MAIN PAGE | EVENTS & PROGRAMS | 2001 | IGM | SPEECHES | JIN NYUM
PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | EVENTS & PROGRAMS | 2001 | IGM | SPEECHES | JIN NYUM
Regional Vitality in the 21st Century
April 6-10, 2001 — Tokyo, Japan
Dr. Jin Nyum
I. INTRODUCTION Good afternoon ladies and gentlemen, Let me first say how pleased I am to be here today before all of you distinguished business executives at the 34th Pacific Basin Economic Council's International General Meeting. The degree to which PBEC has spearheaded economic development in the Asia-Pacific region is impressive. As a respected private sector organization, the PBEC has laid the foundation for the "Pacific Basin Era" by playing a leading role in strengthening economic cooperation and promoting investment in the region. In particular, I would like to commend PBEC members on your contribution towards Asia's recovery from the economic crisis of 1997. No doubt the PBEC's hardwork will continue to contribute to co-prosperity in the 21st century as private sector become increasingly significant sources of economic development. In my view, the world economy in the 21st century will be characterized by acceleration of globalization, with IT revolution being a driving force of knowledge-based economy. Today, I would like to focus on the key challenges of globalization, followed by cooperative strategies for addressing with such challenges, visualizing common goals towards sustainable growth in the region, Lastly, I shall touch upon the recent improvement in Korea's business climate. II. Three Key Challenges to Globalization Let me start with the challenges of globalization. Back in the 1980s, most economists, businessmen and political leaders believed in the benefits of globalization, depicting a world of increasing prosperity and international cooperation. However, after the 1997 Asian financial crisis, the notion of globalization was increasingly criticized and eclipsed by its shadow of economic instability, the widening knowledge gap, and environmental deterioration. International leaders should come up with ways to balance the benefits of globalization with the cost of its shadows. In this context, governments and businessmen in the Asia Pacific Basin must cooperate and address three critical challenges together. First, we must work together to maintain international economic stability. Second, a collective strategy for a knowledge-based economy is urgently needed. And finally, we must pursue sustainable development through social cohesion and environmental protection. Managing Global Economic Stability Ladies and gentlemen, Unquestionably, the world has become more interdependent, with external shocks to a single economy spilling over onto its neighbors and broad market movements synchronized. Thus, concerted efforts to improve global economic management are crucial in reducing the vulnerability of developing countries to crises. This means the leading economies should manage global economic matter in the interests of all, including those of emerging economies. In addition, we must begin seriously addressing the current global economic downturn. With the two engines of growth, the US and Japanese economies, sputtering, the global economy is facing a risk of a more serious downturn. Most emerging economies, particularly the crisis-hit countries in the Asia-Pacific region are experiencing difficulties due mostly to the weakening external environment. "When the leading economy catches a cold, other economies will come down with pneumonia." Thus when leading countries with solid external positions implement their own economic policies, they must also take into careful consideration the spillover effects of their policies on the rest of the world. This suggest that we must adopt cooperative, forward-looking economic policies that pay due attention to global prosperity. In addition, we need to deal with volatile swings in international capital flows, often driven by herd behavior and the contagion effect. There are inherent risks in the synchronization of financial markets and speculative behavior of highly leveraged institutions (HLIs), such as hedge funds. Therefore, we must first address the structural weaknesses in the domestic financial system before pursuing full-fledged capital market liberalization. As well, we should strengthen international cooperation in areas of financial surveillance and crisis prevention. Improving transparency and strengthening monitoring mechanism are keys to identifying the early warning signs of trouble and thus leading to a better policy response. At this point, I would like to say a few words about the post-crisis structural reforms undertaken by the Korean authorities. The reform policy has focused on strengthening the institutional framework for a sound, well-supervised financial system. Recognizing the need for such a system, the financial sector reform was aimed at cleaning up banks' balance sheets. We also implemented institutional reforms to embrace global standards in transparency, corporate governance, and prudential regulation and supervision. A Strategy for a Knowledge-based Economy Let me know turn to the second point of my address: how to cope with the advent of a new knowledge-based economy. This remarkable change called the Third Industrial Revolution, brought about by the rapid diffusion of technological advancements, has profound implications for all players in the world economy. While some countries are enjoying the fruits of the New Economy, such as reduced transaction costs and increased productivity, other countries are facing the new challenge of realigning their industrial structure based on the new technologies available. The business sector is also rushing to transform its conventional business structures to the e-Business model. This is not an easy task, particularly for those countries with unskilled human capital or a social structure that does not encourage active business start-ups. The gap in access to information technology, or the so-called Digital Divide, can lead to growing inequalities, not only between countries but also within countries. In this regard, governments need to provide an incentive framework for expanding net access and invest in IT infrastructure. On the international front, governments in the Asia-Pacific region need to make concerted efforts to narrow the knowledge gap between developed and developing countries. One way to bridge this gap is the provision of technical assistance in areas of IT-related training and education. Multinational corporations should also take part in this critical exchange. This is an area where business interests, such as the PBEC, and governments can have mutually reinforcing roles. Social Cohesion and Environmental Problem Now, I would like to address the issue of social cohesion and environmental deterioration. The social challenges of sustainable development are demanding, as globalization often comes with growing income inequalities and structural unemployment. Acute unemployment and wage problems are particularly severe in crisis-hit countries. These problems can be alleviated by expanding the social safety net. However, the best solution is job creation and enhancing labor market flexibility. This is the very strategy the Korean government is carrying out to develop a cohesive society based on the principle of productive welfare and harmonizing social welfare with economic efficiency. Another key element in designing sustainable policies is maintaining environmental quality. Environmental concerns are not limited to a single country or a particular region, rather they constitute an international matter requiring global initiatives. Accordingly, we must form an international consensus on how to harmonize social, economic and environmental needs. III. Improved Business Climate in Korea Now, let me turn my focus to the recent developments in North and South Korea and improvements in Korea's business climate. Reconciliation on the Korean Peninsula There has also been good news to report from the diplomatic front on the Korean peninsula. Since the historic summit last June between the leaders of South and North Korea, the two Koreas have moved toward reconciliation and cooperation. We believe tension in the region will subside even further if North Korean leader Kim Jong-Il visits Seoul this year. The agreeents on investment guarantee and avoidance of double taxation, as well as Kyesung industrial complex join development project, are other achievements in inter-Korean affairs worth noting. Additionally, the two Koreas agreed to reconnect the Kyoung Ui railway within the year. And if the reconnected railway is extended to the Trans Siberia Railway (TSR) and the Trans-Chinese Railway (TCR), the Korean peninsula would become the logistical and economic link to Eurasia and the Pacific Ocean. This scenario is even more likely now with the opening of the Incheon International Airport last week. With an annual transportation capacity of 27 million passengers and 1.7 million tons of cargo, the new airport will serve as the hub for Northeast Asia. I am sure these developments will expand the growth potential in Northeast Asia, thus providing a larger market for investments. Improved Investment Climate in Korea Significant progress has been made in improving the business climate in Korea in the last three years. Namely, sweeping domestic regulatory reforms were undertaken to eliminate barriers to market entry and business operations. More specifically, we abolished approximately 53% of all business regulations and revamped 27% of these remaining. Furthermore, corporate governance and accounting principles have been substantially upgraded to meet international standards. Labor sector reform of the last three years has enhanced labor market flexibility, making labor-management relations far less divisive and more cooperative. The government now seeks to resolve labor-disputes based on strict application of law and principles. We have also made a decisive turn in our policies towards trade and investment. Laws and regulations governing foreign direct investment were streamlined in accord with global standards. The foreign exchange system was also liberalized to support international transactions in both current and capital accounts. These policy changes have made Korea a more attractive place to do business. Hence, I invite all of you to continue investing in Korea and its future. It is a country that overcame a financial crisis, reemerging with an international economic system that is more transparent, profitable and competitive than ever. IV. Conclusion Before concluding, let me share with you my thoughts on the importance of competition and cooperation for the prosperity of global economy. It is my conviction that fair competition among countries should be based on adherence of global rules. Cooperation, on the other hand, should be approached with an open-minded, especially from the perspectives of other countries. This requires mutual respect and trust. And confidence-building, in turn, would require an objective assessment of history and commitment to moving forward with a common goal of prosperity in the Pacific Basin. I understand that the agenda for this general meeting of PBEC cover various important topics, ranging from "Global Economic Issues of Sustainable Growth" to "E-Commerce." I sincerely hope that your discussion on ways to address challenges facing the global economy will lead to a clearer vision for the 21st century and mutually-beneficial cooperation among PBEC members. Finally, the era of the Pacific Basin Era is at hand. We will be seeing you there. Thank you. |
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