ace to one of serious problem, poverty. After two major wars, the country even with a food shortage experienced lack of capital. There was no source for savings and investment to finance economic growth domestically, so it depended heavily on foreign capital which inflow in a form of mostly aid and loan in the early stage of economic growth. The proportion of foreign capital to total capital formation in 1965 was approximately 40 percent.
             In addition to inflow of foreign capital, the government faced allocation of capital with using its financial system. Before the military government in 1961, the loan decisions of commercial banks were heavily influenced by political interference (Haggard, 26). Well, in fact the loan decisions in Korea mostly were affected by political interference rather than bank themselves until recent time, but during the 1948 ~ 1961 period, the rent generated by low interest rate was used for its political activities rather than economic growth.
             Government's Export Promotion Policies
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