Economic Reform in Korea

The government played an important role in boosting café market. The era of Kim Young-sam governance brought unexpected changes for the Korean society and economy (Song 2). Kim Young-sam was the first civilian president of South Korea (1993-1998) and was well-known for the establishment of an international trade policy, Segyehwa, which literally means globalization. It is a top-down political economic reform leading market liberalization and enhancing global competitiveness of South Korea(Song 2). Under this policy, corporations and banks were allowed to perform market exchange openly and freely. The freedom that they got encouraged them to invest and compete more vigorously in the world’s market. Chaebol, Korean business conglomerate, started to invest over Africa, East European countries and Russia.
 

However, the increasing short term foreign investment running in and out Korea as well as over-extension of corporations led Korean banking system to face crisis of bankruptcy (Song 2). Accompanied with the Asian economic crisis in 1997, a series of corporations bankrupted and the vulnerable banking system was not able to repay short term loans. Therefore, South Korea received a 58 billion dollar urgent package from the International Monetary Fund (IMF) (Song 2). In return, IMF required a more open market which gave a golden opportunity to the international companies, including café franchises, to expand in Korean market.

Furthermore, the South Korean government removed the special excise taxes over products like coffee, soft drink, cocoa, sugar, electronic goods, etc. in 1999 (Song 20). This abolishment diminished entry barriers and encouraged importation of coffee beans from other countries to Korea. As a result, coffee was not considered as luxury goods anymore and became more affordable and accessible for general public.The free-market system and lower importation cost facilitated the growth of international café franchise to dominate the Korean coffee market (Song 21). Starbucks is one of the examples that successfully entered the market under this favorable environment and now develops well in South Korea. It showed that government’s policies are one of the important factors allowing more cafés available in South Korea.