PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | SPEECHES & EDITORIALS | 1999 | TOWARD A NEW ASIA-PACIFIC

Toward a New Asia-Pacific: An Agenda for the Global Era His Excellency Kim Dae-jung President of the Republic of Korea APEC CEO Summit Auckland, New Zealand Saturday, September 11, 1999 Mr. Chairman, and distinguished participants! It is a great honor and pleasure for me to speak to all of you today. Thank you for inviting me. I would like to talk about two things today: first, how Korea has been dealing with the economic crisis over the past year-and-a-half; and second, what we, the APEC member economies, should do together to put the crisis entirely behind us and build a new Asia-Pacific for the coming millennium. The crisis in Asia had many causes: policy mistakes, reckless short-term borrowing by the financial sector, heavily indebted firms, and falling investor confidence as well as hedge funds. However, the fundamental cause behind Korea's economic crisis was structural. The country had been too used to practices not very faithful to the principles of market economy and democracy. These included business-politics collusion and government dominance over banks without having a single share. And past administrations had failed to undertake the structural reforms in the economy to rectify the situation. Thus, it was clear what my government had to do, and we acted swiftly. During the past 18 months, we have concentrated our efforts on sweeping structural reforms in four sectors: the financial, corporate public, and labor sectors. In particular, we have been very serious in cleaning up the corporate sector along five principles, all designed to enhance transparency and accountability in corporate governance and drastically improve the financial structure and thus strengthen the competitiveness of our companies. Through the Tripartite Commission of government, management and labor, we introduced greater flexibility in the labor market and made labor-management relations more harmonious. We have also streamlined the government bureaucracy. We sorted through some 11,000 rules and regulations, and have abolished or changes over half of these. We have opened the way for hostile M&A, and lifted the limit on foreigners owning real estate in the country. Furthermore, to bring in more foreign capital, technology and know-how into the country, we enacted a new Foreign Investment Mart, with great success. Last but not least, we lifted most of the restrictions on foreign participation in Korea's capital market. These reforms have brought back foreign investors' confidence in Korea. Credit rating agencies such as Moody's, Standard & Poor's, and Fitch IBCA have all restored Korea's sovereign rating to investment grade. Returning confidence in the Korean economy is also evident in the amount of foreign direct investment(FDI) that the country has attracted. Last year, the total was around US$9 billion, and we expect the total to reach US$15 billion for 1999 as a whole. Thus, the accumulative amount of FDI by the end of this year would be around 9 percent of our GDP. We hope to bring in far more, to a level similar to many other APEC economies. The effect of the progress made in restructuring is also being felt in economic recovery. During the first half of this year, the economy grew by 7.3 percent with inflation kept under 1 percent. The growth for the whole is expected to be around 7 percent, in contrast to -5.8 percent last year. What's even more encouraging is that the recovery is taking place across the board with very stable interest rates and exchange rates. The usable foreign exchange reserve has been brought up to $65 billion, from the low point of $3.9 billion at the time of my election in December 1997. The government has recently begun to pay back its debt to the IMF ahead of schedule. However, this is not to say that Korea's economic renewal is complete, nor that we have solved all of our problems. Many of the reform measures are in progress, others have yet to be implemented, and many challenges lie ahead. But we are determined to finish the reforms. On particular, we are urging the corporate giants, the chaebol, to complete the restructuring measures they have pledged before the end of this year. Economic reforms alone are not enough, and we have turned our attention to non-economic areas a well. I have made the fight against corruption an on-going part of my administration. We are in the process of introducing an Anti-Corruption Act. The political leadership of my government is clean, but there is still much decay in the officialdom. I know all too well that no country with a high corruption index has joined the rank of the advanced countries. I also believe that without reforming the political sector, Korea will not be able to enjoy sustained economic prosperity. Thus, we are trying to change the regionally divisive way in which political parties are organized and run, so as to open the way for nationally-based political parties. We will strengthen public management of elections, and amend the Political Funds Act for greater transparency in the raising and use of political funds. Just as the working and middle classes suffered the pain of restructuring, they are entitled to the fruits of the economic recovery. The approach my government has adopted is summed up in the concept of "productive welfare." The conventional concept of welfare implies simple giving, which breeds dependency. But "productive welfare" aims at enhancing the quality of life and abilities of people through greater access to education, cultural resources, medical services and better housing. At the same time, through human resources development, it tries to enable the disadvantaged to earn more and generate more added value. The larger goal is to broaden the middle class and strengthen social cohesion. Ladies and gentlemen! I would now like to turn to what the APEC economies should do together to build a new Asia-Pacific. Before the recent crisis, this region, with its great diversity and economic dynamism, served as the engine for global economic growth. I am confident that it will soon play this role again. But my vision of a new Asia-Pacific is not limited to the reclamation of the past pride. The region should also take on a leading role in the evolution of new economic order, in exploring new growth potentials, and in alleviating global inequities. To this end, I would like to make three suggestions. First, APEC should take the lead in the establishment of new global economic norms. APEC should be an active player in the efforts to reform the global financial architecture, eliminate non-tariff barriers, extend mutual recognition of industrial standards and certifications, promote e-commerce, and formulate rational labor and environmental standards. In the same spirit, APEC should take the lead in the launching of the WTO new round. It should take the initiative to make membership in the WTO universal. In all of these efforts, APEC should work closely with other regional economic blocs such as the EU and MERCOSUR, in active exchanges at both the governmental and non-governmental levels. Second, APEC members should join forces to transform themselves into knowledge-based economics. In the industrial age of the 20th century, the dominant ingredients in production were tangible ones, such as capital, labor, and natural resources. But as we move into the new sources of growth potential, such as knowledge, information, and cultural character. Keeping abreast of the transition, my government has coined a new term, "the new intellectual" in effort to encourage all the people to actively apply their minds, and has come up with policies to nurture what may be called "knowledge workers." However, countries vary in terms of their ability to make the transition to a knowledge-based economy. APEC should come up with new programs for increased cooperation in the provision of infrastructure in information industries, e-commerce, e-education, and the training of professionals in these new areas. Third, the APEC economies should pay greater attention to the growing economic and social disparity, both within and across nations. In the coming age of the knowledge-based economy, the disparity will arise more and more from the knowledge gap. To narrow the gap, education is the best answer. Therefore, APEC should step up efforts to promote educational cooperation. There is much room to do so in cyber education, science and technology transfer, and human resources development through vocational training and life-long education. Ladies and gentlemen! You, the business leaders of the region, are the real economic players. You are the generators of innovation and economic prosperity. Your businesses add up to create the vitality of the APEC economies. Without your future-oriented drive and courage, the Asia-Pacific and its people will stagnate. And you should support each other on the road to the future. I strongly encourage you to engage in active exchanges among yourselves. You have so much to benefit from each other, and in doing so, do much good for APEC and its member economies. Indeed, the whole purpose of the reforms that I and my colleagues in governments strive to implement is to help you do your job better. Your input is essential. Let us turn APEC into a model of government-business partnership. I count on all of you, and on your partnership for the success of the reforms in Korea and elsewhere. I hope to see many of you come to Korea. I am sure you will find many exciting opportunities. Thank you.