Rapid growth over the past 3 decades transformed Korea into the world’s 13th largest economy. Exports were a big driver of that growth, which averaged 6.4% a year between 1981 and 2009. Exports and imports together amounted to 83% of GDP in 2007, and by 2008 Korea had become the world’s 7th largest trader. But the economy’s heavy reliance on foreign trade made it especially vulnerable to the global economic crisis of 2008–09. During the height of the crisis, in the fall of 2008, the economy contracted by 15% as exports, hit by poor credit conditions and declining investor conﬁ dence, plunged by 34%.
The government’s policy response to the global economic crisis recognized the larger role played by small and medium-size enterprises, especially in employment—in contrast to before the 1997–98 East Asian ﬁnancial crisis, when the large conglomerates known as chaebol dominated. At the end of 2008 Korea’s 3 million small and mediumsize enterprises accounted for 99.9% of all companies in the economy, almost 90% of employment and about 50% of production. In the wake of the crisis the government took steps to reduce the tax and regulatory burden on these businesses, building on reforms begun earlier in the decade.