Speech at Latin America regional briefing by Vice Finance and Economy Minister Kwon Tae-shin
* Please find the attached above for the whole speech.
Introduction
Distinguished Guests, Ladies and Gentlemen,
It is a great honor for me to speak before such a distinguished audience from Latin America.
First of all, I'd like to express my gratitude to the IIF for organizing this event. I would also like to extend a warm welcome to all of you.
Ladies and gentleman,
Today's gathering is all the more meaningful because it is my first opportunity to meet the distinguished members of the Bank since Korea became the 47th member of the IDB, and the 43rd member of the IIC last year.
Today I'd like to give you an overview of Korea's experience of extremely rapid economic development and poverty reduction.
I would then like to talk about our great potential to usher in a new era of prosperity in the Pacific, in which Latin America and Asia can work and grow hand in hand with each other.
Past and Present of the Korean Economy
(1) Economic Development since 1961
Five decades ago, the Korean economy underperformed most of the other developing countries.
Due to lack of natural resources and technologies, Korea remained a poor and underdeveloped nation.
Moreover, Korea was further devastated by a war, which left our country in ruins.
However, with the help and support of its own people, the government pursued a growth strategy focusing on heavy industry.
As a result, the Korean economy recorded remarkable growth, with an average annual growth rate of 7% since 1961.
Additionally, in just half a century, it rose from the ashes of war to become the 11th largest economy in the world.
Per capita income jumped 199 times from a meager 82 dollars in 1961 to 16,291 dollars in 2005.
GDP increased almost 375 fold from just 2.1 billion dollars in 1961to 788 billion dollars in 2005.
Trading volume which stood at only 2.8 billion dollars in 1970, surged to more than 546 billion dollars in 2005, making Korea the 11th largest trading country in the world.
Ladies and gentleman,
There was a time when our agricultural sector accounted for more than half of all employment, and our main export items were cotton cloth, plywood, and wigs.
However, now we are leading technological advances in state-of-the-art industries such as semiconductors, mobile phones, and LCD panels.
(2) 1997 Financial Crisis and Structural Reforms
As the economy expanded, however, we also faced many challenges as well.
A prominent example was the 1997 financial crisis, which caused a severe shock to our economy and disrupted our financial system.
In my view, however, such crisis was a blessing in disguise, since we were able to turn it into an opportunity to take the Korean economy a step further.
We made tremendous efforts to improve the entire system in all areas, including politics, economy, and society, to meet global standards and to boost national competitiveness.
As a result, Korea's foreign exchange reserves, which were almost depleted during the crisis, recovered to 210.4 billion dollar level last year.
Korea now has the world's fourth largest stock of foreign reserves in the world.
The current foreign reserves covers 3.2 times of our short-term external debt and 1.1 times of our total external debt.
Fiscal soundness has improved as well.
As of 2004, the government's debt-to-GDP ratio stood at 26%, much lower than the OECD average of 77%.
The corporate sector, the driving engine of our economy, has also enhanced its competitiveness remarkably.
The debt-to-equity ratio of the corporate sector recently fell to 114%, down from almost 400% during the financial crisis, while interest coverage ratios improved nearly five times from 129% in 1997 to 483% last year.
Moreover, Korean companies are now competing in the global market with high quality and sophisticated designs, not with low-end products based on cheap labor.
I'm proud to tell you that the Fortune Magazine recently described a Korean mobile phone as "Pocket Jewelry."
This clearly demonstrates the strong brand value and popularity of Korean mobile phones in the world.
Financial institutions improved their profitability and financial health greatly.
Last year the Return on Assets of commercial banks stood at 1.24 %, similar to the level of advanced countries.
NPL ratios among banks are also at a stable level of 1.22% last year, down from 13% right after the financial crisis.
(3) Economic Outlook
Our economic development experience and the financial crisis have taught us many valuable lessons.
In particular, we learned that constant restructuring efforts are a prerequisite for "Sustainable Development."
The Korean government has not forgotten this lesson and has applied it in its economic management over the last three years.
Despite sluggish domestic demand, the government has strived to strengthen economic fundamentals through restructuring, rather than fiscal stimulus.
As a result, the Korean economy was put back on the recovery track recently.
In addition, domestic demand, especially private consumption, has gained momentum, while even exports maintained double digit growth rates.
Also, as consumer sentiment recovers and business investment picks up, overall investment is showing stronger signs of recovery.
Considering all these positive developments, I believe that the Korean economy will grow by around 5% and create 350,000 to 400,000 additional jobs this year.
On the external side, the current account posted a surplus of around 15 billion dollars last year, and is expected to maintain a surplus for the ninth consecutive year in 2006.
The vision of the Korean Economy
Ladies and Gentlemen!
Korea is recognized as a success model in the areas of poverty reduction and economic development.
If we remained complacent, however, we will not be able to respond to challenges ahead.
Therefore, Korea aims to capitalize on the momentum of openness and competition on a global level to leap forward and achieve sustainable growth.
The rapid pace of change in the world economy requires changes in our policy paradigm.
As you all know we now live in a world where human resources, capital, and technologies move freely across borders, thanks to the development of ICT, and more open and free economies.
Therefore, the most important challenge we face today is to build an infrastructure which can nurture and attract capital, technology and talented human resources.
In this regard, government policies should be more nimble and flexible to properly respond to such challenges.
Government policies should also be consistent in realizing its vision.
Distinguished guests,
Our vision for the Korean economy can be summed up in three points.
First, Korea aims to become a more mature and transparent market economy.
We want to build a system where market players can fully realize their potential and creativity and where fair competition is guaranteed for all.
We will also build foundation for sustainable development by constant restructuring according to market principles.
Second, Korea aims to be a more open economy.
We plan to create an optimal business and living environment so that world class companies and talented human resources will come to Korea, and so that state-of-the-art technologies will be developed here.
We will improve various regulations and systems to meet global standards.
We will also send a clear message to the world about our commitment to an open economy by actively participating in and sharing our vision with international institutions such as the WTO, OECD, and APEC.
Third, Korea aspires to build an economy with a robust social safety net.
To maintain the momentum of our restructuring and opening efforts, we must come up with policies to help the vulnerable and underprivileged citizens.
This issue requires the constant attention and support of the government since it is related to quality of life for a segment of the public.
If the society fails to reach a consensus on this issue and to support the most vulnerable members of our society, social integration will be undermined and the economy will not thrive and prosper in the long term.
Strategic Partnership between Korea and Latin America
(1) Need for interregional Cooperation
Ladies and Gentlemen!
As I mentioned earlier, Korea transformed itself from one of the world's poorest countries to the 11th largest trading economy in the world, setting an excellent example in poverty reduction and economic development.
Now it is time for us to share our experience with other countries.
By doing so, we hope to help usher in a new era of peace and prosperity where every country enjoys the benefits of economic developments.
Historically, the psychological distance between Asia and Latin America was as wide as the ocean that physically divides us.
Moreover, geographic and cultural difference has hindered these two regions from coming closer together.
However, as the world economy has integrated into a single market, the need for interregional cooperation is growing everyday.
In this environment, our two regions recently have realized each other's potential.
In addition, we have raised our awareness on the need for cooperation to open a new era of prosperity in the Pacific.
As you know LAC has strived to bring about structural reforms based on open policies and regional integration.
As a result, it is now laying the groundwork for economic stability and prosperity.
Furthermore, LAC now needs a new driving engine that can turn recent economic development into more sustainable growth.
(2) Korea's Engagement in Latin America
At this critical juncture, Korea wishes to strengthen the cooperation with Latin America while preparing a second take-off for the 21st century.
In November 2004, President Roh visited three Latin American countries, taking our bilateral cooperation and exchanges to a next level.
Last year, Korea became the IDB's second member in Asia following Japan.
With our accession to the IDB, we expect further progress in cooperation and exchange programs with Latin America.
For example, Korea will actively engage in various programs for "Poverty Reduction and Economic Development" including building infrastructure, nurturing human resources, and expanding technical cooperation.
As the first step, we created a 140 million dollar fund with the Inter-American Development Bank and Inter-American investment Corporation, with which we hope to bring about IT development, poverty reduction, and SMEs development.
In addition, Korea reaffirmed its commitment to promote cooperation and exchange in this region by signing our first FTA with Chile in 2004.
After the FTA took effect, trading volume between the two nations increased by 55% in the first year. This clearly demonstrates the great benefits of free trade to both countries.
Going forward, Korea will continue its efforts to make bilateral economic cooperation more fruitful.
For example, we will expand investment and development assistance to the Latin American region and support Korean companies which have keen interests in this region.
Up until last year, Korea's cumulative FDI in the region stood at 6.4 billion dollars.
Also, in 2005, the annual amount surged to 900 million dollars, an increase of 162 % from the previous year.
We expect this trend to continue in the future.
Trading volume between Korea and Latin America is also increasing at a rapid pace.
It recorded 22 billion dollars last year, a 20.8% increase in 2005 from the previous year, after 36% increase in 2004.
Moreover, Korea will continue to increase its Official Development Assistance (ODA) to the region.
The Economic Development and Cooperation Fund of Korea provided 67 million dollars in the region for the last three years, and is expected to increase the amount of assistance up to 200 million dollars by 2009.
Furthermore, Korea International Cooperation Agency (KOICA) will continue to strengthen its development cooperation activities in Latin America.
Already, KOICA's medical assistance projects in the region have been regarded as an impressive success.
Therefore, KOICA will continue to assist the region to build capacity for economic growth, focusing on health care and educationthrough cooperation programs such as training programs, experts dispatch, and assistance projects.
(3) Toward Mutual Prosperity
Ladies and Gentlemen!
I would like to take this opportunity to share my ideas about how we can further develop our bilateral exchange and cooperation and thus move toward greater mutual prosperity.
First of all, we must enhance mutually beneficial economic cooperation that can complement each other's strengths and weaknesses.
I believe that LAC and Korea can enjoy enormous synergy effect through reinforced their partnership in areas ranging from natural and human resources to technologies and capital.
The benefits of this cooperation will be most evident in the areas of social infrastructure and resource development, which are important for regional integration.
Second, we should place a high priority on poverty reduction by narrowing the digital divide.
Recently the region's demand in the IT field has been stronger than that of any other part of the world.
Also, the IT industry played a crucial role in Korea's overcoming of the Asian financial crisis and placing the economy back on track.
Now Korea is actively participating in high-speed internet and e-Government projects in Northeast Asia.
As agreed with the IDB, Korea will do its part in building e-Latin America by participating in joint IT projects, which will narrow the digital divide and promote technological innovation in the region.
Third, interregional exchanges at the private level should be encouraged and broadened.
Korea's corporations, currently operating globally, have a profound interest in the industrial development of the LAC region, and are eager to form strategic partnerships.
To this end, I believe information exchange and capacity building of the private sector should be promoted to establish channels for private businesses to enter one another's market.
Fourth, we must work together to promote a more free and open economy in the region.
Opening up markets and promoting investment will help us achieve the goal.
As you know, Asian economies are striving to strengthen economic cooperation with LAC by entering Free Trade Agreements.
In this context, Korea intends to support this trend by building on its FTA with Chile and entering into FTA negotiations with other countries in the region as well.
Closing
Ladies and Gentlemen,
Thanks to our vigorous efforts so far, Asia and Latin America now have the most dynamic growth potential in the world.
If we make progress on the measures I have mentioned, I strongly believe that we can unlock our potential, and bring prosperity and other benefits to both of our regions.
I look forward to seeing Latin America and Asia, including Korea, play a leading role in ushering in the Great Pacific Era through our cooperation.
Once again, I'd like to thank the IIF for organizing this wonderful event.
Thank you very much for your undivided attention.
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2008년 10월 6일 16:30
