of a modern economy. Yet the economy was primarily developed to complement Japanese production. Industrialization was not accompanied by simultaneous development of managerial and technical skills among Koreans. Conseauently. after liberation, Korea found itself with an ill-balanced industrial structure and lacking in managerial and technical experience. Japan's refusal fully to accent Korea's large claims For recarations. counled with Korea's inability completely to bury the past, has, up to the present, orevented the estalblishmnt of normal clinlmatin and commrnial relations with Japan and deprived Korea of the benefits of full-scale trade with Japan and of'Tans t.p.hnirpl ;:;nrl mannagrial a!sis,tancer- 7.zxtennrnal polit+ica eveIP-r rnafte-r t-he l iratio;n fuvrther ag aA Korea's economic difficulties. Liberation coincided with partition of the countrlr- Paritio.Jrn mnt+ fry South1 Kreap thei los oef a majo sorc"o supply of heavy industrial goods, raw materials and power, as well as of an rnnrl- ~r.r~+ol a'v.. v,,~ , ,1 nd nalrnU-n, ---A --n,A--+- i,*----r-- '-er was a large inflow of refugees from the North. 3. The division of the Korean peninsula between hostile political blocs was followed by the Korean war wmich brougIt widespread destruction to the economy, caused another large inflow of refugees and has led the Repub- Lic of orea to decide to maintain a standing army of 600,000 men ever Sirce. These were consequences of far-reaching economic and political significance. Above aLL, tne U.i. became so deeply involved in Korean miLiTary and polIL.- ical affairs that it was virtually committed to financial support of Korea. 4. Dr. Syngman Rhee, elected as the first President of the Republic in 198, continued in office through and after the wa:- until, in April 1960, popular demonstrations against him and his Liberal Party for corruption, dictatorial actions and fraudulent elections forced him to resign and leave the country. The subsequent elections in July 1960 gave a majority to the Democratic Party under John M. Chang, but internal party quarrels rendered the Government ineffective and little was clone to tackle the country's many serious cocial and economic problems. 5. In !lay 1961, Chang's Government was overthrown by a military coup d'etat. The Legislative Assembly was replaced by a. military junta, the Supreme Council for National Reconstruction (SCNR), but the office of President of the Republic and the Cabinet system were retained. In March 1962, the President of the Republic resigned and General Park Chung Hee, Chairman of the SCNR, assumed, in addition, the post of Acting President. The junta's declared policy was to fight communism, to abolish corruption, to develop the country's economic resources, and to restore parliamentary government "as soon as the revolutionary pledges are fulfilled". The new Government soon consolidated its Dosition. Martial law was imnosed. A -2 - guilty under new laws of amassing wealth by corrupt means. Fines and ev4e for f1hes offenses are sad toece ro n 5) . '1 U.L--L-Lul \ 0L ) LIi±±iUi)4 6. Te junta quickly estaolisne complete control over government administration. Although many of the military have now been withdrawn from ministerial and civil service posts, there can be little doubt that the civilian cabinet wields little effective power in its own right and is subject, often in matters of detail, to instructions from the CNR. Among the civil servants, many were dismissed and some prosecuted and convicted for corruption and other offenses. Corruption among civil s(ervants has practically been eliminated and, by raising their grossly inadequate salaries, the poverty that made many of them take to bribery has been apprecialy alleviated. Much good has undoubtedly been achieved, although a bewildering succession of changes in the senior civil service has considerably impaired its efficiency. 7. The present political situation is unclear and the outlook for the near future is uncertain. Until recently, events seemed to indicate that elective Government would be restored around mid-1963 as promised by the junta. The militaiy which initially had appeared determined to make an all-out effort to gain control of the new Government, began to show some vrillingness to accord civilians a. larger role and Chairman Park announced that he would not be a candidate for the Presidency. However, in mid-iarch Chairman Park reversed this decision and declared that, if approved by referendum, military rule would be extended for four years. This proposal met with strong opposition. Attempts to work out a compromise between the military and civilian politicians failed to produce a workable solution. As a result, Chairman Park postponed until September 1963 the decision whether his proposal for prolonged military rule will be submitted to referendum or elective Government be restored before the end of the year as the amended Constitution demands. In the meantime, the junta intends to remain in office. - 3 - II. The Economic Setting Economic Developments, 1953 to mid-1961 8. By ay 1961, when the militarv coup dtetat took place, Korea had advanced a long way from the condition of utter poverty and wide- spread destruction left by the war in 1953. During the seven years between 1953 and 1960, GNP at constant prices had risen by almost 4O% which raised per capita income above its pre-war level despite the influx of refugees durine the war and the subseauent rapid population increase. Moreover, the Korean economy appeared to have been set more firmly on the nath to industrialization. Outout of secondary industry- manufacturing, mining, and construction -- grew on the average at the rate of 12% a year. This sentor rontrihted well over LOh of the growth in Korea's real GNP since 1953 and raised its share of the total from 13 to 20fo. 9. Under agreements with the United States, the Government had begun in 1907 + nok +ntrards mnetary s+tbilization T.which had been completely absent in preceding years when the money suuply and prices had inre =enullyr by-t alnostc 50%.- Thic stbli)io -ro-rnm beca.me! effective as the Government ceased to incur rapidly mounting deficits holding the line on non-defense current and development outlays. After 10 cR +-1~ ~ , ~, -; .~---T,r lw A,-l ,, 1~ ir-A 7vn+-x -ri op,: wAere brought to a proximate overall stability. Steps were taken towards amore± ±CdL~ real sti -canLiee -ate. MlCC CL.' U 0,Y33± 1) ll v,as for certain categories of foreign exchange, followed by successive U1Li alU~± C deval 3u iO 4in J U ii U -dL., L7C _~L. 11C ±CC13 rate was thus raised from 50 to 130 won per dollar. 10. The monetary stabilization orogram was a remarkable success in Unat it enabled tie economy to devote a larger share of its resources to investment as public dissavinLs were drastically reduced and private savings rose. Domestic saving Jumped from 37 of G-1 r in 19u-95u to 6% in 1959-19601/. As for U.S. aid, stabilization marked the end 6f a period during which conversion into local currency at an artificaliy low exchange rate required an inordinate amount of saleable commodities - i.e. raw materials finished and semi-finished consumer goods - in order to suport Korea's defense and general budget through counterpart fund proceeas. The result was a cut in the annual level of U.S. aid from US-,330 million in 1956-1958 to US-. 230 million by 1959-1960, In the improved financial circumstances, the Korean econoimr was able to sustain this reduction in U.S. aid and still raise the level of fixed capital 1/ The level of domestic savings in horea is, of course, strongly influenced by the ver, large size of the defence establishment and the large amount of U.S. assistance. For purposes of more general comparability one might regard about half of &orea's defense outlays as a kind of external service for which a corresponding amount of t.S. aid was compensation. If this approach is adopted and some adjustment of the entirely unrealistic official exchange rate is made, domestic savings were about 6% of GOP in 1953-1958 and 11% in 1959--1960. formation from 11% of GNP in 1953-1958 to 13% in 1959..1960. 11. The drive for monetary stability had, however, depressing effects upon the whole economy. Strong inflation had stimulated domestic production, especially in the manufacturing sector, by rapidly increasing total demand, rising prices, artificially low cost or imported raw naterials and machinery, and ample credit at negligible or no real cost. On the road to stability the economy faltered. Agriculture was adversely affected by falling prices as Government funds for price support were severely cut at a time when stocks sharply increased. Manufacturing was hit hard by slackening demand, rising import costs and lack of credit, and large idle capacities resulted. Growth rates of GNP (at constant prices) fell from a peak of 8.7% in 1957 to 2.0"o in 1960 and by mid-1961 the indications were that the growth rate for the year would hardly exceed 17. Slower growth accentuated the already serious problem of unemployment; at the end of 1960 the unemployed (exclu- ding the underemployed) were estimated to number 1.5 rnillion, equal to 15% of the total labor force. 12. Political uncertainties exerted an additional depressing effect after the Syngman Rhee regime came to an end early in 1960. The much publicised report that economic growth was faster in North Korea than in the South, although not based on verifiable information, led to additional criticism of the Government. The serious economic situation and general dissatisfaction with an ineffective Government were undoubtedly the main causes of the coup d'etat of May 1961. It brought to power the present Government which put expansion in the forefront of its policies. As a short term remedy, it resorted to the injection of purchasing power. As a long term remedy, it announced the adoption of a Five-Year Economic Development Plan to begin on January 1, 1962. The Five-Year Economic Development Plan. 1962-1966 13. The GovernmentIs decision to postulate an average growth rate of 7.1% for GNP over the 1962-1966 period, required extensive revisions of the economic nlan which was alreadv nearing completion at the tIi-of _the_ d 61. According to this direcive, a 41, increase in GNP was nroiecte btween the base year. 1960. and 1966; annual growth rates were to rise from 5.7% in 1962 to 8.3% in 1966. This high growth target became the central noint around which the whole plan revolved. On this basis and in conjunction with an estimated overall capital-output ratio, total investment required over the five-year period was calculated at won 320 billion (USQ2,500 million). Attainment of this target presupposes that anmal invPs,tent, will inreans hv lO/ between 1960 and 1966. as compared with an actual increase of 20% in 1955-1959. It implies further that.the share of investment in cross national xprendi ture wuill rise from 13% in 1960 to 23% in 1966. 14. During the plan period the increases in investment outlays over +1i~ 1O(~fl1 .,.,-.d -o thre-uartersv of the nn,'t r1 -rJ.q J-n (',T\TP, Quite obviously, this would involve an unbearable burden on Koreals domesti presource 1 bi ln , therefore, asin that f8oiansiance will provide won 185 billion (USV"1,425 million), or 58% towards financing total investment of won 320 billion, but that its share vill decline from C05 of investment in 1962 to 43b in 1966 when it will have returned a-proximately to the 1960 level of US250 million. Despite this substantial external contribution, the plan implies that domestic consumption is held rigorously in chec. so that domestic savings may cover the remaininF won 135 billion, or h2', of the proposed investment. It is assumed that private consumption per capita would be reduced slightly and only be restored to the 1960 level in 1966. Public consumtion outlays are similarly restricted, In summary, the plan argues for !trinr:ent qiqteritv in consunntion. It -roiects. on the averaLe. a marginal savings rAte close to 60;j, while annual marginal savings rates are Snmdto n rclinn from 0lmrt. 100 in 196? to 2K in 1966. 1i ncreased indu+.rialization in ikedp nnon .s Kor' most promising avenue to-ards achievement of satisfactory economic growth and the Ionnu.n aol of'a Plf-unnor+ingecnomy The cmrrent nlan neriod is regarded as the period of preparation for industrialization. Thus, -sile +ht r'cQ(n+ n, nn o++ nri : i ch ni +romoerpzi o mnp +n raise productivity and incomes in agriculture, it places its main emphasis onth +11p lp n t,n ofr npower, coal ad other eerr c+ ,rro +V irpr ci nn of an adequate infrastructure, and the expansion of key industrial Cac _1 J ~ +4 J2 e s. T14 +1, -rl 0U CA>1,aQ44tn ±V h~l from the past pattern mainly by a reduction of investment in commerce and forestry, and fisheries, 3L3 to manufacturing and mining, and of the rem tijji q p LIC CdLUOU dlU -Lb kZcUlii, . I C U j L .1;U I.L , Ul. C 04 U 1 L-u ll, communications, and housing. 16. There can be no doubt that Korea's Five-Yea:- Economic Development Plan, 1y62-1966, is a valuable first step towards an assessment of the country's development possibilities. Hoever, because of its practical deficiencies it gives iittle assurance that the necessary restraint will be exercised on uneconomical investment which seriously impaired the economy's growth in the past. Although it must be recognized that the 7.1,' growth rate was decided upon primarily for its psychological effect - internally as well as, vis-a-vis North Korea, externally - it had important operational consequences for the plan and led to an investment program un7ich by far exceeds the economy's ca-acities. As its overall size is too large, tie investment program gives the im-iression that the Government wants the economy to move in all directions at once and at a uniformly high sceed. In other v-ords, the need to a:-rive at an investment target that c uld suprort the postulated growth rate led the planners to surround the core of much needed -rojects with so many other less essentJal schemes that a consistent set of basic policy decisions about the direction of crowth and about priorities is no longer discernible. This is especially true of industrial development, but it pervades the whole program.. It must be concluded, therefore, that art attempt to carry out the five-year plan in its original form raises the prospect not onl of an unbearable strain on Korea's material resources which will express itself in strong inflationary pressures, but also of an over-loaded administrative and financial machine that will impede the speedy execution of the core of much-needed projects. However, an a rraisal of orea's development effort and policies in their effect upon its economic and financial prospects cannot be based solely on the five-ye.r plan in its original form. At the time the plan became effective, much depended on The annual implemen-- tation programs which will be discussed later. - 7 - III. The Current Economic Position National Income 17. A record crop of rice and other grains in 1961 upset preliminary estimates which had predicted that GNP growth (at constant prices) would hardly exceed 1%. The 9% increase in agricultural production by itself corresponded to a 3.7% rise in GNP. Every other sector, except mining and construction, showed either little growth or some decline in output so that the overall rise in GNP was 3.5%. Declines in activity were limited to the service sector. Manufacturing output, the main target of massive stimulation by the new Government, expanded hardly at all and continued to show the decline in growth rates that had been apparent for several years. 18. According to preliminary estimates. GNP (at constant prices) went up by about 2.3% in 1962. This is less than the 5.7% growth rate forecast for 1962 in the five-year nlan. but taking into account 1961 for which no increase in GNP had been assumed, growth. since 1960 has slightlv exceeded t1h nl-n tprat. An nnmnared with 1961 - the nattern of growth during the year was reversed. Extremely unfavorable weather winrd omt the gain. made in Pgrio.itnr in the nrevious year and reiuned production by about 10%, equivalent to a 3.9; decline in GNP. All the o)the-r sectors , howvr, enfte_ f-rncm +3i in-ncPr nirrrliqnf- power of the rural population, created by the record 1961 crop and higher Government purchasing prices for aricultal p cn e,n and roem the con- tinuation of the Government's expansionary fiscal and monetary policies. facturing ranked among the highest as recovery from the depressed mid- stimulation of quickly rising domestic demand. 19. The data on GNP growth during the past two years suggests that one Guvermeinu a n s, uccudu in acteleraui.g Wite Iclve vI 1V_Uo1 eI Vj4 on which had been slowing down since 1957. However, th-s should not be iLnterpreteud as an JndtUo t>.d the economy has once again been s OUU a path of more rapid expansion that can be maintained, for it must be recent increase in output represents solid achievement. This appears to heJ'~1 case~dd 4i1 a~J g.L lLU U1 V, 1J1iLit,. 4=1U 0 1 UVJ U Wl -L- _L_t,-LUZD However, the remarkable recovery of manufacturing industry seems to depend 1i1 L-.y V11 aii dLIOdL ZD,U1i[U_eU(U -LUVu-, 01 CsUni eJrL demad IL1LCI _Zj directly related to a serious deterioration in Korea's financial situa-- ULUi. IUUrndiy, LLb U ledWt:- UUIU.LU.Lon s UUlfld- WIIbH UIIU UUVt1- mentts announced policy of austerit, and greatly increased savings. Kuernaly, it put an Juuieasuigly severe surain on twarea s foreign exchange position. Recent Trends in Output 1. Agriculture and Fisheries 20. Agriculture which together with forestry and fisheries provides income for almost two-thirds of the population and contributes about 40,) of GNK'P, has greatly benefited from increased attention to its pressing problems in the past two years. In 1962 the Government refunded usurious farm debt and expanded institutional credit. Great efforts were made to distribute fertilizer, pesticides and improved seeds on time. ,iore extension officers were sent into the field 7rhere they conducted an a-pa arently ver- successful instructional campaign in Oetter fanning methods. Simple farm machinery and implements were beginning to be used to an increasing extent. As a result, 1962 promised to produce a bumper crop of rice almost equal to that obtained with the help of exceptionally favorable eather, in 1961. Adverse weather conditions prevented this and the rice crop only came up to the averaLe for the previous five years. ThiF meant a decline of 12d from the 2.7 million ton output in 1961 which had established a record at almost 19) above the 196) level. Other grains Pollowed almot, the ,sme nattern. but the fluctuations in output were smaller. 21. Conditions in a,riculture appear definitely to have improved, and cn+rn+ may be ex+pect + folln a somewhat stnner unw;r trend than it did in the latter 1950s (2-3%). Nevertheless, formidable problems re;nin + -- p n Tr_- - n~ +lip ncy'i oiil Hi-rol zp ne li r. r mir 1 related to the small size of the average farm. Viability of Korea's questions of the optimal use of fertilizer and of its composition requre rgert atenton. 14 tuould ltso seem necessa-, to stiidy the role that reclamation of upland and tide land areas could play within a nurchases at a minimum price and similar price support programs for a var-L U _U IUJ ~ UL Uki. ll 'JUUU US 11CL" IQ -U ' attempted to alleviate the difficulties arising from inadequate farm iLncomesU , pencling a. solution of the lundamentadL prob-lemS.* Sne90 the Government p-r chase price of rice has been increased byr 60, and now stands at UT7 per ton 01 unpolished rice. rices of uoter pruuuucts were raised similarly. Partly, -these increases merely co,ipensated farmers for reduced fertilizer subsidies, previous lags in aLricLuraL prices behind other prices and a further rise in the general price level since 196u. But the indirect subsidy to be borne by the rest of the economy has probably increased. ioreover, a price level has been established which makes the export of rice and other agriculturaL pruuuLS (plan target for 1966: USq22 million) through ordinary channels impossible without, a considerable Government subsidy. At present it is not clear that agriculturers basic problems will be tackled eL-lectively. Early in 1962 the Government established a committee for tre structural review of agriculture, but its report has not yet been completed. 22. Fisheries in t'orea make only a small contribution to GfP and employment - 2 and 3/ respectively. However, exports are substantial as roughly one fourth of out ut is sold abroad, aiounting to JSj46.1 million, or 16% of -total exports, in 1961. ioreover, the industry has been -rowing rapidly. Marine production increased from an average of 277,000 tons in 1952-1956 to 37,000 tons in 1957-1961. In 1962, output jumped b, almost 187. In the nast two years, growth was stimulated by the discovery of rich shrimp banks off the coast near Pusan which led to the formation of new private companies that invested considerable amounts in 9 new boats, w-harves and processinf plants, and developed an export market in the United States. The fishing grounds off the Korean coast appear to offer opportunities for substantial further growth of the industry, but mechanization of the fishinT fleet is essential. Progress in this direction was slow in the past. A start was made in 1962 in carrying out the five-year plan's proposal for increased Government financial assistance in thL cnstruction of rew boats and mechanization of old ones. 2. Manufacturing 23. The restoration of prosperitr to the once buoyant manufacturing industry which had been hit hard by monetary stabilization and the introduction of a realistic exchange rate, was one of the principal aims of the militry-In Govcrnment.- The eSence of it.s nlan was to revive consumer demand by quickly increasing the rate of Government spending, even -at.the cost o lg.e n In bueary definit. cnnled with a hold nrnarm of agricultural price supports. Also, credit to industrialists was ePannded ndrl amnp finance for impoi-rts of raw. matePrialsQ andrtlline goods was made easily available. Strict measures to prevent illegal sales of Uj. T.T. and -orMn rm goods and to-r stpI-gl fomJp n bot of which were thought to have reached large proportions, were enforced. reviving demand was met largel', from accumulated stocks which manufacturers viui ULU .L u-).U :II U! :- WU itU _dU L L ao~1U.L~ U.± U . also were many large industrialists who had been heavily fined for iiie,gl " ackLV_Ut-: ± lu-Lii , I'llu 1JIuU_uub L.tEbJ-Ilu aiu vWu.L'= nUII I- p ii to find large sums in cash to p;ay their fines. 24. Manufacturing output showed little growth in 1961 but revival Uecame more vigorous in 1o6, although interrupted in The miadde of the year by Government's abortive attempt to freeze large bank balances as part of a scheme of monetary reform. During the fourth quarter several branches of manufacturing were working to full capacity and it is estimated that output as a whole increased by L/, for the year. Every branch of industry beneited, especially textiles which account for one-fifth of the total value of all manufactures and had been depressed for several years. This impressive recovery, ilhile beneficial to the economy in terms of additional income and employment, depended heavily on Governmentis pursuit of policies that were causing Korea's financial situation to deteriorate seriously. The rise in prices which was the direct result of these policies brought about the recovery that accounted largely for the increase of well over US..,1U million in imports, as compared with 1961, while exports again became unattractive, despite increased subventions and other encouragements. 25. Thus, recent financial policies have tended to work against a correction of the fundamental weaknesses in dorea's manufacturing industry - its dependence on an artifically stimulated level of domestic demand for consumer goods and on a large net inflow of goods from abroad. If production throughout 1963 continues at the level reached in the fourth quarter of 1962, the total output for the year will silow an increase, again of roughly 15'%, over that for 1962. But, as further discussed later, the level of production in 1963 and for some time thereafter is - 10 - likely to be critically influenced by the availability of foreign exchange to pay for imported raw materials and semi-finished goods. It seems cer- tain that the current level of U.S. aid for commodity imports plus the foreign exchange earnings from exports likely to result from current policies, will prove insufficient to maintain manufacturing production at this level. In the longer run, investments under the five-year plan should ease the foreign-exchange problem. For example, the proposed oil refinery and the fertilizer plants under construction or planned should quickly effect savings of foreign exchange once they come into production. But many other projects cannot be expected similarly to help make available the approximate amount of US$170 million needed each year for imports of raw materials and semi-finished goods to maintain existing manufacturing facilities in full production, The potential foreign-exchange savinRs are in many cases lost for the near future by financing through relatively short-term suppliers' credits. Numerous other Drojects would not hel- solve the immediatp nroblem. but would effect foreign-exchange savings only in the sense that they would eliminate the need for additional imnorts which wold. in their absence. arise from an expansion of the economy as projected by the five-year plan. The conclusion is that for 5:inmp t.imp tor ram- +.hp 1pvP1 of nrndiint.ion from existing facilities that Koreats foreign payments position permits to be maint.iairl- ill ronpend nrcarinsly unn the amont of aid available for commodity imports, unless a determined and comprehensive effort is ports, 3. Mining 26. Ilining, measured by its 2% share in GNP, plays a minor role in the economy,- but nevertheless made a significan cont-ributio n to0 the improvement of the country's foreign-payments position. The remarkable L1'~. LLI I UL kjuu., from UI_Lt,0 LIal d IILL-LLIUL1 UVIo L11 L 7 )) bu ) *L4 million in 1960 and then to 7.0 million in 1962 turned Korea from a a- ,, LIIPU± U± U Ld I Ur,)L)__ 1II1111011 111 17)O; 111LO ca Small± riet eX-QJC)rLt.L9 Another mineral, tungsten, is one of Koreats chief exports and although out-put and particularly prices have greatly fallen. S-TInCe the1 _L91bom current earnings are still about US$h-5 million. Iron ore output, too, LOP~ .L L' J..1i .LU%,U11U Y U010 CI.Li4VLI~ O-L-L U11: Lons~\- UUI v IUr being produced are exported, earning roughly US$h million. 27. Substantial investments are planned to be undertaken for the uevelument of coal iniUUg oU proviUe fuel for the planneu large iUcabe in thermal electric power and to permit coal to replace wood and rice traw as tie major domestic fuel. DespLe the poor quality of most coal deposits and difficult mining conditions, this program is sound, since Korea wrn a relatively low level of real wages will probably continue to be a low cost producer, arid, anyhow, will have insufficient foreign exchange to pay for fuel imports to replace home-produced coal. The target of almost 12 million tons may not be fully reached by 1966 because substantial increases in output beyond the current level depend on the exploitation of new deposits and a reorganization of the private mining industry involving the consolidation of numerous small holdings. But some progress in this direction was made last year, and a further significant increase in output should be achieved in the next few years. 4. Other Activities 28. Among other actIvities, electric power generation, transporta- tion and housing deserve special mention because, despite heavy invest- ments in the past, they require substantial further capital outlays. Together, they are allocated a good part of the US$1,250 million investment which the five-year plan proposes to be undertaken in fields other than agriculture, fisheries, manufacturing and mining. Electric power has for some time been a bottleneck as the existing generating capacity of 366 1W proved to be insufficient to assure uninterrupted supply, especially to the growing nanufacturing sector. Some improve- ment was achieved during the last two years by using power barges as well as by reducing the substantial distribution losses that were occurring. Korea undoubtedly needs to expand its power supply markedly in order to satisfy present and expected future demand as well as to lay the basis for accelerated industrialization. 29. Record crops and increased imports made heavy demands on the railroad in 1962 when freight traffic rose by over 10%. Over the last two years, passenger traffic has increased by nearly 20%. A large part of the railroad's investment program, equivalent to about US$100 million, is directly related to the expected increase in coal output which will require additional coal cars and locomotives as well as an extension of the railroad network in the coal-Droducing area. The program also incluldes substantial sums for modernizing and increasing the freight-car fleet and for completinp dieselization. The program appears to be sound. but consideration should be given to the possibility of curbing the embarrassing increase in nassenger travel by higher fares before the proposal to buy passenger cars in addition to the original program is adoted. Tn housing. Korea still has a critiecqI shortage desnite the construction of 800,000 dwelling units between 1951 and 1960. During the nlan nPriod n total investment of s:1200 millior mostly from private sources, is proposed for the construction of 475,000 units - an increase of rna"hly 14l5 or little more than the rate of household formation -- but it is doubtful if this goal can be reached. Very 1-lt.tl in has r ben dneo establis th rgac.qnizatP+ional bas-isq for such a program, arid, especially, to mobilize private savings to ensure the most econonical and hnPficia;nl use of Government funds. - 12 - IV. The Use of Resources and the Financial Situation The Allocation of Resources 1. The Overall Picture 30. Total available resources which had been riSing at an average rate of 5.25% in the reconstruction ceriod, 1953-1957., grew only by 2.8% annually in 1959-1960. W4hile it had been possible for consumption and investment outlays (at constant orices) to increase by over 5fo a year, the scope for further expansion of expenditure was severely limited in 199-1960. However. by deliberately restrictinL the erowth of consumation outlays, primarily through fiscal policies, the Government succeeded in chnnnelling most of the increase in resornces into investment_ The share of consumption expenditure in GNP declined from an average level of 97% in 1953-107 + Qh, In 1 O196, vTb-1l fId a 1 -Nole_ni+..iI tin rnen from 10.5 to 13%. Significantly, reduced negative savings of the public scor nla-ed an imrV+an+ role in raicincr +hio lval -%f rnPq.i- q.vHns from 3 to 6% of GNP. 31. The accession to power of the new Government in May 1961 brought rise in GNP growth rates, as compared with 1960, probably to around 2.9% avea in ,- 91-192 HowLTever, they also tended to riethe l-ee o consumption at the expense of savings so that the gap between total limited in 1961 and apparent only from a significantly higher level of the Government's efforts to expand purchasing power, and some increase in the cur-11- deficeit of the public sector, Du, on the whole, consump- tion (at constant prices) declined slightly, chiefly because rising expenditures of the rural population on manuI acured goods were met PI-- marily from stocks and, therefore, had little effect on manufacturing output and on urban incomes Inus domestic savings mainuained their 1959-1960 relationship to GNP. To some extent, this result was, of course, misleading because it reflected the considerable increase in grain inventories which resulted from the year's bumper crop. The sub- sequent sale of these inventories at high, government-supported prices was undoubtedly a factor which reinforced the stimulating effect on domestic consumption of substantlUy higher Governmenu e uiU>res, involving a large deficit, in 1962. An analysis of preli:in ry national income n:c'rc, tes in 1962 indicates a strong trend tou-wrds -ii-h r priv2te and public consumption outlys which greatly reduced domestic savings. 1-n f%ct, the data shows that the GovLrnmunt's concurrent efforts to raise the standard of living and to increase capital outlays resulted in a current account dGficit on the balance of payments whose relative .,,:gnitude is reminiscent of th- yea.rs preceding the achiLvCment of 11nancial st:bilization. - 13 -- Saving and InveStment (in billion won, at current market prices) 1953 1956 1958 1959 1960 1961 19621/ Fixed Capital Formation 3 13 22 27 25 30 39 Change in Inventories 3 -7 3 1 7 - Gross Investment 6 6 25 31 26 37 39 in % of GNP (15.4) (4.8) (14.1) (16.4) (12.4) ()5.5) (13.9) Private Savings i -6 14 22 11 19 12 Public Savings -1 -5 -6 -6 -4 -5 -7 Total Savings 3 -11 8 16 7 14 5 in % of GNP (7.4) (-8.7) (4.5) (8.6) (3.4) (5.9) (1.8) Deficit 3 17 17 15 19 23 34 in % of GNP (8.0) (13.5) (9.6) (7.8) (9.0) (9.6) (12.1) 1/ Rough preliminary estimate. 2. The Pattern of Investment 32. The annual investment programs for 1962 and 1963 do not deviate significantly from the original plan in total amount of investment and broad sectoral allocations. The size of the 1962 investment program equalled the original target of won 50 billion (equivalent to 20% of the 1962 GNP as oroiected in the -lan). When the 1963 orogram was pre-ared, it was initially set at won 70 billion, but subsequently the amount was, for financial rensonq. reduced to won 19 billion. In nominal nrice terms. this equals the original plan target for 1963, but in terms of 1961 prices it is roughly 8V lower. The 1962 nrogram allocated about 70% of total investment to planned projects which were identified individually, while the remainder renresented an assumntion about investment that, would be undertaken by the private sector in small schemes (so-called non-planned nroey t.)i Of the investmen+ prnram for nlanned I n-rnico-+ in 1(9 roughly 30% was earmarked for agriculture and fisheries, 7% to mining, 13% to manfa+uring, 17% each to nlec+ric poer and +ran ten- +o+nn' and the remaining 16% to other sectors, primarily housing. The 1>63 program Allocations for so-called non-planned projects are alnost completely while that of manufacturing is raised to 20%. Moreover, while the 1962 Progra caL..u .LU . J_/O U d'L _L ±±4EL MiIi'111 .111 P-Ld.UV-ut PI-OJOIU L LU O l DE _L_MEUJCtEU - 14 - - ANTAL, TNVVSTM4T PFOGRAMS 1962 1963 (US$ million) (won billion) (won billion) (US$ million) (won billion) (won billion) i. Plannea Pro5ects ture 0.9 6.8 6.9 .100 !0.7 Livesok 0.9 1.1 1.2 Farmland improvement 1.5 1.5 - 1.6 1.6 Reforestation, erosion control - 0.5 0.5 0.2 4.7 4,7 Loans to farmers 3.2 3.2 - 0.7 0o7 Others 0.4 0.4 0.9 2.3 2.5 U. 0 oR A Construction, import of vessels 05 0..6 0.3 1.1 Others - 0.6 0.6 0.5 0.5 0.5 Minin 7.2 1.5 2.4 9A2 g2 _3-3 Coal mining 7 1 7.9 1.3 1.4 Tungsten mining 0.9 0.2 0.3 0.2 0.1 0.1 Iron mining 0.8 0.1 0.2 0.9 0s2 0.3 Others 1.5 0.1 0.3 0.9 n. 1.5 Manufacturing 37.2 7.1 12.0 .-26 12.7 Fertilizer plait 0.6 0.6 0.7 1.7 0.2 0.4 Fertilizer plant 16.5 0.1 2.3 - 0.4 0.4 7hungju fertilizer plant exp. - - - - 0.3 U.3 Soda ash plant 1.9 0.1 0.3 3.8 0.1 0.6 PVC plant - - - 0.1 0.1 Cement plants 4.3 0.1 0.6 16.5 0.5 2.6 Combined steel products 0.4 1.4 1.4 - - unsettled Transp. workshop 0.3 0.4 0.4 2.6 nor 0.8 Machinery works - - - - - unsettled Shipyards 2.8 0.6 1.0 1.2 0.3 0.4 Others 5.8 3.7 4, 1O.1 3. 6.1 Electric Power 8.3 2.0 3.1 7.2 Transportation 3.0 2.2 2.6 1.6 Rail track extension improvement 1.1 0.9 1.1 0.1 0.3 0.3 Coaches - - - 1.2 - 0.2 Jiesel locomotives - - - - - oads and bridges 1.9 0.7 0.9 1.4 0.7 0.9 Vessels - - - 14.3 0.1 1.9 Others - 0.6 0.6 2.6 2.2 2,6 comrunic:tons 6.6 0.4 1.2 18.8 1.0 H'i- 6.0 6.0 _ (ther Services -- _ -2 Total 63.7 26.7 35.0 137.7 36.3 54.2 II. Non-nlaned Proi etn n.a. n.a. 15.0 2.1 1.8 2.1 III. Local Government - - s A tO GRAND TOTAL 50s0 143.0 40.7 59.3 Govc nment 24.9 23.5 Gov't-owned enterprises 7.0 6.7 Frivate sector 18.1 29.1 - 15 - by the Government and government-owned enterprises, this proportion is reduced to 55: in 1963. 33. It is beyond doubt that annual programs of such magnitude as proposed for 1962 and 1963 are impossible to achieve. Shortage of financial resources appears to be the most restrictive factor, especially as long as the Government does not curtail increases :n consumption. In 1962, the Government had to rely heavily on relatively short-term suppliersl credits of which about US4l50 million were planned to be contracted. As a result, projects so financed will, during the period of repayment, not effect the foreign exchange savings that were projected by the plan. Moreover, down payments and service payments on these credits, in addition to considerable payments under contracts financed out of Koreats own foreign exchange, will begin to create a serious strain on Korea's payments position towards the end of 1963 or early in 1964, which may well preclude an- further financing of projects from these sources. And long- term financing from foreign sources is unlikely to be available in the amounts reauired b-- the -roposed investment prograns. The shortage of internal resources oill probably be even more restrictive. On the one hand, this is resulting in under-financing of Drojects - a problem that has p,lagued Korea's manufacturing industry for many years. On the other hand, it is driving the Government into inflationary financing and into continued efforts to raise the amount of counterpart generating aid which. even if successful. may well be self-defeating because additional imports of food and other consumables, apart from their disincentive effent.q on Tnoal ncnt,inn. wolild anhablv reniire nolicies designed to increase absorptive capacity for such oods and detrimental to savings. Tn aditinn. nrframe of the nrnnmed mqcnitide trned hv far the economvts absorptive capacity in public administration, financial institutions and. +hep nriva+p scor. T+. anitei annaent +at.G+.ho Tvrnment att.emnt. to reach the 1962 target overloaded the administrative and financial mahieso much tha the sk,~eveut of much ~ poet a seriously ipeded. 34. Preliminary data for 1962 indicate that total capital outlays for the y17ear amounted to won 3 ilo,o 5 ftepooe mln. Compared with this actual achievement, the 1963 program in its present form cal fo an increase in --esnRe- of ove4.LO /1 suggests that the reduction in the 1963 program from the initial proposal of won 7u bi-llon to the present amount of won 59 bilon falls shrtb far of the cut required to bring planned investment into line with resources. oreover, tis reduction affected onLy the allocation lor non-planned projects, i.e. smaller schemes to be undertaken by the private sector. As experience in 1962 has shown, t1s part 01 the program had very little chance of being carried out anyway, without much more support by the Government and its financial institutions. Therefore, this reduction cannot be regarded as a step towards relieving the pressure on resources. At the same time, it emphasizes the Government's pre-occupation with the - 16 - large Z~U 1 land IU-rjects, -OLiiuoutlrgr 1)or uie Jiportance whLih the~ small.r, 'non-planned' projects have for the economic justification of many of the large 'planned projects. 35. Thus it appeared to the mission, that the Government was actively pursuing its original investment targets for 'planned" projects, e.g. in cement and power where even in the context of the full program the estimated output requirements seemed far too high, and that it did not recognize the need for a balanced reduction in the investment program. The expansion of cement production from 700,000 to 2,000,000 tons by 1964, as then planned, would undoubtedly create substantial excess capacity in the context of a feasible, much smaller investment program. Planned investment in electric power facilities would increase generating capacity form 366 to well over 1,000 1Wby 1966. Plants currently under construction will almost double capacity within the next two years, and it vo-uld appear necessary -to review the remainder of the program within a thorough reapnraisal of the whole five-year plan in order to avoid construction of considerable surplus capacity. According to recent information, the Government has deleted one cement plant from the progra and is reviewing the plans for power development. 36. Analysis of the investment programs for 1962 and 1963 reveals that a sizeable number of 'planned' projects are apparently being undertaken without a thorough examination that proves convincingly that they represent the optimum use of scarce resources. There is the development of the Ulsan Industrial Comolex on the Southeast coastof the Korean pensinsula. This will not only involve the Government in substantial outlays - probably around won 6 billion (U.Q- O million), but will also burden the plants to be erected there with extremely high cost for levelling and for housing which ha, to he nrovirled for emnlovee-_ Three hvdro- electric projects are currently being undertaken and more are planned. Not, only nre +.he omnqri nnq of hydro- anr thermal eLectrin nower nsts: biased by the use of unrealistically low interest rates, but capital cost Pe+.imates also fail + make nn nHnnrJtri ii llmn fn-r ip -nc+ nf r cnt+inc the farmers who will hive to be dispossessed. Moreover, the political necessity of prnviding new. n lnd t the clinP fvrmPrq wiTl i nevitblV involve the Government in costly reclamation schemes whose economic justificatinn has not.vet_heen proved. In addi+in, resettlement will require most of the tidal land areas that could be reclaimed for several -ea rs to com and -.04i-11 +hus e lim inate- nanne sibl apnn-roac vo a,l s- ,c,io ±in of Korea's problem of overcrowding on existing farmland. 37. Tte investment program for the manufacturing sector suffers pera -S n mre 1a Wn- Wn - the- n+ln+ -F-4 - a A-; --tnr 4-1-aC a 44,.- - a4- by lack of managerial and technical experience, shortage of domestic anDUIC-I U k UaUC-L CJIU 111PL.1-'4 U IUVI1U4L I-LU1 -s a reSLUU, MiOUh UI L'II pJJCLUnIC outlays appears to be of questionable justification at this stage of Koreals ovCaJ-L uCViuptuiI Llu dO uI )u,uuu Lu US u[Ue azu Uu1iing mill, the shipyard expansion, and some synthetic fiber and chemical plants. Vjhile in the long run the solution of Iorea's economic difficulties - 17 - Uu- LU U e U L _v: -L~ il -Li~t, . U _L U U _1±c1J±ZC:LU±UlI3 t, J~ JII± U t U IV61CI11 UU not seem to provide a balanced and feasible course to that end. Although t contains a core UOf highly desirable projects, in 2-s entirety it threatens to perpetuate, and possibly increase the weaknesses which have adversely ai,_ected the manufacturin, sector in the past. 3. In summary, it is apparent that so far the deficiencies of the original five-year plan have not been corrected in the process of implementation. In their present form, the annual investment programs are essentially a collection of inadequatcay examined projects whose execution is largely determined by accidental factors, e.g. the availability of foreign financing, and not by rational choice. Recently, the Government has begun to re-examine the five-year plan with a view to eliminating its structural deficiencies and improving the investment programs from 1964 onwards. At the moment, it is too earLy to judge the outcome of this review, although the relatively short period of time allowed for this review, if adhered to, is bound severely to limit the usefulness of the effort. The Internal Financial Situation 1. Money Supply and Prices 39. After May 1961, the 21 years of approximate monetary stability came to an end. The widening imbalance between total demand and currentreources, including foreign aid, was reflected in the deterioratine financial situation as evidence, by the rapidly expanding money supply which rose by L2%. to won 32.1 billion. between Anril and December 1961. During 1962, the rate of expansion appears to have slowed down to roughly 18% as the money supply increased to nhout, won 37 billion hv the end of the year. However, the source and significance of the expansion changed considerably between 1961 and 1962. Tn thp former vPr )-r nrrimniin foreign exchange reserves were the main source of expansion, accounting for almn!t two-+.hi rd- of the inrense- while risin net credi+ + +th public sector was responsible for only 10% and bank credit to the private sector for 24% of the total_ Tn cnntrast. the won b bill in expansinn in 1962 occurred despite a substantial drawdown of foreign assets, while domestic credit increased by abonw+.rn 11 billion, urmialen+ to 7 f th +e money suppLy at the end of 1961. Moreover, this increase was due almost exi .~lr% orapidllyr ri n net , 4 credi to . the4 pul setr * Gross credit to the -rivate sector also grew substantially, but its effect on partly attracted by substantially higher interest rates (up to 16% p.a.) businessmen convicted of illicit profiteering to meet their fines. 40. In the first months of 1962, the Government apparently became ULUUL-L LJy lAIt b.LUW ru01i,j:(.L wt -L;u1)ITuIY T o itL-63 AA OS - 18 - Continuoua in-ectinn nf' nnJrrcin nr TTn P-ri rIn+IT hint 1 ++10 success in stimulating production, but the resultant increase in money a,nnlyxr holA ho -nn 1+ i Q 061 n +- -ic n vriI T A! a +in n iva+ro+a investment activity did little to support the Government' s ambitious accumnlated. On June 10, 1962, the Government, therefore, announced won, at the rate of 10 to 1. ;ihe principal object of the reform, 11wee, wa tcuCVe LAB-, LL bUUVPVbUU.Id n1umerous large urrenci1.y b*±IU1cUUS and their transference to blocked accounts as a preliminary to compulsory coiverson intoe e-tures of a projecte gUvernmen u r oveLopment cor- poration which would use the money to further the five-year plan. Actually, large currency balances were much less Than suspected, amounting in value to less than 31 of the total. There was, however, a paralysing effect on trading activity and a number or amending regulations was passed in quick succession until, on July 13, the whcle scieme iias virtually abandoned. 41. In 1961, prices reacted with some lag to the continuous increase in money supply. In fact, at the end of the year the wholesale price index stood slightly below the April level. However, this was only due to the seasonal decline in grain prices; prices for other commodities had begun to rise towards the end of 1961 and were 6% above the mid-year level. Following the introduction of increased excise taxes in January 1962, prices for commodities excluding grains rose sharply; they continued to go up until August when extensive price controls were inposed on essential commodities. Grain prices, however, increased almost continuously, until, in December the wholesale price index for all commodities was about 16% above the level of December 1961. 2. Public Iinance Government Finances (in billion won) Revised Estimate Budget 1957 1958 1959 1960 1961 1962 1963 Revenue, excluding foreign aid 1-.47 19.35 26.22 32.17 31.63 ho.0h h4.59 Current expenditures 24.30 27.8 32.91 32.69 40.15 52.65 53.36 Current Deficit 8.A 8.R 6.69 0.2 8.2 1. 7.77 Ca-ital exoenditures and advances 10.7I 13.38 10.2h 10.16 17.00 2h.90 ?-l1 Total-Deficit 19.5$7 21.86 16.93 .2.T2 37.1 , P? Foreign aid proceeds In Qn IOt 1 a 13.2 21 ReU) LUU SurpsL- Residual Surplus De fi2Lcit _U0.64 - 4. 7 0 -3.99 +2. 64 el.2 -7.07 -)4.1") - .9 - 42. In 1960, for the first time, Government revenue from all sources, including foreign aid, exceeded total expenditures, leaving a surolus of won 2.6 billion. However, since the military Government came to power fiscal developments have been a practical expression of the new economic policv which was described in the 1962 budpet messaze as a "bold policy for expenditures even at the risk of a large deficit in the budget. abandoning the old stabiliait!n - first nrininple". Mounting deficits, practically fully financed by bank credit, resulted. According to nreliminary etimates cnenteornnditures Tont nn hv approximately 60% between 1960 and 1962, reflecting a much needed in- crease Of emriolu1Wyents for, civ-til ondl militayr c'W1 --Z in military expenditures and an expanded relief and welfare program. n +-rfl r +1 nTrQ -,nmrmA -,r 1 rtn+ rP * .l -n+1 ,-_. -,rr -- r+ three-fourths which represents a massive increase, even considering ments considerably. Revenues proceeds did not keep pace with outlays. everteless ta reeit ros reakal as4 tax co-cto wa improved and a tax reform carried out .which raised indirect taxes and lowered direct taxes to - -- -or reliti an enfrcablnlvelng fo. uhe of the foreign exchange tax after the 1961 devaluation, domestic revenue ~~ ~~ V~~ ~S lu~ "-y .U LU ?./O. J.1UWV1Vz;, UP=: tL J U U± _L LL' k, L )~~ aid, rose from won 10.7 to 37.5 billion. Foreign aid proceeds probably doubledl beteen196 andu 12.lmostZ) entdirely as a result of the- Igher exchange rate. 43. It is now estimated that non-tax revenue and foreign aid pro- ceeds iu 1962 did not reach the estimates. As a result, the budget deficit to be covered by domestic borrowing apparently exceeded the budget estimate of won 7.1 billion by a considerable amount. To the budget deficit must be added the result of extra-budgetary operations. In particular, the Govern- ment policy of agricultural price supports involved large purchases of grain which were financed ty means of bank overdrafts. Higher purchase prices and larger purchases raised the amount of overdrafts required in 1961 and 1962 by about won 2 billion each year. If these amounts are added to the budget deficit, the Government's total cash position shifted from a won 2.6 billion surplus in 1960 to a deficit of won 6.3 billion in 1961. In 1962, the deficit was apparently in excess of won 10 billion which was al- most entirely financed from inflationary sources. 44. The 1963 budget provides for total revenue, including foreign aid, of won T2.7 billion - an increase of about 9% over the estimated result for 1962 - and total expenditures of won 76.9 billion, a slight reduction as compared with 1962. The resulting deficit is won L.2 billion. However, an analysis of the budget estimates reveals that the Government's financial policies as reflected in the budget would produce a deterioration rather than an improvement of the budgetary situation in 1963. The estimated non- tax revenues include won 1.5 billion from penalties and indemnifications and won 5.6 billion from sales of government-owned property and shares. These estimates appear excessive. In particular, the proposed sale of large blocks of shares must prove difficult. because the level of currPnft private savings is low and the Seoul Stock Exchange, despite all Government efforts, was in a chaotic state during the greater part of 192 qn( ij q+jli inoperative. Thus receipts from this source will, at best, reach perhaps - 20 -- won 3.0 billion. US grant aid is estimated at won 27.1 billion kVOjPC-LVA IJIi .L.LUII), VUU, CL-VL A.L116 UOI U1J _ &'JQU VJ. I J +J~JI~ receipts from current appropriations and some reduction in aid carried .Pver - _ .-411 -,4- -- -4-' 1-4, -- 0 TTQ4,'170~ --; I ov r LVLPL V_LUUO YU21 WJJ.L, CIU 11LUD~U, UU VVU11 C_ U L±-LU11\ ~ I *--~I Allowing for some increase in tax receipts beyond the original estimates, blUL re veniue, inl U- U 11-1C> WCU. .lt:;aul vvuli UU kd.L.L.L.Lkj1 ..Lio u U .' '- _11 V'' 72.7 billion. As regards expenditure, supplementary provisions will UL t-l aulf A Lr l _U U11(_ uoubtess oe requred. n ±a snown by the auniZ=u sIhown by1 number of civil servants, the budget contemplates extending Government CL.LU1UUr,1 1,1t tVu U~ UCLI prVisionU1 for (.U1'1U11U t j t:1ULU1t- 1U111LL11 practically unchanged. Moreover, no allowance is made for the effect 01 price increases on overnment outlays. For these reasons, supplementry provisions of about won 2 billion would seem necessary. In addition, the Goverrnment's program of agricultural price supports will require a net increase in bank overdrafts of almost won 2 billion if grain is purchased in the same quantity and at the same price as in 1962. Thus actual expenditure may total won 81 billion, and the resulting overall deficit would be around won 15 billion, 45. Since the mission's departure, the Government has reconsidered the budget with a view to reducing the deficit. However, it takes a much more optimistic view or the deficit to which execution or the original budget would lead. The Government expects US$210 million in US aid as UicuUed in the Uudget, and it believes that, as in l62, tax receipts will exceed the original estimates and that this excess will compensate for the likey shortfall in non tax revenue. Inus Me overnment still expects to realize total revenue, including aid, of won 72.7 billion as estimated in the budget, without an increase in taxes. As for expenditures, the Government aims at limiting supplementary provisions to won 1 billion. lt also plans to limit additional bank overdrafts for financing grain purchases to won 1 billion which implies an intention to reduce the quantity of gra purcaCed uy about one-third and to allow no higher purchase price than in 1962. By these means, the Government hopes to keep U 'a" expen-uures to won 7o.9 billion and the overall deficit to won o.6 billion. It also expects that cuts in current expenditure will further reduce the deficit and limit the need for inflationary financing to about won 3 billion. As is evident from the proposed corrective measures, the Government takes an optimistic view of the situation. In these circumstances, it is unlikely that the Government will take in 1963, the drastic measures needed to effect an improvement on the adverse results of 1962. Even if the proposals are carried out effectively, it is difficult to foresee a deficit below won 12 billion in 1963. 3. Credit to the Private Sector 46. In the last two years, gross bank credit to the private sector doubled and reached roughly won 50 billion at the end of 1962. It expanded at fairly uniform rates between May 1961 and September 1962, when further expansion was arrested by the imposition of a ceiling on hank rePit. except for specified purposes related to export trade and investment under the 1962 Program. Total credit- includinr loanq bythe overnmen+ wne Korean Reconstruction Bank, rose somewhat less rapidly, by 75%. The dis- tribution of new loans made during the +t..y.r nor-o cosely resembl the pattern of investment. Loans to the electric power industry showed - 21 - tne fastest growtn ana amost quadrup]Xed. ureuus uo agriuu-ue nearly doubled. In contrast, loans to manufacturing industries which had led the expansion in previous years, only increased by just over dp,O. 47. Little genuine progress was made in 162 towards a solution of two distinct but related problems which have for a long time impaired the effectiveness of Korears Goverrment-owned financlai institutions. A rational appraisal of alternative investment proposals continues to be all but inossible because interest rates on loans, depending on the specific source of funds from which they are financed., range from 3% to lU%. There is, in addition, the problem of the Korean Reconstruction Bank, the largest source of investment financing, which in the past has had neither the independence from the Government nor the competent management essential for sound lending operstions. The new Government has granted somewhat more freedom, initiated reforms in management, and permitted equity investments. But effective reorganization of the Bank to transform it into an effective instrument of development has still to be achieved. The External Financial Situation Balance of Payments (in US$ million.) 1956 1960 1961 1962 (estimate) Ex-orts, incl. sales to U.N. Forces L8.8 95.5 120.6 137 Imports -386.1 -342.6 -31-0.1 -430 Trade deficit -337.3 -27 .1 -189.5 -293 Net invisible receipts 24.1 h.4 1-5.7 35 Current acnnt -1L2 -22.7 -17L8 28 Pu1blic grants 31h.2 243.1 22h.2 205 Other rannit.n1 - 3.2 ..1. 3 Reduction in net assets -6.3 -1.5 47.0 50 brror -noasin --3 -- 2. - - foreign-payments position, although the current account continued to show, a lar-ge chroni defici nd Co-1e wit anaeaeonTOOf in 1956-1958, the trade deficit was reduced to US, 235 million. In 1961 4-C1 Accl-;--, Pur4.",- ITC UJ10r/) m1iL L UJ~ o O ULI~ aILngsO _L.unI A L- and sales to U.N. Forces in Korea rose and imports were depressed by the kwu OucOsve aUevCX1U n vS onIe -,uI:n eary in o CaL dA U. t Uw level of economic activity during the greaterpart of 1961. This trend. 47.e' vU,wCL7en W79u-±y-e a uu ±y 7-Y±1 , Uports 1UjL aImost ;s. Nearly half of this reduction was due to lower food imports, ieflecting - 22 - L.IIJJU V~U UUUU~ ±U JAULL UL±1 La ,UZ; L1') JCU k,.L U V ) L,7,11 J L U t j '. 2dIkPJJ in 1959-1961 were still 101 of the total. Imports of coal declined from over uo.e2 million to aout ____Ui I r -LLL L)UU 1 UIDQ4 -1C 1' c UL- UULIU.L- IU~ remained almost stable. Imports of fertilizer continued at an annual level arouna uSP55 millionV or nearly 2fZ 01 oTal imports. Some Gecline in manufactured products, includin- machinery and transport equipment, was offset by a corresponding rise in liported raw materials. In 19o0, however, imports are estimated to have returned to the 1956-1957 level of US$h30 million, an increase or more than US LUU million over the L9_5-_9C1 level. This is about USI25 million less than had been projected in the five-year plan. However, it is siLnificant to note that imports of machinery and transport equipment reached only US:4650 million, instead of the projected amount of US 125 million. Mioreover, fodd imports roughly equalled the estimated amount and were approx±nately the same as ir 1959-1961. This means that imports of other commodities increased substantially and exceeded the rojected amount by about UsD50 million. Analysis of the import statistics reveals that apart from some increase in finished manufactures and fertilizer, imports of raw material and semi-finished goods accounted for roughly three-fourths of the US4l00 million increase in total imports and for a large part of the excess over the plan 1rojection. 50. Ecrnings from exports and sales to U.N. Forces in Korea rose in 1962. At US$137 million they were US;i37 million above the average 195 -1961 level and continued the advance which, since 1959, has raised earnings by over 80%. Exports have trebled during this period, but the momentum appears to have slowed down in 1962. Of the US 12 million increase achieved in 1962, roughly three-fourths resulted from exuorts of rice made Possible by the record crop of 1961, while exports of minerals and manufactured nroducts sta,'nated. 51. Thus hiaher earnings from exnorts !nd sales tn U.N. Forces mitigated the effect of larger imports on the balance of payments. Nevertheless. the trade defic.it moa from a19-191 nverae of US220 million to USS300 million in 1962. Receipts from invisibles, primarily Drivate donations. increasdi non-i rir v n thr .h crrent account deficit was only enlarged from US$210 million to US$260 million. While the current 1_ont efini. inny a Sv 5_n million, receipts of U.S. aid declined from an a.verage of US, 225 million in 1959-1961 to about U& 20 mill ion in I1962- Th-is ecline repflece piail rgnztinl rather than substantative changes in the U.S. aid program. These changes technical assistance) and transferred it to development loans. In fact, ment loans remained far below the previous level of project aid and dis- bursements weate veiy mall. tnde the rduct0ioin ini current yeveL of aid -vas substantially higher than the US:P20 mill:ion indicated by the decoline in receipts. it w~as a1-4,o Uc,* iion but -1- usn a- U59I3-5T?- - 23 - £1J1tLvII'.L LY kiy V IZP .L - UI IIU111 L-CkA . ;L . ±u u UIi .LUi2 L b PCu-dULY UUIIyI1P:Ib tA-'U* In addition, Korea had also to draw doin its exchange reserves b about vjopu:R) II L-LI01u WuIrea: tL y iau IucXEastau slltritly in ±yy-iyua ana substantially in 1961. In summary, foreign payments in 1962 exceeded the LUvel of current receipts by about UOqUo> millIon. As a result, the anount of U.S. aid in the process of collection was reduced to US'950 million and net foreign exchange reserves decined to about U42L0 million by the end of the year. 52. As a result of thesedevelopments in 1962, it can now be foreseen that Korea will face a serious shortage of foreign exchange towards the end of 1963 or early in 1964. In the present circumstances, it acmears that export earnings are unlikely to rise ap)reciably in the near future. Following the smaller crop of 1962, rice exports will certainly dwindle in 1963; moreover, any sale of rice abroad will require heavy subsidies at current domestic prices., Higher exports of manufactured products might possibly be achieved despite the lack of marketing experience abroad; but they will hardly materialize in conditions of high domestic demand and prices which, at the present exchange rate, make any effort in this direction unattractive despite Government subsidies and other encouragements. 53. The upsurge of imported raw materials and semi-finished 'oods in 1>62 reflected, of course, the recovery of the manufacturing sector. The conclusion is inescapable that if manufacturin. out ut is maintained at the level reached in the fourth quarter of 1962, these imports will continue to rise, nossibly by about US.A 25 million or 1 5 in 1963. Tn addition, food imports will almost certainly be higher. As the import of ca:ital ,oods for the maior investment aroient-s in the ner fiitmre will -oredominantly be financed by foreign loans which have already been arranged, this item can safel be disre. rirded in this ronnnertion Never theless, payments for imports of capital goods in 1963 will be at least the same as in 1962. as substantiql nayments on qiinnuli'r! creits and on projects financed by the Government become due. Thus,' leaving aside investment goods fininced by fnr.ian lnans, total payents are ikly to reach about USqh70 million in 1963. Receipts, on the other hand, are not likely to exceed US,360 million. incluiina U. niA nf mIU 7nn millinn, earnings from exports and sales to UN Forces of US$15C million, and in- visibles US4hO million. These estimates indicat t+hat Krnen may exyhns its existing net foreign exchange reserves in 1963 or early in 1964. To avert. i-hisq dngr- mimpor -rest"rctins- will almost cetanl hav- include raw materials and se. -i-finished goods and thus hurt the manufacturing inrN.-,tTrv ~ TTTiP- 1 + Tan3iilel ccoi fcn,!'-kW n 4--~ -.,4- 4-1,-; s efec -11 non-essential imports were eliminated and all -ossibilities for reducing lmnnrt. -, inl 1he 0MVrnien took- ~.1OA ~ some measures designed to curtail imports. A s,:ecial duty, ranging from 10% tI1.-,wI imposed on 23) non-essentia itms -*1 adiin fore-- -- Ign- exchange allocations for imports were, with some exceptions, linked to expot ensU. However, the exceptIouns were subseouently broadened - 24 - considerably as shortages of imported goods developed and prices rose. Thus, in effect new import restrictions have so far remained mild and cannot be expected significantly to improve the foreign exchange prospects for 1963. Moreover, as experience with the export-imnort link system has shown, import restrictions alone will not solve Korea's financial problems, a comprehensive progran designed to restore financial stability in all its aspects will be required. As yet there is no evidence of corrective measures equal to the gravity of the situation. - 25 - V. The Conclusions 4.n appraisal of Korea's economic situaTLion an policies must fully take account of the intractable nature of Korea's basic economic weakness. Far removed from the main trade routes of the world, with a dense and rapidly growing population, but only meager natural resources, the country would, in any case, find it difficult, without foreign aid, to provide its people with more than the bare necessities of life. And it must be ree gnised that even with the best of intentions and the soundest of policies, the country's achievement of a self-supporting econon would be a very distant ,-oal and --rogress towards it slow. In fact, the country's financial situation has deteriorated seriously during the last two years. As a result, dependence on a net inflow of goods, financed largely by grant aid of the United States, has even increased considerably and prospects for a marked L.,provement have dimmed. In these circumstances, it appears unlikely for some time to come that Korea can be considered for a Bank loan. 55. In 1961, the new Government appeared intent upon enforcing strict standards of asterity in consumption. It also adopted a develop- ment plan which constituted the country's first comprehensive effort to anpraise its development opportunities. While this Plan was deficient in many respects and far too ambitious, there was also w'despread recognition of its shortcomings and the promise that the- would be co-crected in the process of implementation. These hopes have not been fulfilled. In 1962, Korea's financial situation deteriorated so seriously that it overshadows all accomplishments. It reflects the Government's failure to recognise the limitations that Korea's resources impose uoon its efforts to nroduca a spectacular improvement in the country's economic situation in a brief per-iod of time. On the one hand. it has rermittei consumntion outlavs to rise noticoably and to all but eliminate domestic savinPs. On the other hand, it has so far not realized the consmqenes! which rising consumption outlays will have on its development efforts and has not yet revised its annual investme nt; nmram.s in +.he light of a raescomn+ of attainable resources. 56. As a result, inflationary pressures gained considerable strength in 1962. especially in the second half of the vear Prire: Tr hr nwr 15%, and imports increased by one-third, requiring exchange reserves to be drawn down by nhout. UTS.40 n million +r .lOn millin-ri On +Th basis of present trends and policies, it must be expected that inflationary pres- sures will not abate in 1963 nd +.ht imrnts+m wni- 1 Tjll er s , arain on reserves that they will be all but depleted in the next 12-18 months. At the s-me time. +he evolving invcementpattern+ ++- reflecsI teoverm failure to face the task of establishing sound investment priorities 57- There haebendscussions bewe the 1 Korean andcu ci Japanese5v Governments about the settlement of Korea's financial claims. At present, i ismssi bl o ude whn an agreement -ill be concluded and what its terms will be, although it is known that Japan may make available fairly large amnounts, ingrnsadla,ovraumeofyr. However, even if the settlement became effective in the near future, it LULLLLU. UL~ill) 040 1it ObtL UL DUCLU.L -LU1 Ut- o1U,U bu. . current economic and financial difficulties. The Government would still U - LtJ.uirU LU Uis e cUi-)tlhi iv e Ul CL-LI11L1L Jlt: L U b UU b Ud ±±±- UI. L B country 's financial situation and to correct the basic deficiencies of its five-year plan. KOREA - EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1962 (In thousands of U.S. dollar equivalents) Debt outstanding December 31, 1962 Item Net of Including undisbursed undisbursed TOTAL EXTERNAL PUBLIC DEBT /1 28,696 201,750 Privately-placed debt 22.201 154,300 U.S. Government loans (AID) 6,495 33,450 International Development Association credit - 14,000 l Does not include three loans with 574,819,973 outstanding which are payable in local currency. IBRD-EcnoM vision IP,)-Econonic Staff ebruan.r ILL- 1963 KOREA - ESTIMATED CONTRACTUAL SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UND ISBURSED AS OF DECEMBER 31., 1962 /1 (In thousands of U.S. dollar equivalents) Debt out- amets urig year Debt out- standing Payments-during-year -standing mPaymets during year Year plus un- Year plus un- disbursed Amorti- In- Total disbursed Amorti- In- Total January I zation terest January i zation tere st Total debt Privatelyplac ed debt 2 1963 201,750 8,750 147 8,897 1963 15,300 8,750 88 8,838 1964 193,000 9,324 1,081 1o,h4o5 1964 1h5,55o 9,32j 973 10,297 1965 183,676 10,253 2,39 12 ,647 1965 136,226 10,253 2,239 12,492 1966 L73,U23 15,766 5,743 21,509 1966 125,973 15,766 5,5ho 21,306 1967 157,657 21,423 6,997 28,420 1967 110,2o7 21,423 6,748 28,171 1968 136,234 21,045 5,66o 26,705 1968 88,78h 21,045 5,363 26,08 1969 115,191 19,896 h,357 24, 253 1969 67,74:L 19,896 4,014 23,910 1970 95,295 17,606 3,135 20,7 41 1970 47,8415 17,606 2,742 20,348 1971 77,689 13,234 2,105 15,339 1971 30,239 13,234 1,667 14,901 1972 6)4,U55 11,147 1,300 12,4h7 1972 17,005 11,147 814 li,961 1973 53,308 2,337 750 3,087 197 5,858 1,083 232 1,315 197 50,971 1,784 692 2,476 1974 ),775 530 186 716 1975 49,187 1,784 660 2,hh 1975 4,245 530 165 695 1976 47,403 1,784 627 2,hn 1976 3,715 530 143 673 1977 45,619 1,784 593 2,377 1977 3,185 530 122 652 U.S. Govt. loans - AID IDA credit 1963 3359 1963 1-,00()- - - 1964 33, 45o 100 100 1964 14, oco 8 8 1965 33,450 - 142 142 1965 14,000 - 13 13 166 33,450 - 184 184 1966 114,00o 19 19 1967 33,450 - 225 225 1967 114,000 24 24 1968 33,450 - 266 266 1968 114,000 - 31 31 1969 33,450 - 308 308 1969 1i,0o -5 5 1970 33,450 - 350 350 1970 114,ooo -3 3 J,971 33,45o - 391 91 1971 14,000 - 47 47 1972 33,450 - 433 33 197i2 114,00 - 53 53 197 33, 1,n1 459 1,573 1973 11),0 o4o 59 199 32,336 1,114 444 l66 ,58 1974 13,860 62 202 31 222 1,;1L 29 1, f3 197 13720 iho 66 1976 30,108 1,11 1 1,d 1976 13, 80 140 70 210 1977 28,994 1,114 398 1,512 1977 13,44o 14D 73 213 KOREA - ESTIMATED CONTRACTUAL SERVICE PAYMENTS ON EXTERAL PUBLIC DEBT OUTSTANDING ICLUDTNG UNDISBURSOD AS OF :DECEMBER 31, 1962 /1 (In thousands of U.S. dollar equivalents) FOOTMOTES /1 Includes debt service on all debt listed on nreceding tables. /2Term~s and debt.-servic c~ hedules of suppliehrs' credits are part!y estimated by the mission; amortization payments in 1963, 1964 and 1965 inclu de:ome rown-nr.mnts, Table I GROSS NATIONAL EXPEND1TURE (in billion won, at current market prices) 1953 1956 1958 1959 1960 1961 1962 ' I. Private ConsumptionY 32.3 119.3 139.2 l0.2 170.1 189.3 227.1 Food 17.5 62.3 74.2 71.4 83.9 99.3 Bveragsndo 2.3 7.6 9.L 10.8 11.8 13.0 Textiles apparel, footwear 4.1 14.8 17.1 19.2 20.0 19.8 3, 10.4 1L6 16.9 19.9 20.5 Other goods and services 6.4 19.8 27.6 31.6 33.3 39.4 Adjustn-1.5 . -3.7 -9.7 1-2 -2.7 II. Puiblic r.nnsuinr 37 13.1 _cJ, 3. 37.9 .,7.9 TTT Grss Invemt 6 5.9 2h.h _CL 26.2 37.3 39 ReidntalconstrUction n.7 2.2 3. z. n. 3.8 Plant and equipment 2.2 10.7 19.0 22.3 19.9 26.0) 38.6 ~ 1 7 f i 1 l 1 (~ 7 ý fl I: t.h1ange' in. .C1V'1 inventories 3.1 -7.0~ 2.i :4 6.0 1.5 7 *.5 '-.5 I N. -urEt Account Balnc -3n-65-66-g 1. . 3. E4xports of goods and service n. .3 3n. .6 n.7 1.0 21.5 Imports of goods and services -h.7 -19.8 -19.8 -17.9 -25.2 -40.9 55.5 auj U, UIII . - - -.3 -3. -3.u -u.3 V. Gross National Product 38.9 122.0 172.1 8 210.7 2h1.4 279.7 (See footnotes on next page) Table 1 FOOTNOTES 1/ Based primarily on family budget surveys; total adjusted to correspond to private consumption expenditure as calculated as the residual between GNP and the other expenditure items. 2/ Includes fuel and light 3/ The following adjustments have been made: 1953 1956 1958 1959 1960 1961 Budget Survey Data 33.8 114.9 142.9 149.9 168.9 192.0 Expend. by residents abroad 0.1 0.3 0.5 0.5 0.6 0.8 Expend. by non-residents -0.2 -0.6 -1.0 -1.0 -1.2 -3.2 Inventory adjustment -1.5 3.9 -1.6 -6.9 - - Foreign exch. tax adjustment - - 2.3 3.3 3.8 0.3 Statistical discrepancy 0.1 (D.8 -3.9 -5.6 -2.0 -0.6 Total -1.5 h.4 -3.7 -9.7 1.2 -2.7 / The current account balance has been adjusted to include collections f'-rn tJirf'n-iILn exhne taxy nr aid -undsz (, n ii r nnn +.n +.lie rl f"r'C' between actual and official exchange rates). / Preliminary Sour c e: Economic StatiLstics Yearboo00k, 1961- aE-d J-7uzL P-1VL11L_± U tsic- Review, August - September 1961; information provided by the Bank Ui Tf " L d Table la SAVING AND INVESTMENT (in bil-Lion won, at current ma,rket prices) 193 1956 1958 1959 1960 1961 19621/ 1, Domestic Gross Investnent a. Fixed capital formation Private 2.5 9.7 14.6 18.2 16.1 17.-3 n.a. Public 0.4 . 3.2 7.3 83 _.6 12.4L n.a. Total 2.9 12.9 21.9 26.5 24.7 29.7 38.6 b. Change in inventories/ 3.1 .-70 2.5 4.0 _1 7. c. Total domestic gross investmerit 6~0 5.9 24.4 30.5 262 37.3 39,1 2. Domestic Gross Saving a. Private savinjg Disposable iJ cme 35.8 110.6 151.5 160.5 179.1 201.9 23/ ConsurptionP 13.2 12 .144.1 146.3 15.3 190.8 23g Net private savings 2.6 -10.9 7.4 14.2 3.8 11.1 4 Capital consumption allowance 1. 4 4.7 6.9 _._4 _7.8 8.2 _ 8 Gross private saving '.0 -6.20 143 21.6 11.6 19.3 12 b. Public saving Government revenue±/ 2.6 10.0 19.2 23.5 29.8 36.7 43 Current expenditure5 3.9 15,3 26.9 30.7 36.2 43.9 5 Net public saving -L.3 -5.3 -7.7 -7.2 -6.4 -7.2 -10 Capital consumption allowance 0.2 0.9 1.2 1 2. Gross pubLic saving -1.1 -4.4 5 -5.7 -7 c:. Total domestic gross saving 2.9 -10.6 7.8 15.9 7.1 14.2 5.1 3. Deficit -3.1 -16-5 -16.6 -14.6 -19.1 -23.1 --340 4. Relationship to GNP (in ) a. Domestic gross investment Fixed capitaL for'mation 7.4 10.5 1L.7 14.3 11O7 12.3 13.8 Change i~n inventories 8.0 -5.7 1.4 2.1 _- 3 0.2 Total 15.4 4.8 14.1 16.4 12.4 15.5 14.0 Table Ia (continued) SAVING AND INV\rESTMENT (in billion won, at current market prices) 1953 1956 1958 1959 1960 1961 1962 b. Domestic_gross saving Private 10M2 -5.1 8.3 11.6 5.5 8.0 4.3 Public -2.8 -.6 -3.8 -3.0 -2.1 -2.1 -2.5 Total 7.14 -8.7 4.5 8.6 3.4 5.9 c. Deficit 8.0 13. 9.6 7.8 9.0 9.6 I/ Rough preliminary estimate. 2/ Large fluctuations in inventories reflect predoTinantly exceptionally poor crops (e.g. 1956) or good ones (e.g. 1961). / Derived as a residual; not identical Jith data given in Table I because private consumption expenditures in this table include estimated. capital consurption allowances in the private sector and exclude Government subsidies and transfer payments to the private sector. Comprises general government revenue and surplus of government enterprises (monopoly enterprises, transportation, communications, and postal life insurance and annuities); general government revenue in 1958, 1959, 1960 and 1961 excludes collections from the foreign-exchange tax on foreign-aid funds (equivalent to the difference betiween actual and ufficial exchange rates) which are treated us part of the deficit on the current account of the balance of payments. (Comprises general government current exrenditure; exceeds public consumtion data of Table I by the amount of subsidies and transfer payments to the private sector. Source: Economic 'tatistics Yearbook, 1961 and 1962; iionthly Statistical Review, August/September 1961; information provided by the Government and the Bank of Korea. Table II INDUSTRIAL ORIGIN OF GROSS NATIONAL PRODUCT (in billion won, at constant 1955 market prices) 1991 i9'6 1<98 1959 1960 1961 19622/ 1- Prima Industry 6 3.8. i6.2 c) . |. 2 )9.h J 5.2 Agriclu 3.5-1/ 4 Q 3. Q 7 b.o n02 i. J0.5 Forestry 2.01/ 2.4 2.7 2.7 3.21/ 2.7 2.5 Fishery 1.3 1.5 1. n 1.8 1.gl 1.9 2.2 2.Scndary industn: *. 0. 4253 2. Mining., Qurrig . 1.0l . 1.7 2. 2.6 3. Manufacturing 7.1 12.3 14.8 16.2 17.1 17.2 19.8 r, 1 1 n1 n 1. fl r' r' r' ^ r, r, 4Z n ýJonstructionLJ 3.1 2. 97 ' .5 5-5 5).0 u. . U. 3.~41j Tetir Indus9 37.- 700 65 .9 i4u. 46.97 5. Electricit,A tr Sanitary Service 0.5 0.6 0.8 0.9 1.0 1.0 1.1 Tran, snort- a -t io n, Storage, Communications 1.9 3.1 3.8 4.3 h.9 5.0 5.4 Other 20.8 21.7 23.5 24.1 23.9 23.5 25.2 4. Rest of the World 1.7 1.3 1.3 1.3 1.3 1.4 1.5 Total 86.9 95.3 110.7 116.5 115.9 123.0 125.9 Roughly estiNated on the basis of output data. 2f Preliminary. Source: Economic Statistics Yearbook 1962; information provided by the Bank of Korea. -. TTT Iabule H!.L (in percent, on the basis of constant 195 market prices) 1953 1956 1958 1959 1960 1961 Primary Industry 1.9 13.8 10.2 11.0 14.0 18.8 Secondary Industry 16.4 18.3 20.5 22.3 18.6 15.5 Tertiary Industry 68.7 67.9 69.3 66.5 67.4 65.7 Total 100.0 100.0 100.0 100.0 100.0 100.0 Gross Fixed Cap. Formation 9.3 9.7 14.3 16.4 13.6 14.3 (in billion won at constant 1955 market prices) Source: Economic Statistics Yearbook, 1961 and 1962; information provided by the Bank of Korea. Table IV PRODUCTION OF MAIN AGRICULTURAL CROPS (in 1,000 MT) 1953 1956 1959 1960 1961 1962 Rice 2,049 1,852 2,h06 2,311 2,740 2,395 Barley 299 355 425 437 460 29 Naked Barley 296 298 395 385 432 n.a. Wheat 102 134 163 158 172 165 Rye 20 22 24 23 25 25 Soybeans, other pulses 222 172 158 151 190 175 Potatoes 798 635 689 757 872 n.a., Vegetables 566 705 723 774 887 n.a, Fruit 108 117 167 166 151 n.a. Cotton 47 49 25 19 28 22 Hemp Ramie 7 8 8 7 6 7 l/ Preliminary Source EcoiSt o A icu e Yeadrb Forstr Ministry of' Agriculture and Forestry Table V INDEX OF IDUSTRIA.L PRODUCTION (196c) 1= 0 ) Weight 1954 1957 1959 1960 961 1. Mining 15.22 52.2 76.1 . _ 1 Coal 72.6 16.6 45.6 77.3 100.0 110.0 Metal 23.3 55.2 71.4 69.8 1C.0 124.1 12. 3 Non-Metal 4.1 n.a. n.a. n.a. 100.0 113.2 10 .1 2. M anufac turinf 80.5 4.7.0 77.2 25.1 100.0 104. 121 8 Food 9.8 44.2 86,9 95.2 100.0 109.9 1 5.7 Beverage 4.2 34.7 69.2 94.5 100.0 105.1 99, Tobacco 4.1 79.1 91.2 101.5 100.0 108.6 121.2 Textiles 23.4 55.2 96.5 103.2 100.0 91.2 105.6 Wood, Cork 5.7 78.2 89.8 99.6 100.0 93.5 111.5 Paper, Paper Products 3.1 39.3 49.7 76.7 100.0 122.3 145.4 Printing, Publishing 4.8 40.6 57.9 86.5 100.0 80.9 9. 7 Leather,, Leather Products 0.4 94.4 128.2 113.9 100.0 123.0 12C.2 Rubber Products 5.8 51.4 61.7 104.0 100.0 94.7 99.9 Chemicals 5.9 25.7 389 74.5 100.0 120.2 142.1 Petrole.um, Coal Products 3.0 n.a. n.a. n,a. 100.0 137.3 16C.9 Glass Prod., Ceramics 9.0 36.5 67.1 97.6 100.0 99.8 13C.6 Basic Metal 2.9 24.7 53.7 89.3 100.0 85.6 115.2 ietal Producto 3e1 35.7 93.4 92.5 100.0 107.7 13..1 Machinery 2.8 104.2 136.1 134.1 100.0 145.9 1.7 Electrical Liachinery 1.3 26.8 59.8 111.3 100.0 134.9 248.k Transport Equiprient 3.2 73.3 144.7 79.4 100.0 146.8 14-.2 Miscellaneous 1.6 85.9 102.7 105.2 100.0 101.2 1 .C 3. letricity . 0 77.9 9.3 100 104 3 L1.5 4. Total Production 100.0 4,72,6 1,Q0 1.5._7 Source: Mlonthly Bulletin of Statistics, Bank of Korea. Table VI ANALYSIS OF FACTORS AFFECTING THE MONEY UPPLY (in billion won) End of Year 1956 1957 1958 1959 190 1_61 ;L962 I. Public Sector 1,Bn4n.i t h Goerme- 2y, 2.0 3r,7 3j02. ¿9 4. a) :Bank of Korea 21.0 30.0 30.3 29.6 28.7 34.5 41.4 b) Commercial banks 0,4 0.4 0.4 0.4 0.3 0.4 0.4 2. Bank credit to GovIt, financial inst._2/ 01 2a 3._ 2.5 L ..0 a) Bank of Korea 0.2 4.3 3.3 2.5 4.4 4.7 0.6 b) Cormercial banks - - - - 0.4 0.4 0.4 3. Gross credit to the -ublic sector 21.6 _43732.5 3). 0 2.8 Offsets: 4. Government cash balan; esd 3.7 5.3 6.0 4.6 6.3 11.5 8.5 5. Cash balances of KRB-/ 0.8 1.5 0.7 0.5 0.5 2.7 1.2 6. Counterpart fund balances 11.0 18.9 16.2 14.1 14.7 8.9 8.4 7. MisceLlaneous accounts (n.et)51 - -0-_ 0.2. 1.2 _.7 .1.5 8. Total offsets 15.5 25.6 22.8 19.4 22.7 27.8 19.6 9. Net credit to the public sector 6.1 9.1 11.2 13.1 11.1 12.2 23.2 II. Private Sector 10. Loans, discounts, overdrafts 7.1 10.7 16.0 18.5 24.3 32.7 46.0 11. Securities -- -0 .1.0 12. Gross credit to the private sector 7.1 10.7 16.2 18.9 24.7 33.5 47.0 Offsets: 13. Time and savings deposits 3 1.3 1.7 4.7 5.0 8.2 15.3 14. Fiscal funds lent to banks - 1.0 6.3 7.7 8.6 11.5 16.0 15. Bank of Korea credit to NACF - 3,5 1.7 0.9 2.8 3.1 0.6 16ý. Miscellaneous acc. of commercial banks 0.1 0.3 0.6 0.5 L.5 17. Total offsets 1.4 6.1 10.3 13.5 16.8 23.3 36.4 18. Net credit to the private sector 5.7 4,.6 5.9 5.4 7.9 10.2 10.6 19. Net domestic credit 11.8 13.7 17.1 18.5 19.0 22.4 33.8 TABLE VI (continued) ANALYSIS OF FACTORS AFFECTING THE MCNEY SUPPLY (in billion won) End of year 1956 1957 1958 1959 1960 1961 1962 II.External Sector 20. Net foreign assets/ 1.7 2.9 4.1 3.9 5.2 18.2 1,3.9 21. Devaluation profits - - - -1 6.5 6.5 22. Adjusted foreign assets 1.7 2.9 4,1 3.9 4.0 11.7 7.4 23. Deposits of foreign org. 1.4 2.1 1.9 1.4 1.1 2.9 4.5 24. Net external sector 0.3 0.8 2.2 2.5 2.9 C.8 2.9 MONEY SUPPLY 12.1 14.5 19.3 21.0 21.9 31 .2 36.7 Annual change 2.4 4.8 1.7 0.9 9.3 5.5 Annual change in % 20% 33% 9% 4% 42% 18% _1/¯neludes securities held by the banking system. 2/ Comprises the Korean Reconstruction Bank (KiB), National Agricultural Co-operative Federation (NWCF) and Medium Industry Bank (MIB). 3/ Deposits of the central Gove-Lnment only. 4/ Includes only KRB deposits with the Bank of Korea. / Consists of othe, assets and liabilities of the Bank of Korea, NAOF and MIB which are not separately classified in this table. Miscellaneous accounts of the Bank of Korea in 1960, 1961 and 1962 have been adjusted to exclude devaluation iorofits. 6/ Comprises funds lent by the GovernmenttotheNACF, MIB mmrcial baks as ell as oan to n institutions by the BOK out of the coufiterpart loan fund; excludes Government loans to the KRB which is treated as part of the public sector. 7/ Zalance of foreign exchange assets and ].iailities zs it ai--ars i et. tenents of condition of the iank Cf Korea. d/ Comprises estimated profits ariszing ut of devaluations (wo-n 1.2 billion in 1960 and. won 5.3 billion in 1961). 3/ Includes counterpart funds under US ownership. Source: Economic Statistics Yearbook, 1961 and 1962; Monthly Statistical Review (October 1962); information provided by the Bank of Korea Table VII PRICE IND ICES:L/ (1955 100) iMay December My Dcemaber 195_ 19 28 1952 1960 1961 1961 1. Wholesale Price Index Grains 159.5 1-832 150.0 131.4 157.4 218.1 172.D 213.7 217.5 All CcMMMdities, excluding grains 122.4 142.9 141.4 151.5 164.2 191.7 199.9 219.4 225.8 Producer Goods 138.5 156.3 156.1 173.9 192,3 231.4 243.1 255.9 260.7 Consumer GoodS 128.8 151.6 138.1 135.1 149.7 183.3 171.4 200.7 207.1 2. Seoul Cons2Mer Price Index 122.9 151.3 146.0 150.6 162.9 182.9 16S.3 139.8 197.7 1 Data for 1956 - 1960 are annual averages. Sour.: Monthly Statistical Review, Bank of Korea. TABLE VIII CNSCLIDPTED OWVRINENT REVENUI AND EXPEIEDITURE (in billion won) 191;7 1958 1959 1960 1961 19621/ 1963?! EVENUE 1. Tax Revenue 13.60 16.87 2h.49 27.55 27.57 30.52 33.18 Direct tayen l.-o .2H 6.09 6.2)1 10.59 9.26 11.25 Indirect, taxes on d s g 3/ ?.22 _2 1.1 11.11 11._3 5. 7) 16.5 Indirect taxes on foreign goods Q/ 2.38 h.39 6.28 10.20 5.55 5.52 5.8 2. Other Reeu 5/ 1.87 2.I58 1.73 .2 .0 9.5 12.r3 l TOTALt PlUETc 5.67 19-35 o,6.2 32-1 ~7 31.63 ht J. 1 V.59 1. Current Expeniditure 2h.30 27.83 32.91 32.69 h0,15 52.65 53.36 Other current 13.31 15.Ltl 19.20 18.37 23.55 31.93 32.11 2. Capital Expenditure 10.7Li 13.38 10.2h 10.16 17.00 2L6.90 23.51 Economic Services -.6 5.2 ~65 5.07 13.20 20.10 19.01 Other capital 6f 6.3h 8.15 5.70 5.09 3.80 h.80 h.5O TOTAL EXPENDITURE 35.0h Lkl.21 h3.l5 h2.85 57.15 77.55 76.87 / roevised estinates. 2_/ Approved budget. In Tluding revenues from Government mnopolies el4 d nt receits on nso anruis a i u nce f5 receipts from Government enterorises; receipt7s fr32 .9e o O4v e2.rnment hare and property and other non-recurrent revenue. 6/ Including loans and advances, to GoverrÅnent enterprie andr i budget funds. Source: Bank of Korea and Government Budget Bureau. Table VIIIa FINANCING OF DEFICIT (in billionwon) 1957 1958 1959 1960 1961 1962±/ 1963L' Revenue 15.47 19.35 26.22 32.,17 31.63 40.04 45.59 Current Expenditures 2b.30 27.83 32.91 52.69 4o.15 52.65 53.36 Current Deficit 8.83 8.48 6.69 0.52 8.52 12.61 7.77 Capital Expenditure 10.74 13.38 lo.24 10.16 17.00 24.90 23.51 Total Deficit 19,57 21,86 16.93 10.68 25.52 37.51 31.28 Financirig:- Å. Frein ]i P-rceed J/.8 1?.OR 129 0) 3.63 2-1,31 30.o 2)7.131 2. ForeignBorrowing - - -3 3. Domestic Borroving (net) 5.15 1.23 -4.71 5.50 3.OC 7.07 4.15 Gross Borrowing 21.50 20,26 11.79 18,59 4.28 7.87 5.11 Rcpy4. 1 16.35 19 143 1 -.5 13 .0r i .) .8 n..9 6 Het Lorrowing 5.15 1,23 -4.71 5.50 3.0O 7.07 4.15 Bank of Korea 3.95 -0.27 -4.88 4.93 3.58 5.97 2.85 7on-bank public 1.20 1.50 0.17 0.57 -0.58 1.10 1,30 4. Use wash Ealances Lý.l 3.5 0.(U -0.1j 1.21 - - Total19 21 .8 6njé' i693 10.c 25.5i2 37.51 31.28 1/ Revised 7stinates 2/ Approved 3udget / Froceeds usually differ from the actual use of counterpart funds. Data refer to proceeds because they are more comprehensive. Differences between proceeds and actual use produce changes in net cash balances of counterpart funds which are included in the "Use of Cash Balances" figures in the table. L/ Data differ from those in Table VI (H'oney Supply) because they refer to accounts for fiscal years which are closed in February, while nonetary data refer to the end of the calendar year. Source: Bank of Korea and Government B3udget Bureau. Table IX PRIVATE CPEDIT FROM PMIKING IXSTITtrTIIONISY (i n hil Ii.on wmn) 1957 1958 1959 1960 1961 1962 Primary Industry 7.3 8.3 8,,8 12.2 17.3 18.7 Agriculture 7.9 7.9 - -i~.T 16.5 ~17.2 Forestry 0.1 - Fhi0.h 0.h 0,6 0.7 0.8 1.9 Secondaiy Industry 8.6 13.7 18.1 20.9 24.6 32.2 n c n 1 .? 17 27.2 1.ning, Quarrying 0.8 1.1 1,4 1.6 1..8 2.1 ConstctiOn0.2 0.9 20 2.3 2.6 2.9 Tertiary Industry 4.3 4.4 5.5 6.9 11.1 18,2 E i ra 1.6 1 7 ~_77 1.7 15 uas.± U ,Lg -L*~ f -L.,-'J- 1 -, . -.1 Transport, §torage 0.5 0.5 0.9 0.9 0.8 1.3 Others 2.2 2.2 3.0 h.3 5.0 9.3 4dJ. 1\9 LV.n 4 JL,L -Dn.\ n Ko.- 1/ Comprises commercial banks, Korean Reconstruction Bank, i,edium-and Small-Scale Industry Bank, and lational Agricultural Co-operatives Federation (Korean Agriculture Bank); includes credit to Goverrn-,ent- oiwned enterprises. Source: Economic Statistics Yearbook 1961 and 1962:; information provided by the Bank of Korea. Table X :BALilCL F PiY,IENTS (in USW' million) )s afl ist half ist half stimateZ/ 95 56 1952 1960 1961 1961 1962 1962 Current Account Mlerchandise Exports f.o.b. 39.7 24.7 19,8 32.9 40.9 18.0 22.5 52 Sales to UN Forces3 30.6 24.1 63.3 62.6 79.7 33.1 41.1 85 Imports c.i.f. -345.4 -386.1 -302.7 -32.6, -310.1 -175. 7 -143.00 Coimercial -153.6 -66.2 -83.9 -96.3 -113.3 - 4r, -74.34/ -205 Aid -191.8 -_219.9 -2 18 .8 -246.3, -196.8 --1277,07 -113.21-5/ 5 Trade Balance -275.1 -337.3 -219.6 -247.1 -189.5 -124.6 -124.1 -293 Other Current (net) Transport and insurance -2.1 -0.1 1.5 -0.2 5.1 -0.3 -0.,5 1 Investment incoine 0.5 1.7 3.5 4.3 4.4 1.9 2.5 5 Other irivisibles -3.2 -0.3 -12.9 -19.3 -18.4 -5.4 0.,1 1 Private donations 01 __22.8 17.2, _19, 24,&6 0..9 18,2 28 Total -4.7 24.1 9.3 4.4 15.7 7.1 20.3 35 Current. Balance C-2798 -313.2 -2i0.3 -242.7 -173.8 -117.5 -103.8 -258 Capital Account Private Capital, Official Loans - - 0.2 3.2 -1.8 -3.1 -48 3 Public gfrants (net) 194-2 314.2 215z1 243.1 224.2 142.8 95.9 205 Reduction in net assets 85.7 _-63 -46 _-1.5 -47.0 -21 _144 50 Total 279.9 307.9 210.7 244.8 175.4 118.6 105.5 258 Errors and Omissions -0.1 5.3 -0,4 -2,1 -1.6 -1.1 -1.7 - 1/ Preliminary. 2/ Estiinated on the basis of data for January-September 1962; estimated 'other currentl items not fully comparable to data for earlier years* 3/ Coprises receipts from the sale of comnodities, services, and local currency. A/ Estimate. servnp: IFS, information provided by th1-e Lank of krea. Table XI EXTERUAL ASSETS (in U.S.j million) End of 1953 1956 1959 1960 1961 1962 Gross asseý of Bank of Korea -,s108.7 98.5 17.3 157.0 207.0 167.h Other assets 8.5 8.9 13..1 5.4 5.4 5.41 Total gross assets 117.2 107.7 160.l 1I7 E 212.h 72.8 Liabilities 21.4 46.1 4.5 4$10 48.0 "0.3 of which JApan-Korea account (211.4) (46.1) (44.2) (44..1) (h6..2) (19.4) TtIl netassets 92.8 61..3 115,9 1174 Change in net assets -5 .7 6 .7 1 70 -71 l_/Exlues sstsof overseas branchies of thne Dank of Kore-a 2/ Comprises net IMF position, claims on UN Forces, and other assets 3/ Estimuate Source: Economic Statistics Yearbook, 1962; information provided by the Bank of Korea m Ln VTT. UUPirUO LUl u'r L u.i y - (in U.S.$ million) Jan.-August >0 Y,I)u _559 .L7UU 7 U± 4'J Food 44~.0 65). *J,. 351.6 40.1 26. Dairy products U0S 2.1 1.1 1.3 1.1 Grains and its products 31.2 l.1 17.5 20.6 30.2 21.6 Fruits, vegetables O.1 0.3 0.,3 0M2 0.2 0.2 Beverages, Tobacco 1011 4.l - - Crude 1aterials _9 .1 7 7 63.3 Hides, skins 0.9 0.6 0.4 0.5 0.h 0.3 Oilseeds 0.2 0.2 03 0.3 0.9 0.4 Raw rubber 5.0 4.5 6.7 7.6 5.8 4.3 Wood, lumber 8.8 11.0 6.4 8.1 7.4 9.3 Pulp 0.9 1.7 2.6 3.4 5.0 5.3 Textile fibers 28.5 48.8 43.,9 46.4 42.1 32.0 Crude fertilizers 0.3 0.2 0.3 0.6 0.5 0.9 Nineral Fuels 44.6 37.1 38.2 23.0 27.4 18.4 Bituminous coal 2477 I. 9.0 _07 7.3 1.1 Petroleum products 19.9 21.7 29.2 22.L 23.1 17.3 Animal, Vegetable Oils 2.5 2.7 2.5 2.5 3.9 1.9 Chpmnn c1 66.~~5 ~ 7 76.1 7.7 73.3 Chemic! elements, comp. . 7.7 . 5.4 5T nv_ _ 2A 3.3 L 3.L7 3.h L.0 1.5 Medicines, pharmaceuticals 4.2 5.3 4.1 3.4 5.2 3.7 EsntLal oils 0n2 n4 0.4 n0.4 0_7 0.6 Fertilize;s 58.3 460 48 .0 55.4 403 537 EXp,SiSes, cther chem. hA 7.8 7 8.0 R. b.9 Hanufactured Goods 70.7 56.7 38.1 47.0 39.5 4o.6 Rhbber producs 2n 0 2 0 1 0.1 0.1 0 9 'ood products 0.2 0.2 0.1 0.1 0.1 0.1 D --- --- Iram prvu,Ct+s 10 7 7 1 7 7 L CO saye , paper pl uu v Ave; A.o InA . o e Textile yarn, fabrics 29.3 12.7 15.8 18.1 18.8 13.0 Mc-mtllcmanufactures 84 7. A . 8I A . 3.9.2 Base metals 17.1 18.5 12.1 14.7 11.1 15.1 7atnufacures of met II_aLe s Am yu ve Machinery, Transport Equip. 42.8 36.7 41.8 40.1 42.4 36.9 Aion-elecuric meaninery C.L. u _LU.c r_) 4 r- C c4 ..; Electric machinery 13.3 10,6 9,4 10.5 18.7 16.4 lVT I/lO ONCo /U.U (UoO \ U [ /Us{ "UNU /_ "\ / Z\/n } Transport equipment 7.9 7.9 6.9 1.2 1.3 2..6 (passenger cars) (- O (ou4N -) (-) (-) u4) Miscellaneous 1/anuf. 9.6 11.6 6.3 6.0 5.7 6.3 eisc. fixtures 2.9 0.3 U,I U9) U0n U*1 Clothing 2.1 2.8 0.3 0.1 0.1 0.1 instruments 2.4 4.9 3.9 3.9 3.6 4.1 (cameras, films etc.) (0.3) (1.0) (0.8) (0.6) (0.6) (1.1) (watches, clocks) (0.2) (1.4) (1.4) (0.8) (1.1) (1.0) 1/ Comprises commercial and aid imports. For composition of aid imports see Table XIIb. (continued on next page) Table XIIa (continued) Jan. -August 1956 1958 1959 1960 1961 1962 Miscellaneous 2.0 3.1 1.9 1.7 1.8 1.6 (musical instruments) (0.2) (0.5) (0.5) (0.5) (0.4) (0.6) (books) (0.4) (0.8) (0.6) (0.6) (0.7) (0.7) Others 41.4 26.1 6.5 48.7 32.1 o8 Total 386.1 378.2 291,6 343.5 316.1 259.1 Source: Economic Statistics Yearbook, 1961 and 1962; information provided by the Economic Planning Boarrl Table XIIb OPOSITICN OF AD IRJRT±: (in US, million) Jan,-June2/ 1956 1958 1959 1960 1961 1962 T. Nn-Project Assistne 1. Agricultural Com-modities 70.7 89.6 43.8 56.7 61..9 27.0 Fnnd 39.2 5. 1. 2-0.7 30. L2,8 Others, iainly cotton 31.5 33.6 32.2 36.0 31.3 142. 2. Fls 23.5 35.Å 20Yn 2)i. 20.3 11. Fetroleum, oil 20..2 2 7 19~. 22.0 19.5 11.3 Bituminous coal 3.0 10.6 1.0 2.1 -6 - Others 0.3 0.1 0.2 o.h 0.2 - 3. Ra Ma+.., Sem-finished Prod.107.2 98.0 88 9 76..5 55..2 6.7 Fertilizers 5.7 47.7 I 5.6 0.7 27.7 3 Ram, rubber- 1.9 3o 5.5 R. 3.6 -ý ) Textile yarns- 21.0 17.7 13.5 8.1 2.5 o.4 Chemicals 3.3 5.9 5.3 3.3 16.5 0-1 Pulp, paper 7.7 8.4 3.8 h.h 2.6 Pl1astic 2. 3.) 2. 3.. 0.5 Others 11.4 11.4 13.2 12.1 14.o 27.2 4.. Ivestt'L Gods 1. 26.6 22.7( 36J. .7 C8 L Lumber, logs ¯. .0 5.L 7. 4. 0.-4 F'Lat glass 1.7f 0.L - U0.1 .. - Cemeit, constr. mat. 2,3 1.6 0.3 1.1 1.0 - fl 0 - I *, -1 n i Iron, steel .shapes 2.8 4..6 2.8 2.2 3.3 2.2 Others 4.2 6 5.1 13.4 6..4 o.6 Total 218.7 2h9.6 176,0 194.6 163.1 108 II. Project Assistance 1. Agriculture, Nat. Res . 1.8 4.6 6.,9 5.0 1.9 0.1 2. Industry, :ning 26.0 22.h1 12.3 19.3 1.2 3.7 3. Transportation 42.1- 20.2ýI 10.1 8.9 8.5 1.6 4. Health, Sanitation 2.1 3.8 3.1 3.2 0,6 - 5. Education 1.0 3.2 3.7 4.2 2.3 0.3 6. Publie Administration 0.1 1.4 1.2 1.5 1.9 0.4 7. Social felfare, Housing 9.0 4.9 2.5 4.0 2.9 0.1 8. General, iiscellaneous 3.3 3.4 3.8 4.4 3.8 1.1. Total 85.4 63.9 43.6 50.5 36..1 7.3 Grand Total 304.1 313,5 219.6 245.1 199.2 112.1 1/ Imports under AID(ICA) and PL48-0 programs; ineludes technical assistance and administratiori expenditures of the aid agencyr in local currenc--; includes irports under Development Loans (DLF). 2/ Includes coal imnorts for the Korean 'ationpl Railways 3/Prelimlinary. Source: Sconomic Statistics Yearbook, 1961 and 1962; ?'tcnthlyt Statis't-~-iclRie,.. Table KIII COMIPOSITION OF EXPORTS (in USp million) jan,-J une;/ 1956 1958 1959 1960 1961 1962 Food 1.5 2.5 4.1 9.7 8.9 8.6 xish, fish products O.b 2,3 1,2 2.7 4.0 3,6 Grain, grain products - - 0'8 3.8 0.5 43 Fruits, vegetables 0.1 0.1 0.1 0.1 0.4 0.2 Seaweeds 0.6 - 1.2 1.3 0.9 - Beverages, Tobacco - - 0.1 D.5 0.,2 0,1 Crude ikaterials 207 1U 11.7 157 21.0 77 Textile fibers, mainly silk 27 1.0 1.0 1T 3. 1.5 Crude Hinerals 2.7 1.9 1.8 2.5 3.0 1.1 Iron ore n,a. 2.2 2.2 2.5 4.3 1,6 Tungsten ore, concentrates n.a, 2.5 3.4 ,.7 4.5 2.-1 Mineral Fuels - 0.3 0.7 1.1 2.2 1._ Anthracite - 0..7 1.1 Animal. Vegetable Oils 0.1 0..2 0.2 0.2 0.1 01 Chemicals - - 0.1 GfD .4 7075 Manufactured Goods 2.1 271 2.1 3.9 T.0 1.9 Veneer sheets, plywood - - -- 1.2 1.1 Textile fabrics - 0-9 1-t 2.ii 0.9 0.6 Machinery Transp. Equip. 0.2 - - 01 0.9 0.6 Tiscellaneous 0-2 7 0.2 1.1 3 0 _T Tot_ Ph.J 16. 19.9 32.8 LO..9 22 1j Preliminary. Source: Economic Statistics Yearbook, 1961 and 1962; i 'nr ,j , 2onmcP