In tax incentives and lowered direct tax

In order to achieve EOI, South Korea used too many major types of export-promotion oriented industrial policy interventions.South Korea’s government under valuated their currency to reflect a pro-export bias. They decided to keep their effective exchange rate in favor of exporters. South Korea’s effective exchange rate was 281 for exporters and 247 for importers, in 1964.The government provided preferential incentives for imported intermediates which were used in production for export. To prevent abuse, the government only refunded documented exports.The government’s main mission was to protect targeted infant industries as they starting export drive. The government maintained a high dispersion of protection.South Korea imposed tariff incentives for exporting activities.For exporters, the government issued domestic indirect tax incentives and lowered direct tax rates on income.To encourage domestic production, South Korea provided tax breaks for domestic suppliers of inputs to exporting firms.To make South Korean exporters more attractive in the market, South Korea accelerated depreciation on its currencySouth Korea founded The Korean Traders Association and the Korea Trade Promotion Corporation in order to promote South Korean firms worldwide.South Korea enlarged size of the market by creation of free-trade zones, industrial parks, and export-oriented infrastructure.To encourage firms, the government promised monopoly rights for the firm that achieved exports in the targeted industries.South Korea also founded the Korean Export-Import Bank which enabled a system that allows export credit insurances and guarantees for overseas marketing and post-shipment export loans.In order to secure better terms, the government of South Korea conducted foreign technology licence agreements in behalf of private firms.Since the early 60s, South Korea is setting export targets for the firms.As a result, South Korea generated more than 8 percent growth rate each year since 1960s. This kind of growth makes South Korea’s economy fastest growing economy in the world. Despite the fact that South Korea’s history has several obstacles such as the Korean War and heavy military expenditure under national partition, South Korea achieved an impressive performance.The South Korea’s policy change from import substitution to export orientation development has a major effect on unprecedented economic growth started with 1960s. Aggressive export promotion policies has resulted in expansion of export and improved growth rate of the economy. Also, the South Korean government ensured tariff, tax and financial incentives in addition to their policy changes to export-oriented development. That’s why, South Korean economic development can be considered as an example of pursuing the export-led economic growth strategy.


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