In the early 1960s, the government of Park Chung Hee instituted sweeping economic policy changes emphasizing exports and labor-intensive light industries, leading to rapid debt-financed industrial expansion. The government carried out a currency reform, strengthened financial institutions, and introduced flexible economic planning. In the 1970s Korea began directing fiscal and financial policies toward promoting heavy and chemical industries, as well as consumer electronics and automobiles. Manufacturing continued to grow rapidly in the 1980s and early 1990s.

In recent years Koreaís economy moved away from the centrally planned, government-directed investment model toward a more market-oriented one. Korea bounced back from the 1997-98 Asian financial crisis with some International Monetary Fund (IMF) assistance, but based largely on extensive financial reforms that restored stability to markets. These economic reforms, pushed by President Kim Dae-jung, helped Korea maintain one of Asiaís few expanding economies, with growth rates of 10% in 1999 and 9% in 2000. The slowing global economy and falling exports contributed to slower 3.3% growth in 2001, prompting consumer stimulus measures that led to 7.0% growth in 2002. Consumer over-shopping and rising household debt, along with external factors, slowed growth to near 3% again in 2003. Economic performance in 2004 improved to 4.6%, based largely on vibrant exports.

Economists are particularly concerned that South Koreaís economic growth potential has fallen, due to structural problems that are becoming increasingly apparent, along with a rapidly aging population. Foremost among these structural concerns is the rigidity of South Koreaís labor regulations and the need for more constructive relations between management and workers; the countryís underdeveloped financial markets and a general lack of regulatory transparency are also key concerns. Restructuring of Korean conglomerates ("chaebols") and creating a more liberalized economy with a mechanism for bankrupt firms to exit the market are also important unfinished reform tasks. Korean policy makers are increasingly worried about diversion of corporate investment to China and other lower wage countries.

Tourism : R.O.K.-organized tours to Mt. Kumgang in North Korea began with cruise boat tours in 1998. Overland tours to Mt. Kumgang began in 2003, five years after the cruise tours started.
Infrastructure Development : East and west coast railroad and roads links have been reconnected across the DMZ and work continues to improve these transportation routes. Much of the work done in North Korea has been funded by the R.O.K. On the west coast, the rail line and road are both complete as far north as the Kaesong Industrial Complex (six miles north of the DMZ), but little work is being done on the rail line north of Kaesong. On the east coast, the road is complete but the rail line is far from operational. As of March 2005, neither railroad link had been tested; however, the media reported that a ceremonial, inaugural rail trip from Seoul to Pyongyang may occur as soon as April 2006.
Kaesong Industrial Complex (KIC) : Following a June 2003 groundbreaking the KIC entered its pilot phase, when 15 R.O.K. companies began constructing manufacturing facilities. By the end of 2005, thirteen of the companies had begun operations. Plans for the complexís first phase envisage participation by an additional 250 R.O.K. companies during 2006.

Two-way trade between North and South Korea, legalized in 1988, had risen to $697 million by 2004. This total included a substantial quantity of non-trade goods provided to the North as aid (food, fertilizer, etc.) or as part of inter-Korean cooperative projects. Approximately half of the total trade consisted of commercial transactions and was trade based on processing-on-commission arrangements. The R.O.K. is North Koreaís second largest trading partner.