South Korea ranks 16th in the global ranking of economic sovereignty with an index of 84.4. A country that has made the transition from a war–torn territory to the 11th economy in the world in half a century. A state with a GDP exceeding 1.87 trillion dollars, exporting 684 billion dollars annually. The birthplace of Samsung and Hyundai, corporations whose brands are recognized in every corner of the world. The power that controls more than 70% of the global DRAM memory market, producing advanced chips for artificial intelligence, cars of the future, state-of-the-art displays and ships.

But in the same coordinate system, Kuwait ranks 61st with an index of 79.3. The Emirate has a population of about 4.3 million people, 90% of whose budget revenues come from oil, 95% of export revenue is generated by hydrocarbons. An economy where the oil sector has seen six consecutive quarters of negative growth due to OPEC+ quotas. The state, whose GDP decreased by 1.8% in 2024, is experiencing structural economic stagnation. The country with a budget deficit that totaled $3.46 billion in fiscal year 2024-2025, despite a giant sovereign wealth fund worth over a trillion dollars.

The difference in economic sovereignty indices between the tech giant and the oil monarchy is only 5.1 points. How is this possible? Why is a country that exports integrated circuits worth $142 billion and cars worth $71 billion, with a trade surplus of $51.8 billion, at almost the same level of economic independence as a state that is completely dependent on a single raw material resource?

Chaebols: Pushers of Growth or Chains of Dependence

The five largest South Korean conglomerates, Chaebol, produce about 40% of the national GDP. Samsung alone controls about 20% of the country's economy. The assets of the ten largest chaebols account for 67.8% of GDP, their total assets exceed 110% of gross product. Samsung Electronics exported 200 trillion won worth of goods in fiscal 2024, about $145.6 billion.

Exports account for 88% of South Korean GDP, one of the highest rates in the world, where the average level for OECD countries is at 56%. Trade (exports plus imports) forms 85.7% of the economy. Three quarters of this trade is controlled by the Chaebols. But this concentration creates a specific vulnerability. The country's economy does not just depend on exports – it depends on a handful of family-owned corporations that control strategic industries through complex cross-ownership schemes.

In 2016, the impeachment of President Park Geun-hye was linked to allegations of corruption involving Samsung. If Samsung faces serious problems, the collapse will slow down the entire economy. It turns out that South Korea has delegated a critical share of economic power to private family conglomerates. Is it possible to consider a sovereign economy, where the decisions of several family clans determine the fate of the entire country?

The Semiconductor Trap

Semiconductors are the crown of the South Korean industry. In 2024, chip exports reached a record $141.9 billion, an increase of 43.9%. Almost 20% of all South Korean exports. Samsung and SK Hynix control over 70% of the global DRAM market, and SK Hynix supplies critical HBM memory for Nvidia chips.

But here's the paradox: China and Hong Kong together absorb more than 50% of South Korean semiconductor exports. In 2020, this share was 61.6%, by the end of 2024 it decreased to 51.7%, but remains dominant. Direct exports to mainland China fell from 40.2% to 33.3%, and to Hong Kong from 20.9% to 18.4%. Most of the trade through Hong Kong is eventually re-exported to China.

At the same time, South Korea is critically dependent on Chinese raw materials for the production of those very chips. Dependence on Chinese silicon increased from 68.8% to 75.4% in 2022. Dependence on Germany jumped by 17.4 percentage points to 74.3%. Dependence on gallium and indium increased by 20.5 percentage points to 46.7%. According to 2024 data, 47.5% of the rare earths needed for semiconductor production come from China.

Samsung NAND's manufacturing facilities in Xi'an, China, have increased their share of the company's total production from 29% in 2021 to 37% in 2023, with an expected increase to 40%. SK Hynix also has significant manufacturing assets in China. U.S. sanctions against the Chinese semiconductor industry are jeopardizing the long-term viability of these factories.

It turns out that the main asset of the South Korean economy, the semiconductor industry, simultaneously depends on the Chinese market, Chinese raw materials and Chinese production sites. China is investing more than $150 billion in the development of its own semiconductor industry.

Local companies YMTC and CXMT have already narrowed the technological gap in NAND and DRAM. When Beijing reaches full self-sufficiency, what will happen to South Korean chip exports?

Energy vulnerability

Dependence on Middle Eastern oil has grown: 72% of oil imports in 2023 came from the Middle East, compared with 60% in 2021.

In 2024, South Korea imported 48.2 million metric tons of LNG, of which 5.7 million tons came from the United States. In the summer of 2025, the South Korean government agreed to purchase $100 billion worth of energy from the United States as part of tariff negotiations. If this is spread over three to four years, the South Korean energy bill could rise 1.3 to 1.7 times from the current level. In 2024, Korea imported $19 billion worth of energy products from the United States, including crude oil ($14.25 billion) and natural gas ($3.09 billion).

A sharp increase in LNG imports risks freezing South Korea's long-term dependence on fossil fuels, undermining the goal of reducing LNG's share of the energy mix to 10.6% by 2038. Commitments to additional LNG imports pose challenges in the face of impending global overproduction and an expected drop in demand and prices. Energy imports account for about 20% of South Korea's total imports. The country is completely dependent on external suppliers for the functioning of its economy. Any geopolitical upheaval in the Middle East or in relations with major energy suppliers directly threatens energy security.

Debt burden: The Hidden Time Bomb

South Korea's household debt reached 93.5% of GDP in the third quarter of 2024, the fifth highest figure among 44 countries tracked by the Bank for International Settlements. Some sources point to 90.7% or even 91% in the second quarter of 2024. For comparison, the average level for developed economies is 68.9%. In China – 63.67%, in India – 39.16%, in Japan – 65.66%.

The debt-to-net disposable income ratio in South Korea was 186% in 2023, compared with 130% in 2008. The rate of debt accumulation is outpacing the growth of wages and GDP. According to the IMF, South Korea had the highest household debt-to-GDP ratio among Asian countries in 2023– at 93.4%. The total debt of the private sector (households plus corporations, excluding financial institutions) reached 207% of GDP in 2023.

This figure is almost identical to Japan's 208% in 1992, the year when Japan's economic downturn deepened into what became known as the "lost decades." Loans related to real estate accounted for about half of the total debt of the private sector at the end of 2023 – 1932 trillion won (about $1.4 trillion).

Since 2014, real estate-related debt has grown by more than 100 trillion won annually, doubling over the past decade. The real estate loan concentration ratio – calculated by dividing the industry's credit balance by the sector's contribution to GDP – was 3.65 in Korea last year. In 1992, Japan's equivalent figure was only 1.23. This highlights the extent to which South Korean lending has been channeled into relatively unproductive real estate assets.

South Korea's external debt reached $735.6 billion in the second quarter of 2025, a historic high. This amounts to 35.8-36% of GDP. By itself, this level is not catastrophic, but combined with record household debt and concentration in real estate creates an explosive mix.

Kuwait: The Trillion-Dollar Oil Curse

Kuwait is on the other side of the spectrum. An economy where oil generates almost 90% of government revenues and more than 95% of export earnings. The hydrocarbon sector is almost entirely state–owned. The oil sector recorded the sixth consecutive quarter of negative growth in the third quarter of 2024 due to production cuts under OPEC+ quotas.

Kuwait maintains oil production at the OPEC+ quota of 2.41 million barrels per day. The average price of Kuwait Export Crude was $86.3 per barrel in March 2024, but during 2024, Brent crude averaged $80 per barrel, the third consecutive year of decline ($82 in 2023, $99 in 2022).

Kuwait's economy saw a 3% contraction in 2024. The IMF's forecast for 2025 is growth of only 1.9%, with an average of 2.4% between 2025 and 2027. Without fiscal reforms or higher oil prices, the budget deficit could rise to -7.2% of GDP by 2025. The fiscal deficit in the 2024-2025 fiscal year (ended March 31) amounted to 1.06 billion dinars ($3.46 billion), significantly lower than the projected 5.6 billion dinars due to higher oil revenues and cost reductions. However, the draft budget for 2025-2026 provides for an expansion of the deficit by 11.9% to 6.31 billion dinars.

The overwhelming reliance on hydrocarbon revenues to fuel growth and the slow pace of reform and economic diversification expose Kuwait to a multitude of potential risks. The economy remains vulnerable to prolonged periods of low global oil prices, rising marginal production costs, and continued declining demand for fossil fuels as the world transitions to renewable energy sources.

Sovereign Wealth Fund: A Lifeline or a Temporary Reprieve

Kuwait Investment Authority (KIA) is the world's oldest sovereign wealth fund, established in 1953. In July 2025, KIA's assets officially exceeded $1 trillion, an increase of 18.44% over the year (an increase of $156 billion). KIA ranks 10th in the world in terms of assets and 3rd in the Persian Gulf after Saudi PIF and Abu Dhabi ADIA.

The Fund manages two portfolios: The Future Generations Fund (estimated at over $700 billion) and the General Reserves Fund (Treasury). About 23% of the portfolio is placed in alternative investments: real estate, infrastructure, direct investments, hedge funds. The fund owns significant stakes in BlackRock and Mercedes-Benz Group. KIA's London–based unit, Kuwait Investment Office, manages $250 billion in assets, up from $27 billion in 2003.

Kuwaiti investments in the UK have grown to $42 billion from $9 billion two decades ago. KIA is constitutionally prohibited from taking out loans for investments and does not use derivatives as investment instruments. The latest increase in contributions to the Fund for Future Generations: the government has raised the share of income allocated to the fund from the usual 10% to 25% in the current fiscal year.

Revenues from large financial assets, including investment income from an extensive sovereign wealth fund and profit transfers from state-owned enterprises, have in the past provided stability to the Kuwaiti economy during periods of low global oil prices.

But without urgent reforms and economic measures, even Kuwait's large fiscal assets will not be enough to sustain long-term growth and meet the needs of a growing population.

The Paradox of Measurement: What Really Defines Independence

South Korea has a trade surplus of $51.8 billion, maintains a current account with a surplus of about 5.3% of GDP, and owns foreign assets approaching 50% of GDP. The external debt amounts to a moderate 35.8% of GDP. The national debt is 46.8% of GDP, relatively low.

But the economy depends on exports for 88% of GDP, on energy imports for 93%, on the Chinese market for 25% of exports, and on Chinese raw materials for the production of the main export commodity, semiconductors. Half of the chip exports go to China. Household debt accounts for 93.5% of GDP, concentrated in real estate at a ratio of 3.65. Five chaebols produce 40% of GDP, while one produces 20%.

Kuwait has a huge sovereign wealth fund of $1 trillion, zero private household debt (thanks to a system of state paternalism), and a current account surplus due to oil exports. But 90% of the budget depends on oil, 95% of exports are hydrocarbons, a structural budget deficit of 3-7% of GDP, an economic contraction of 3% in 2024, the oil sector has been in the red for six consecutive quarters, and diversification is moving slower than planned.

Structural Vulnerability Against Resource Dependence

South Korea has built one of the most technologically advanced economies in the world. The country ranks 6th in the Global Innovation Index 2024 and 2nd in Asia. The intensity of R&D reached 5.0% of GDP in 2023, the second highest indicator among all countries. South Korean companies are leaders in the information technology, shipbuilding, and automotive sectors.

But this impressive technological power is embedded in a system of multiple structural dependencies: 93% energy imports, raw materials for a key industry from a geopolitical competitor, export markets controlled by the same competitor, the concentration of economic power by a handful of family conglomerates, household debt burden at the level of the Japanese pre-crisis bubble, and a vulnerable currency.

Kuwait does not have advanced technologies, does not produce complex goods, and depends almost entirely on one raw material resource. But the principality owns a trillion-dollar fund with a globally diversified portfolio, has no private household debt, maintains zero government debt (all assets against minimal liabilities), has the sixth largest proven oil reserves in the world, and has a constitutional ban on borrowing from the fund.

An Unanswered Question: What Do We Actually Measure?

The index of economic sovereignty of South Korea is 84.4. Kuwait's index is 79.3. The difference is 5.1 points.

A technology giant with $684 billion in exports versus an oil monarchy with a declining GDP for the third year in a row. A country that controls 70% of the global DRAM memory market is opposed to a state where 90% of the budget depends on a single commodity. An economy with an R&D intensity of 5% of GDP versus an economy where diversification has been advancing for decades without significant progress.

Why is the gap so small? What do these indexes measure? Yet, can a country that depends on 93% of its energy imports be economically sovereign? Can a state where five family-owned conglomerates produce 40% of GDP be considered independent?

On the other hand, can a country with 90% of its budget from oil be sovereign, even with a trillion-dollar fund? Does the giant sovereign wealth fund create economic independence or just postpone the inevitable need for structural reforms? You can find all relative information by clicking on the link