The official currency of South Korea is the won. The won historically had been broken down into 100 jeon, but typically the smallest amount that crosses hands presently is 100 won. The currency is pegged against the U.S. dollar. The peg formally stood arbitrarily at 2.16 won to one dollar (February 16 is the birthday of Kim Jong-il) but has recently been brought down in value because it was being exchanged at a far lower rate on the black market.
| Moody's Rating |
| A3 |
| S&P Rating |
| A- |
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Political Structure
Republic of South Korea is divided into nine provinces and seven metropolitan cities. The government consists of three branches: the executive, the legislative and the judicial. The heads of the executive branch are the President and Prime Minister. The cabinet is the State Council, which is appointed by the President by the Prime Minister's recommendation. The President is elected by popular vote to a single, five-year term. The President appoints the Prime Minister. The legislature is a unicameral 299-seat National Assembly. Members are elected to four-year terms by popular vote. The judiciary is the Supreme Court to which the President, with the consent of the National Assembly, appoints judges.
Prominent Figures
The acting President of South Korea is Han Duck-soo. He replaced No Mu-hyun, who was impeached in 2004. Kun is also the current Prime Minister, as it is he who takes the place of the President upon impeachment according to South Korean law. The central bank of Korea is The Bank of Korea. The Governor of the bank is Seung Park, who will serve that roll until the end of his term in 2006.
Unique Characteristics
South Korea's chaebol are often compared with Japan's keiretsu business groupings, the successors to the pre-war zaibatsu; and the Chinese characters used in Korean and Japanese for chaebol and zaibatsu are even the same. This comparison is misleading, however, given two main differences between the two. First, the chaebol are still largely controlled by their founding families, unlike the keiretsu, which are run by professional corporate managers. Second, the government prevented the chaebol from owning private banks, partly in order to increase its own leverage over the banks in areas such as credit allocation. The keiretsu, by contrast, usually work with an affiliated bank, giving affiliated companies almost unlimited access to credit.
Key Economic Factors
The strength of the South Korean won coupled with a recent pull-back in the price of some of Korea's key imports, especially oil, has kept imported inflationary pressures at bay. In the first half of 2005, the won strengthened 3% against the greenback and around 7% against the yen; following on from a 15% appreciation against the greenback and a 10% gain against the yen in 2004.
Inflation is very well contained in Korea. Since hitting a high of 4.8% in August 2004, inflation has been more or less on a downward trajectory. The reason for the subdued inflation is probably because domestic demand is still not strong enough to cause prices to increase substantially. In fact, there are some concerns that the recovery that we have seen in domestic demand in recent quarters could already be losing some of its momentum.
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