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It scored high points for several indices measuring various parts of the economy.
Notably, it got a perfect score of 100 for maintaining macroeconomic stability and earned the "leadership" title for high-tech infrastructure development and adoption. A top score of 100 means a country is a "frontier."
Its high spending on science and tech R&D, second only to Israel, also further backs the forum's analysis that Asia's fourth-largest economy is an early tech adopter.
However, Korea is not an innovator such as the United States yet, because its society does not have "the spirit of entrepreneurship" as people here generally do not possess a "positive attitude" toward taking risks, the WEF report said.
Also, the heavily top-down hierarchical culture and rigid labor market have been hindering innovation and competitiveness. Korea's hierarchical structure is a lot worse than in China, which ranked 50th. The country ranked 88th in 2018.
"Despite some recent increases, the appetite for entrepreneurial risk in Japan and Korea is significantly lower than in the U.S.," the WEF's 2018 report said. "Possible explanations include perceived higher opportunity costs to entrepreneurial risk."
One of its weakest pillars was the labor market due to "its rigidity and sup-optimal utilization of human capital," it added. Korea scored 56 in market openness, the lowest among 12 categories, including labor which earned 62.
Analysts said the country needs to push forward with labor reforms that can help underutilized, highly educated women join the workforce, while achieving a balance between job security and labor flexibility amid the aging population.
"The sub-optimal utilization in this sense, I believe, relates to the low female labor participation here, even though they have become highly educated," said Kim Jung-ho, a labor economist at Ajou University.
"Due to the longstanding rigid system, most women find it hard to rejoin the workforce after getting married or having babies. The country needs a policy that ensures job security, at the same time boosting flexibility, while expanding its social protection system."
Kim added the change needs to happen in education where students can learn and develop the creative skills readily needed by the private sector as soon as they graduate.
Kim Sang-kyung, chairwoman and chief executive of the Korea International Finance Institute (KIFI), agreed, saying women are being underutilized in the economy for reasons including the market's rigidness and inequality, even though they have a longer average lifespan and equal education level to men.
"Should more women join the workforce, it will be able to reduce the elderly poverty rate," she said, citing the country's high rate among the OECD members.
Meanwhile, Korea was able to see its rank climb in the financial system category, from 74th in 2017 to 19 in 2018 with an average score of 81 points. In 2017, Korea's financial system competitiveness was far below that of Uganda.
The Financial Services Commission (FSC) explained the WEF has expanded the scope of its statistical measurements to further "objectively" evaluate 140 economies' financial systems.
It included measurements of its domestic credit to the private sector, SME financing and banks' regulatory capital ratio, the FSC added.
