New Business Opportunities in Korea
The Honorable Han Duck-Soo
Minister for Trade
Republic of Korea
Distinguished guests, thank you very much for giving me an opportunity to put forward where Korea is heading; and why the foreign economic communities can cooperate with Korea at this moment; and why is that kind of cooperation appropriate; and from the learning we had this morning, how these kind of cooperation -- will this kind of cooperation be influenced by security situations on the Korean Peninsula.
The first question I would like to address is, 'Where is Korean economy heading?' As Dr. Cho has just indicated, the 1997 economic crisis triggered by financial crisis was a historic event in the sense that no situations was so serious as in 1997 and Korea's economic survival was at stake at that time. I would like to say constantly here that Korea emerged with totally new shape and new ideology for economic development. Korea is heading for open market economy. I would like to put a prefix 'small' -- but I don't know whether elevenths largest economy of the world can be called small. But I would like to put a prefix 'small' because all our economic standards from now on and during the last two years was internationally compliant. We did massive reform in financial sectors, corporate sectors, public sectors, and labor markets in compliance with what are now being done on the international economic area. We adopted a lot of new international standards in all those areas and we will continue to move forward toward that direction.
Then the question naturally arises, and it is a very deep question, whether this kind of reform, which was the motivating factors behind our economic recovery, reaching about ten percent growth last year and in the first quarter of this year, whether that kind of reform can be sustainable. I was in Washington in 1998, very early in 1998, and one journalist from Washington Post had an interview with me and he met me five years ago in 1994 when Korean government did its best efforts on concentrating the corporate efforts on the core business lines. It was the policy adopted in the previous administration to increase the competitiveness of our corporate sector. He told me that when he met me in 1994 I told him that our reforms would continue and our corporate sector would regain its competitiveness, recovering from somewhat sluggish economy in 1992. And from his conclusion, that reform failed. And he said that, 'When will the reforms that are now being undertaken in 1992 be gone?" So I told him that these reforms this time will be sustainable because we had a big crisis in 1997 and we think that these reforms are the only way out. There is no alternative; and we had a close consultations with international institutions, including IMF; and the top political leadership, which is President in Korea, which is taking the presidential system, knows what's going on in this country and how we should get out of this crisis. Five years ago it was the policy that was recommended by the government and understood by the president, but this time this is the policy recommended by the government, but fully initiated by the President. So this initiatives will continue and they will certainly be continuous reform and determination to succeed those reforms. And we have those results now and we think those reforms will be sustainable and in that context we believe our economic growth will be sustainable too.
Then third question, "What are the areas and what are the possibilities for cooperations with Korean economy for foreign investors or foreign traders who would like conduct trading with Korea?" When the economy is too much settled there is very little room for strategic alliances and cooperations between Korea and other world economy. We are a very rapid transition now and we are in a very, very rapid structural adjustments process, and in that context there is a lot of rooms for strategic alliances between Korean economy and the economy outside of Korea. We had a lot of strategic alliances. Previously, in 1997, there was only seven billion foreign investments into Korea. In 1998 it increased to nine billion; and last year it again jumped to sixteen billion and this year too, it'll be hovering around sixteen billion U.S. dollars. Now our cumulative figures of foreign investments to GDP is now around 7.7 percent, which is still far behind Singapore, which is eighty-one; China, which is twenty-one; and Malaysia, which is around thirty to forty. We will continue those policies, but 7.7 percent is meaningful for us compared with only two percent before the crisis. So there is an ample room for cooperations between Korean economy and world economy.
Why are those cooperations appropriate and possible? I would like to put out some of the merits that these kind of strategic alliances can be made. First, Korea is at the level of development with various affiliated and related industries developed. We had a good raw material producing industry, including steel; and we had a very good assembled industry, including electronic appliances, automobiles; and we had a well developed related industries, related with those good assembled industries, and we are having a very strong construction industry. And in addition to that, we had a very good asset, which has been our traditional and conventional assets in Korean economy - good people. Hard working, well educated and intelligent. We will continue to generate those well educated people through more educational reforms - which will aimed at bringing about more technology intensive and knowledge intensive people in Korea.
The third aspect of our economy is that geographically, we think we had a good locations; we got surrounded by Japan, Russia, China; and quite as spontaneously and naturally, the United States is very near to Korea although geographically, there's a distance. These four big powers will make the geographical location of Korea a very suitable place for foreign investors to have the manufacturing locations and business hub in Korea. We can utilize those three very fundamental merits of Korea as a factors contributing to increasing the strategic alliances between Korea and the world economy.
Now we had the lectures this morning that there is a very, very intimate relationship and interactions between security and economic development. Korean Peninsula can never be discussed without touching on what's happening on the Korean Peninsula in the context of the security. Of course, we have a alliance with United States and US military presence is still continued in Korea; which is fundamental to maintaining security and peace on the Korean Peninsula. But with the incoming of the new administration two years ago, we continuously pursued the policy of engagement - so called 'Sunshine Policy' toward the North. That is, to make friends with the Communist North -- not through armed confrontation, but through the engagements with the ways of economic, as well as humanitarian engagements. We have pursued that policy in a quite consistent way during the last two years. There was a criticism there. And there was the worries there; and still some worries are lingering, not only in Korea, but also in United States Congress. We completely liberalized the business activities in North Korea - separating politics from economics. Now already, one hundred small and medium-size firms are operating in North Korea. And we continuously persuaded other countries, other big powers, to have direct dialogues, and diplomatic relationship with North Korea, which was a fundamental diplomatic policy which centers at direct dialogue between North and South. As far as North Korea would like to avoid direct consultations with the South, we need some time for that kind phenomenon to be dissolved. We would like to let other countries to have more sound and healthy diplomatic relations with North Korea so that the diplomatic relations can be of some help to bringing out North Korea into the world arena.
So South Korea proposed three fundamental policies toward the North. That is: South Korea will never absolve North Korea; and no armed provocations should be made by the North; and South Korea will have continuous reconciliation and cooperations with the North Korea. Last year Secretary Perry of the United States, who was the Defense Secretary in the previous years, in close consultations with South Korea, US, and Japan, we came out with some of the package with North Korea. That is, we gave something and we want something from the North Korea. We insured the security in close consultations among three, Japan, US and Korea, the security for North Korea. Therefore, we want North Korea to be rather more relaxed in putting out their plans of liberalizations and their engagements in the world economy.
Second, we will in economic way, we will persist North Korea to develop and to sustain and their standard of living. And third, the three countries, including South Korea, will help North Korea to be the responsible member of the international community that took the form of supporting the efforts of other countries, including Italy and possibly, Philippine, to have the direct diplomatic relations with the North. In return we ask three things: that is, they should stop another missile launch; no development of nuclear weapons; and no armed provocations by the North.
What are the result of those two years of engagement policy? Still there are some uncertainty, but some results are coming out. One is very frequent exchanges of people between South and North, sometimes initiated by our private sector. The so-called 'Kungun Mountain Tourism Projects' allowed about one hundred-eighty-thousand South Koreans to have toured the mountains in the North. And the direct exchange of people has reached almost ten times the number of South Koreans coming to the North, excluding tourists, during the last ten years. And, North Korea stopped the launching of another missile; and a nuclear constraint program is well put into effect. And, as we heard this morning, the North Korea is now actively pursuing the reach-out policy to have more direct diplomatic relations with the countries in the world.
We believe that those actions by the North and the result of our two years consistent engagement policy, will bring down the tensions on the Korean Peninsula and that will contribute to the more economic activities on the Korean Peninsula between South Korean economy and world economy. And maybe, in the North Korea, the activities by the South and the other countries of the world can be undertaken in the North Korea, together.
So, as a conclusion, I think that because South Korean government, and people, and corporate sector, and financial sector, are very firm to continue their reforms. Our growth will continue and will be sustained, although not at such a high level as before the crisis. And second, South Korea will be subject to very strong structural adjustment; and in that sense there is a wide scope for cooperations between South Korea and the world economic partners. And peace and stability on the Korean Peninsula will be maintained. Putting all these together, Korea - South Korea - will never be complacent. We will never be satisfied with what we have achieved. We will continue our progress. We will continue our reform efforts; so that South Korea can emerge with a more stronger country, with the international standards of complacency, international standards of transparency, and a various accountability standards.
Thank you very much.