Korea in Focus

KOREA IN FOCUS

A People and History in Harmony

Introduction

In the past two decades, Korea has been one of the fastest developing

nations in the world - both in economic and social terms. Rapid industrial

and economic growth has seen the Republic nearly reach developed nation

status in a remarkably short time. The Korean people also find themselves

in the midst of a new era of democratic development following the birth of

the civilian Administration of President Kim Young Sam on February 25,

1993. This wiped out the negative legacy of decades of military-backed

authoritarian rule. The country has since been implementing bold political

and economic reforms to eradicate corruption and revitalize and restructure

the economy with the goal of building a New Korea - a mature and vibrant

industrial democracy.

This rapid economic and social development has brought Korea

increased international exposure and recognition, as the Republic begins to

expand its role on the international stage. Testifying to this was the

successful hosting of the 1988 Seoul Olympics, the largest held in history

up to that time. This was following by the 1993 hosting of an international

exposition, the Taejon Expo ‘93. Both the Seoul Olympics and the Taejon

Expo played an important role in deepening ties between Korea and countries

all over the world and gave an impetus to the Korean economy.

This era of stability and expanding international ties represents the

most exciting period in the country’s history - and yet, in retrospect,

Korea has, in its 5,000-year history, quite an enviable record for

governments of longevity and stability. The country’s last dynasty, the Yi

Dynasty of the Choson Kingdom, lasted 500 years.

The Koreans of today, while enormously proud of their country’s past,

look at Korea’s role and reputation from a more recent historical

perspective; but, in order to understand today’s Korea - its land, people,

culture, history, and recent economic and political transitions - it is

necessary to look at both the past and the present. “Korea In Focus” aims

to give you a brief overview to help in your general awareness of Korea

today. More detailed information can be obtained from individual

organizations or government offices.

Land

The Korean Peninsula, located in Northeast Asia, is bordered on the

north by China and Russia and juts towards Japan to the southeast. Since

1948, the 221,487 square kilometers which make up the entire Peninsula

have been divided, roughly along the 38th parallel, into the Republic of

Korea in the south and the Democratic People’s Republic of Korea in the

north. The Republic of Korea covers 99,221 square kilometers, a land area a

little more than twice the size of Switzerland.

Seoul is the capital of the country which is made up of nine

provinces; other major cities include Pusan, Taegu, Inch’on, Kwangju, and

Taejon.

The landscape is spectacular in its variations and about 70 percent

of it is mountaneous. The oceans around the Peninsula are a major source of

livelihood and recreation for Koreans. The shoreline is dotted by more than

3,000 islands.

The Peninsula’s longest river is the Amnokkang (790 km) in the North.

One of the South’s major waterways is the Han-gang River, which flows

through Seoul to the West Sea (Yellow Sea).

History

A look back at the 5,000 years of Korean history reveals triumphs and

tragedies, successes and struggles which have been instrumental in shaping

the Korea and Koreans of today. One remarkable fact that emerges from such

a historical examination is that Korea has largely been ruled by long-

term, stable governments. Korea’s kindoms and dynasties generally lasted

about 500 years or more.

Although Korea’s traceable history began considerably earlier that

the seventh century, it was the Shilla Unification in 668 that Korea, as a

historical entity with a cohesive culture and society, came to occuрy most

of the Peninsula as it exists today.

It was almost a decade after the end of the war before the Republic

of Korea had recovered sufficiently to establish stability and start the

momentum for its now remarkable recovery and development. The three decades

since then have been a time of spectacular progress which has seen the

creation of a modern, industrialized nation.

People

Korea is homogeneous society, although there have been historic and

prehistoric migrations of Chinese, Mongols and Japanese. Koreans are very

conscious of the ethnic differences and cultural distinctions which give

them their unique identity.

The population of the Republic of Korea was estimated at 44.1 million

in 1993. Its population density is among the world’s highest and Seoul, the

capital, has more than 10 million inhabitants. The annual population growth

in the Republic has dropped from an average of 2.7 percent in the 1960-66

period to only 0.90 percent in 1993. The slowdown is also partly the

result of the increasing number of young working women.

The country’s rapid industrialization is responsible for today’s

concentration of population in urban centers. The proportion of Koreans

living in cities has jumped from only 28 percent in 1960 to 74.4 percent as

of 1990 - very similar to the 73 to 76 percent levels in the United States,

Japan and France.

Language

The Korean language is spoken by some 60 million people living on

the Peninsula and its outlying islands as well as some 1.5 million Koreans

living in other parts of the world.

Korean belongs to the Ural-Altaic language group, which is found in

an narrow band from Korea and Japan across Mongolia and central Asia to

Turkey. Korean is a non-tonal language, with agglutinative and

polysynthetic elements.

Religion

Religion in today’s Korea covers a broad spectrum of faiths and

beliefs. Buddhism, Christianity, Confucianism, Islam and numerous other

indigenous religions exist in Korea. Although none of them dominates, they

all influence contemporary culture.

Education

Education has been at the heart of Korea’s growth by training and

supplying the manpower needed for rapid industrial and economic expansion.

A multi-tiered educational system is currently in use, encompassing

elementary school (six years), middle school (three years), high school

(three years), and college (four years), as well as various graduate and

professional programs.

The government has eased regulations on overseas study. This new

policy also encourages those in the teaching profession to take advantage

of opportunities for training abroad.

Transportation

The tremendous pace of domestic economic growth in the past two

decades has been reflected in the expansion of transportation facilities

and the increases in Korea’s annual passenger and cargo volumes. The annual

volume of passenger transportation rose from 1.6 billion persons in 1996 to

14.24 billion in 1993.

Seoul has a well-developed mass transit system of subways, buses, and

taxis. Airport shuttles or city buses are conveniently available and

operate throughout the city. The subway system is the eighth longest in the

world, carrying 1,388 million people in 1993. Its four lines reach most

major locations in the city.

Korea has three international airports in Seoul (Kimpo), Pusan

(Kimhae) and Cheju (Cheju), all of which are equipped with modern air

traffic control facilities and support systems. Korean Air’s worldwide

network serves 43 cities in 24 nations, including recently inaugurated

flights to Rome. The newly launched Asiana Airlines recently started

international flights with regular service to fourteen cities in Japan, the

U.S., Singapore, Hong Kong, Taipei and Bangkok.

All expressway system also connects Seoul with provincial cities and

towns, putting any place in mainland South Korea within a one-day round

trip of the capital. Express buses transport passengers to and from all

principal cities and resorts in the country.

The railway also serve the entire country through an efficient and

extensive network. The super-express train, Saemaul, runs 444.5 kilometers

from Seoul to Pusan in four hours and 10 minutes. There are also ordinary

express and local trains.

Ocean liners, cruise ships, and passenger-carrying freighters visit

Korean ports. A ferry service links Pusan with Chejudo Island and the

Japanese ports of Shimonoseki, Kobe and Hakada. Another ferry service

recently started between Inch’on and Tianjin China.

Telecommunications

Telephone services have rapidly expanded during the last decade,

particularly during the last 5 Years (1988-”92). During these years, with

the investment of US$2.64 billion in communications annually, 1.76 million

new telephone circuits were installed each year, increasing the total

number of telephone lines to 10.14 million as of 1993. Virtually every home

in the country now has its own telephone and all the telephone circuits are

connected by automatic switching systems.

Also, through the launch of KOREASAT scheduled in 1995, Korea will be

able to provide satellite communication services by using its own satellite

from October 1995.

THE ECONOMY

Looking Ahead to the 21st Century

In the last quarter century, Korea’s economic growth has been among

the fastest in the world. The country has overcome obstacles and challenges

to transform itself from a subsistence-level economy into one of the

world’s leading newly industrialized countries. Today, however, the Korean

economy faces the new challenges of internationalization and globalization

in an increasingly complex global economic environment.

Past Performance and Policies

Since Korea launched its First Five-Year Economic Development Plan in

1962, the country’s real GNP has expanded by an average of more than 8

percent per year. As a result, Korea’s GNP has grown from US$2.3 billion in

1962 to US$328.7 billion in 1993; per capita GNP has increased from a

meager US$82 in 1962 to US$7,466 in 1993 at current price levels.

The industrial structure of the Korean economy has also been

completely transformed. The agricultural sector’s share of GNP declined

from 37.0 percent in 1962 to 7.1 percent in 1993. The manufacturing

sector’s share has increased from 14.4 percent to 27.1 percent in the same

period. The service sector accounted for only 24.1 percent of GNP in 1962

but grew to 40.0 percent in 1993.

Korea’s merchandise trade volume increased from US$500 million in

1962 to US$166 billion in 1993. The nation continuously posted trade

deficits until 1985 when its foreign debt reached US$46.8 billion, the

fourth largest in the world. From 1986 to 1989, Korea recorded current

account surpluses and its debt declined.

Trends of Major Economic Indicators

| |Unit |‘62 |‘70 |‘80 |‘85 |‘90 |‘92 |‘93 |

|GNP |US$ |2.3 |8.1 |60.5 |91.1 |251.8|305.7|328.7|

| |bil. | | | | | | | |

|Per Capita GNP |US$ |8.2 |242 |2,194|2,242|5,883|7,007|7,466|

|GNP Growth Rate |% |2.2 |7.6 |7.0 |7.0 |9.6 |5.0 |5.6 |

|Domestic Savings |% |3.3 |17.9 |29.1 |29.8 |35.9 |34.9 |34.9 |

|Trade Volume |US$ |0.5 |2.8 |39.8 |61.4 |134.9|158.4|166.0|

| |bil. | | | | | | | |

|Producer Price |% |9.4 |9.2 |38.9 |0.9 |4.2 |2.2 |1.5 |

|Consumer Price |% |8.3 |15.9 |28.8 |2.4 |8.6 |6.2 |4.8 |

Inflation in Korea was one of the major economic problems in the 70s

and early 80s, during which consumer prices rose at annual rates of 10-20

percent. Since 1982, Korea has managed to keep inflation down to a single

digit. The ratio of domestic savings to GNP grew from 3.3 percent in 1962

to 34.9 percent in 1993.

Recent Challenges

Beginning in 1989, the Korean economy began experiencing slower

growth, high inflation and a deterioration in the balance of payments. The

GNP growth rate fell to 6.7 percent in 1989 from the 12 percent level of

previous years. A slump in the growth of the manufacturing sector, from

18.8 percent in 1987 and 13.4 percent in 1988 to 13.7 percent in 1989,

contributed largely to this decline in GNP growth rate. The export growth

rate on a customs clearance basis, which was 36.2 percent in 1987 and 28.4

percent in 1988, fell to just 2.8 percent in 1989. Reflecting this fall in

the export growth rate, the current account surplus lowered to around

US$5.1 billion, a significant drop from the 1988 surplus of US$14.2

billion.

In 1991, the economic growth rate showed signs of recovery. The GNP

grew during the year 9.1 percent. However, most of this growth was

attributed to an increase in domestic demand, particularly domestic

consumption. Exports increased 10.3 percent compared to 1990, while the

growth rate of imports increased 17.7 percent. The trade balance

deteriorate rapidly to a US$7.0 billion deficit in 1991 from the US$4.6

billion surplus in 1989. In addition, price stability, which had served to

boost Korea’s competitiveness, weakened. Consumer prices, which had risen

on an annual average of 2-3 percent between 1984 and 1987, rose 9.3 percent

in 1991.

Recent Economic Trends

| | |‘91 |‘92 |‘93 |‘94. 1 |

| | | | | |( 6 |

|GNP | | | | | |

| GNP |Growth Rate in |9.1 |5.0 |5.6 |8.5 |

| |% | | | | |

| Manufacturing |Growth Rate in |9.1 |5.1 |5.0 | |

|Sector |% | | | |10.0 |

| Private |Growth Rate in |9.5 |6.6 |5.7 |7.2 |

|Consumption |% | | | | |

| Investment |Growth Rate in | |0.8 |3.6 | |

| |% |12.6 | | |10.3 |

| Equipment |Growth Rate in | |1.1 |0.2 | |

| |% |12.1 | | |17.7 |

| Producer Price |% |4.7 |2.2 |1.5 |2.2 |

| Consumer Price |% |9.3 |6.2 |4.8 |6.2 |

|Balance of Payments| |7.0 |2.2 |1.9 |1.6 |

| | |69.6 |75.1 |81.0 |43.1 |

| | |76.6 |77.3 |79.1 |44.7 |

| Balance |US$ bil. |8.7 |4.5 |0.4 |2.7 |

In 1992, the Korean economy rapidly cooled off, with the GNP growth

rate dipping to 5.0 percent, influenced chiefly by blunted investment in

capital goods. The consumer price index rose just 6.2 percent, and the

deficit in the balance of payments also dropped to US$4.5 billion.

At that time, the Korean economy faced many challenges on both the

internal and external fronts. Part of the economic slowdown may be

explained by the cyclical adjustment of the economy after three consecutive

years of rapid growth. However, the stagnation was more likely the result

of a structural deterioration in competitiveness, due to a combination of

the lingering legacies of the past government-led economic management

system, which had now become inefficient, and the disappearance of the

advantages derived from the once ample availability of low-cost labor: Thus

the country was forced to search for a new driving force sufficient for

sustained economic growth.

Major Tasks and Policy Directions

To revitalize the economy, the Kim Young Sam Administration, which

was inaugurated in February 1993 as the first civilian democratic

government in over three decades, is endeavoring to construct a new

developmental paradigm called “the New Economy”. This signals a clean

departure from the past, when the government directed and controlled the

concentrated investment of capital, labor and other resources in selected

“strategic” industrial sectors to achieve rapid economic growth. Instead,

the New Economy will promote the autonomy and creativity of all economic

actors in order to maximize efficiency, while ensuring the equitable

distribution of income. In that way, it seeks to enable the nation to leap

into the ranks of the developed nations within the next five years.

As an initial step, the new Administration implemented a short-term

100-Day Plan for the New Economy in March 1993, designed to promptly create

conditions conductive to revitalizing the economy. This was followed by the

development of a new five-year economic development plan. Formally

announced in July 1993, the Five-Year Plan for the New Economy was

conceived primarily to lay the basis for joining the ranks of advanced

countries and thus to effectively prepare for the eventual unification of

the Korean Peninsula.

The Government will continue its efforts to ensure the effective

implementation of the five-year plan through the spontaneous participation

of the people by reforming economic institutions including the improvement

or simplification of existing financial and tax systems and administrative

measures. Furthermore, the Government will continue to endeavor to fully

realized the nation’s economic growth potential, strengthen its

international competitiveness, and improve the economic conditions of the

public.

If the plan is implemented as intended, the Korean economy is

projected to change as follows:

First with increased efficiency and greater realization of growth

potential, the gross national product should rise at an average annual rate

of about 6.9 percent, raising per capita GNP to US$14,076 in 1998.

Second, greater price stability should prevail as balance is

maintained between the more steadily rising demand and the more briskly

expanding supply, while wage increases are linked to rises in productivity.

The stabilization of the value of the won currency should help stabilize

the prices of imported goods and services. The net effect should be to hold

down the rise in consumer prices to an annual average of 3.7 percent, the

increase in producer prices to an annual average of 1.6 percent and the

rise in the GNP deflator to an annual average of 4.6 percent.

Targets of the 5-Year Plan for the New Economy

| |‘91 |‘92 |‘93 |‘94 |‘95 |‘96 |‘97 |‘98 |‘93-’9|

| | | | | | | | | |8 |

|GNP growth, % |8.4 |4.7 |6.0 |7.1 |7.2 |7.1 |7.0 |7.0 |6.9 |

|Per capita GNP, |6,51|6,74|7,30|8,19|9,33|10,7|12,3|14,0|14,076|

|US$ |8 |9 |6 |6 |9 |16 |05 |76 |2) |

|Rise in producer |4.7 |2.2 |1.8 |1.8 |1.7 |1.6 |1.5 |1.4 |1.6 |

|Rise in consumer |9.3 |6.2 |4.9 |4.3 |3.7 |3.6 |3.2 |2.9 |3.7 |

|Rise in GNP |11.2|6.3 |5.3 |5.3 |4.8 |4.5 |4.1 |3.8 |4.6 |

|Balance on curren |8.7 |4.6 |1.4 |0 |0.9 |2.1 |3.7 |5.3 |5.32) |

|Exports 1) ,US$ |69.6|75.1|82.3|82.3|99.3|110.|122.|136.|136.32|

|billion | | | | | |1 |6 |3 |) |

| Rate of |(10.|(7.9|(9.5|(9.5|(10.|(10.|(11.|(11.|(10.4)|

|increase, % |2) |) |) |) |2) |9) |3) |2) | |

|Imports, US$ |76.6|77.3|81.3|81.3|95.8|105.|116.|128.|128.12|

|billion | | | | | |3 |1 |1 |) |

|Rate of increase, |(17.|(1.0|(5.1|(5.1|(9.3|(9.9|(10.|(10.|(8.8) |

|% |5) |) |) |) |) |) |2) |3) | |

Note: 1) On a balance-of-payments basis

2) In terms of 1998 current market prices

The Real name Financial Transaction System

On August 12, 1993, the President took a decisive step toward

revitalizing the economy and eliminating corruption by announcing the

inplementation of the long-anticipated real-name financial transaction

system. In the past, it had been possible to open accounts and conduct

business transactions under false names, directly and indirectly fostering

institutionalized-corruption and illegal financial dealings. Deeming this

reform as the most important in the creation of a New Korea, the President

announced this action in a Presidential Emergency Decree, stating that the

real-name system was essential for cutting the dark link between politics

and business.

With the introduction of the real-name financial transaction system,

it appears that financial dealings are becoming fully transparent and

underground economic dealings and nonproductive land speculation are

diminishing. It is hoped the funds that had been channeled into political

circles in the past as a result of government-business collusion are now

available for more productive activities.

Encouraging Signs

The implementation of a real-name financial transaction system, the

easing of administrative controls, expanded capital investment by major

enterprises, and increased financial and administrative support for small-

and medium-sized enterprises all combined to lay a solid foundation for

another economic take-off. Exports rose 7.6 percent in 1993 to US$82.4

billion, while imports grew just 2.5 percent. Korea was thus able to

four years. The current account also yielded a surplus of US$200-300

million. Industrial production has been growing at about a 10 percent rate

during the first half of 1994. Furthermore, labor disputes decreased

markedly last year, while the composite stock index of the Seoul Stock

Exchange climbed markedly. In view of these indications, the Korean economy

seems to be well on the way to revitalization.

External Policies for Greater International Cooperation

Import Liberalization

Korea is committed to fulfilling its international responsibilities.

It positively supports the trend toward openness and utilizes it as a

catalyst for further enhancing the international competitiveness of

industry and thus speeding the advancement of the economy, so that it can

join the group of advancedcountries.

Since 1980, Korea has made continuous efforts toward import

liberalization. The import liberalization rate increased from 68.6 percent

in 1980 to 98.1 percent in 1993. The average tariff rate decreased from

24.9 percent to 8.9 percent during the same period and is expected to be

only 7.9 percent by the end of 1994, the same average level of tariffs

found in OECD member countries.

In October 1989, Korea decided to relinquish GATT balance of payments

protection which mostly covers agricultural products. According to the

decision Korea will move to eliminate its remaining restrictions or

otherwise make them conform with GATT rules by July 1, 1997.

Liberalizing Foreign Exchange Transactions and Capital Markets

In June 1993, the Korean Government made public the third-phase of

the blueprint for financial liberalization and internationalization, which

was implemented from the second half of 1993. Under the plan, procedures

for various foreign exchange transactions are being gradually simplified.

Beginning in 1994, the ceiling on foreign investment in the stock market

will be gradually raised, and the bond market will also be gradually opened

to foreign investment. Initially, from 1994 foreign investors will be

allowed to purchase convertible bonds, even those issued by small-and

medium-sized domestic enterprises.

Foreign-invested firms engaged in the manufacture of high-tech

products or banking and other services are currenlty allowed to induce

foreign credit repayable within three years. Beginning in 1997, the

liberal inducement of foreign credit by both domestic and foreign-invested

enterprises will be allowed.

Increasing Opportunities for Foreign Investors

In June 1993, the Korean Government also announced a five-year plan

for liberalizing foreign investment. Under the plan, 132 of the 224

business lines currently being protected from foreign competition will be

opened to foreign investment in five phases, over a period of five years

starting from July 1993. With the implementation of this plan, of the total

1,148 business lines under the standard industrial classification of Korea,

1,056 will be open to foreign competition. This means that the foreign

investment liberalization rate will rise from 83 percent as of June 2, 1993

to 93.4 percent by 1997.

Included among the business lines to be opened to foreign competition

under the plan are most of the service industries including distribution

and transportation, hospital management, vocational training and “value-

added” communications.

The business conditions for foreign-invested firms will also be

greatly improved through various measures, including relaxed control on the

acquisition of land by foreign-invested firms, the augmented protection of

foreign intellectual rights, and other similar steps.

Cooperation with the Rest of the World, Including Developing Nations and

Socialist Countries

Expanding Trade and Economic Exchanges

The Republic of Korea has emerged as a major global trader by

steadily pursuing freer trade and greater openness, while promoting its

business presence around the world. In the past, Korea’s foreign trade

concentrated on the developed world - mainly the United States, Japan and

the EU. In more recent years, however, it has rapidly expanded trade and

capital cooperation with Southeast Asia, former and present socialist

countries and Third World nations as well.

Especially since the 1988 Seoul Olympics, economic interactions with

the former Soviet republics have been brisk. The Republic of Korea is also

increasing its support of economic development efforts in the Third World

on the basis of its more than three decades’ experience with successful

domestic development.

The nation will continue to pursue expanded and more diversified

trade and to promote economic cooperation on a long-term basis with the

rest of the world, taking into consideration the individual economic

characteristics of each country.

With the United States, the Republic of Korea will pursue not only

expanded bilateral trade and increased mutual private investment and

technological cooperation but also government-to-government cooperation in

industrial technologies. As for Japan, the Republic will pursue Forward-

lookoing practical economic relations and will, in particular, strive to

attract Japanese investment more effectively. Since Korea does not have

serious trade issues with the EU it will focus on promoting overall

economic cooperation, including mutual investment and industrial and

technological cooperation.

With the dinamically growing Asian economies, such as China and

Southeast Asian Nations, the Republic of Korea will endeavor to continue to

expand two-way trade, especially by helping to meet their expanding needs

for capital goods and intermediate products to support their continuing

rapid development, while increasing imports from them as much as possible.

The nation will also encourage Korean business investment in these

countries and make efforts to build an industrial structure complementary

with theirs.

The Republic of Korea is increasing its official development

assistance to developing countries proportionate to its economic strength.

In this, efforts are being made to combine such assistance with private

Korean investment, with the aim of maximizing its effect, while developing

two-way trade and other economic ties on a long-term basis.

Economic ties with the Commonwealth of Independent States and East

European countries will continue to focus on commercial applications of

their high technologies and other forms of technological cooperation and

joint development of natural resources.

Korea Trade with and Investment in Various Countries and Regions

|Country or |Trade (US$ bil.) |Investment (US$ mil.) |

|Region | | |

| |1987 |1993 |1987 |1993 |

|U.S.A. |27.1 |36.1 |165.3 |380 (30.3) |

| |(30.7) |(21.7) |(40.3) | |

|Japan |22.1 |31.6 |1.4 (0.3) |6 (0.5) |

| |(25.0) |(19.0) | | |

|EU |11.2 |19.6 |6.5 (1.6) |157 (12.5) |

| |(12.7) |(11.8) | | |

|China |1.7 (1.9) |9.1 (5.5) |6.0 (1.5) |260 (20.7) |

|Southeast Asia |8.9 (10.1)|27.8 |130.5 |179 (14.3) |

| | |(16.7) |(31.8) | |

Note: Figures in parenthesis represent percentage of the total.

Active Participation in Multilateral Economic Forums

Korea has actively participated in virtually all major multilateral forums.

During the Uruguay Round of trade talks, finally concluded in December

1993, Korea tried to make conrtibutions commensurate with its capabilities

as a major world trading power, and play a mediating role between the

developed and developing countries. Korea introduced various proposals in

the Uruguay Round negotiations to reduce tariffs, eliminate non-tariff

barriers, liberalize the textile trade, improve safeguards and reduce

subsidies and countervailing duties.

The Republic of Korea is actively participating in global efforts to

protect the environment, a crucial task facing all of humanity. In recent

years it has joined the Convention on Climate Change, the Basel Convention

on the Control of Transboundary Movements of Hazardous Wastes and their

Disposal, the Convention on the Prevention of Marine Pollution by Dumping

of Wastes and Other Matter, also called the London Dumping Convention, the

Convention on International Trade in Endangered Species of Wild Fauna and

Flora, and the Convention on Biological Diversity.

Korea has also begun an informal dialogue with the Organization for

Economic Cooperation and Development (OECD) and has expanded participation

in its various committees . Korea hopes and intends to improve its economic

systems to the level of advanced countries so as to join the OECD in 1996.

One organization in which the Republic of Korea has played a

particularly critical role has been the Asia-Pacific Economic Cooperation

(APEC) forum, a forum for multilateral discussions on economic issues

concerning the Asia-Pacific region.Two examples of Korea’s valuable efforts

have been the “Seoul Declaration” adopted at the third APEC Ministerial

Meeting hosted by the Republic which laid the foundation for the

institutionalization of APEC, and its diplomatic role in bringing China,

Taiwan and Hong Kong, three key regional economic powers, into the APEC

fold, giving the forum a new impetus. Subsequently, the Republic played a

leading role at the first APEC Leaders Economic Meeting in Seattle in

November 1993, which coincided with the fifth APEC Ministerial Meeting, and

was elected the chair member of the Committee on Trade and Investment

(CTI).

Conclusion

The rise of the Korean economy over the past several decades, often

called the “Miracle of the Han”, has been an inspiring model of modern

economic development. The rapid pace with which the Koeran economy rose

from the ashes of war and expanded stunned the outside world. However, this

rapid growth was not unaccompanied by growing pains which began to manifest

themselves in all sectors of society particularly during the late 1980s.

Excessive wage hikes, high capital costs and an overly bureaucratic

administration, not to mention institutionalized corruption, served to

weaken Korea’s international competitiveness, and this was aggravated by

unfavourable external circumstances. In the past year, though, strenuous

efforts have been made to overcome these impediments and through this, as

well as improving international economic climate, it appears that the

Korean economy is regaining its former vigor. The upcoming years pose

severe challenges for the Republic in light of the December 1993

conclusion of the Uruguay Round and the rise of the Asia-Pacific region as

the new global economic center, but with the increasing emphasis in both

the public and private sector on globalization and internalization, the

Republic seems braced to meet these challenges.

REFORM TOWARD A NEW KOREA

The Basic Goals and Reform Process of the Kim Young Sam Administration

What are the vision and goals of the Administration of Kim Young Sam,

inaugurated on February 25, 1993. In a nutshell, the answer is the

“creation of a New Korea” through “Reform Admist Stability.” This concept

was the keynote of the President’s inaugural address as well as the main

slogan of his presidential election campaign in December 1992.

“I have a dream. It is the creation of a New Korea in which a new

politics, a new economy and a new culture will bloom. This is my dream and

vision; it is the dream and vision of all our people.” This quotation

appears in the book, “Kim Young Sam: New Korea 2000,” published in Korea in

October 1992 prior to the presidential election.

In his inaugural speech on February 25, 1993, President Kim Young Sam

defined the three major priorities of his policies to create a New Korea:

the eradication of social injustice and corruption, the revitalization of

the national economy and the establishment of official discipline and

public order.

The President declared that the eradication of corruption was a vital

foundation for reforms in every sector of the country, and that there would

be no sanctuary from the investigation of misconduct. The movement to

establish official discipline and public order, which began with high-

ranking government officials, is intended to ensure integrity and high

ethical standards by “purifying the upper reaches of the stream,” i.e., the

upper levels of government and society.

The main purpose of these reforms is to revitalize the nation and

elevate the overall standard of living. President Kim Young Sam has thus

pushed ahead with firm determination since his inauguration, bringing about

enormous changes in this country.

From the very start of his Administration, President Kim Young Sam

concentrated on eliminating corrupt practices and behavior which arose from

decades of authoritarian rule. This kind of housecleaning was unhead of in

the past. President Kim believes, and popular opinion supports him on this,

that such reform must be carried on without letting up in the interest of

the long-term stability and economic development of Korea.

The Concept of a New Korea

The creation of a New Korea means the building of unified, fully

mature democratic state. To that end, drastic changes and reforms are being

pursued to raise the quality of life for all those who were sacrificed in

the blind quest for rapid growth over the past 30-odd years.

What will the future New Korea be like? Korea’s first non-military

President since 1961, President Kim in his inaugural address said the New

Korea will be:

. A freer and more mature democratic society.

. A community where people share, work and live together in harmony. A

higher quality of life will flourish and the dignity of the individual

will be upheld.

. A state where justice flows like a river throughout the land. In other

words, it will be a just society in which honest and earnest individuals

live well.

. A new country in which human dignity is respected and culture is valued.

. A unified land where the presently divided people live in peace as one.

. And, it will stand tall and proud on the center stage of the civilized

world, making vital contributions to global peace and progress.

Curing the Korean Disease

The problems which are widespread in Korea today are often referred

to as the Korean disease: (1) Korean industriousness and ingenuity - long

the envy of the world - seem to be evaporating, (2) values continue to

erode, due to injustice, corruption, lethargy, bigotry, inertia, strife and

confrontation, and narrow self-interests, and (3) self-confidence has been

lost and defeatism has set in.

To create a New Korea, the new Administration has been vigorously

addressing these symptoms through drastic change and reform. The President

outlined the goals of these changes and reforms in his inaugural address:

(1) the establishment of a new era of courage and hope by shaking off

frustration and lethargy, (2) the replacement of bigotry and inertia with

openmindedness and vitality, strife and confrontation with dialogue and

cooperation, mistrust with trust, and (3) the building of a society which

sees all citizens not only living together but also truly carring about one

another, discarding narrow self-interests.

Three Tasks

The President outlined three essential tasks in his inaugural

address.

First, misconduct and corruption must be rooted out. He defined

misconduct and corruption as the most terrifying enemies attacking the

foundation of society, and called for an end to all manner of impropriety

and graft, allowing no sanctuary. He called for immediate reform starting

from the very top.

Second, the economy must be revitalized. He vowed that the new

Administration would do away with unwarranted controls and protection and

instead guarantee self-regulation and fair competition. “Private initiative

and creativity will thus be allowed to flourish”. He went on to say. “The

Administration will be the first to tighten uts belt. Our citizens must

also conserve more and save more. Extravagance and wastefulness must be

eliminated... Only when the Government and the people, and labor and

business work together with enthusiasm will it be possible to turn our

economy around...”

Third, national discipline must be enhanced. “Respect for authority

must be reestablished... Freedom must serve society... The true meaning of

freedom is in using it to plant a flower in the park rather than picking a

flower from the park.” The President also said, “Ethics... must be made to

prevail. To this end, education must henceforth cultivate wholesome

character and unwavering democratic belief, as well as equip our young

people for the future with knowledge and skill in science and

technology...”

Four majot Goals of the New Administration

The four major goals of the Administration are clean government, a

sound economy, a healthy society and peaceful unification.

Clean government means a government free of corruption and

injustice. There is a saying that the lower reaches of a river will be

clean only when the upper reaches are kept clean. The President is

determined to keep the upper reaches of the stream clean, and all the

Cabinet members and high-ranking public officials will join in this effort

so that the public will have confidence in the Government.

The campaign to keep the upper reaches of the stream clean means

reforms from the top. The new Government has required high-ranking public

officials to register and make public their personal assets to discourage

the illegal accumulation of wealth under the Public Officials’ Ethics Law.

The President himself has made public his own assets and has said that he

would not accept political contributions.

A sound economy means a New Economy free of unwarranted controls and

protection - an economy which guarantees self-regulation and fair

competition and encourages the private initiative and creativity necessary

for economic revitalization. The economy has been marked by quantitative

growth in the past three decades; now it needs qualitative development. In

order to develop New Economy, Korea must (1) establish a liberal market

system, (2) liberalize financing, (3) decentralize economic power and (4)

promote economic reforms.

The New Economy emphasizes concentrated efforts for the renovation of

science and technology. In the 21st century, the strength of nations will

be measured by the development of science and technology. It is for this

reason the new Administration is sharply raising research and development

expenditures.

President Kim Young Sam announced on August 12, 1993, implementation

of real-name system for all financial transactions to assist in the

realization of economic justice and clean government. The new

Administration also has a firm position to control speculation in real

estate and institute tax reforms.

By effecting all these changes, it is predicted that the inflation

rate as measured by the consumer price index will fall to the 3-4 percent

range by the end of 1994 from the usual past level of nearly 6 percent,

while the balance on current account will shift into the black. The

economy as a whole should grow at an average annual rate of 6.9 percent,

boosting per capita GNP to US$14,076 in 1998 from US$7,466 in 1993.

A healthy society means a society in which all people work hard and

receive just rewards. It is obvious that a clean government and sound

economy alone cannot create a New Korea. A healthy society is absolutely

required as well. Everyone must spontaneously take responsibility for

keeping society healthy. Each and every person must be honest, courageous

and dignified.

Peaceful unification is the supreme task for Koreans. the Republic’s

Korean national Community Unification Formula envisages a Korean

Commonwealth, an interim arrangement designed to build political, economic

and military trust and restore national homogeneity, leading to full

national integration through free general elections throughout the Korean

Peninsula. President Kim will consistently pursue this unification formula,

widely regarded as being very realistic. He will, however, flexibly adapt

it to changes in the international situation. In a Liberation Day speech on

August 15, 1994, he thus prpoposed South-North joint projects for national

development, including light-water nuclear reactor construction in the

North, once the North Korean nuclear issue is resolved.

Reform backed by the Korean people

The Korean people’s deep support of President Kim’s comprehensive

reform agenda has been reflected in the Korean leader’s strong public

approval rating. President Kim has fared consistently well in public

opinion polls which indicate that his reform policies continue to enjoy the

support of a solid majority of Koreans.

Ethics Reform

To maintain the public’s trust, President Kim has pledged to create a

corruption-free political environment by establishing high ethical

standards for the members of his administration and political party.

Symbolizing his strong commitment to this goal on February 27, 1993, just

two days after his inauguration President Kim disclosed all of his

financial assets to the public, and encouraged all senior cabinet and

ruling party figures to do the same. A number of his government’s newly

appointed officials were forced to resign for their past unethical

financial conduct and President Kim declared that there would be “no

sanctuary” from his clean-up campaign. He stressed that the new ethical

standards “must be internalized and become a way of life” for all Koreans.

In order to institutionalize the disclosure of public officials’

assets, the existing Public Officials’ Ethics Act as revised in June 1993,

and ranking government officials are now required to register and

disclosure their assets under this law. As a result of the clean-up drive

resulting from the asset disclosure, 1,363 public officials were dismissed

for malfeasance and 242 were forced to resign due to improperly acquired

wealth.

President Kim’s inauguration brought to an end the deep involvement

of the military in Korea’s political arena. Corruption in the armed forces,

long a taboo subject, became a focus of the new reform drive. Promotion

kickback scandals were uncovered, and a number of senior military officers

have been removed from their posts. The Administration has also

investigated and taken legal action against defense procurement

irregularitites. At the same time, Prsident Kim has moved to depoliticize

the government bureaucracy. In particular, he has reformed the nation’s

intelligence apparatus, ending its involvement in domestic politics and

directing it to focus solely on Korea’s national security concerns.

President Kim has taken steps to reform the Office of the President

itself. The President’s residence and office complex, Chong Wa Dae, better

known as a Blue House, has been made more accessible to the public. For the

first time in decades, the avenue in front of the Blue House is now open to

traffic, as are the scenic mountain hiking trails adjacent to the

presidential residence. Gone are the lavish Blue House meals once served to

staff and guests. Instead, everyone, including the President himself, dines

on simple yet traditional Korean cuisine.

Financial Reform

Following this reform to require the disclosure of personal assets by

public officials, President Kim Young Sam boldly introduced a real-name

financial transaction system in order to achieve fundamental structural

reform that will greatly assist in the realization of economic justice and

clean government.

This real-name financial transaction system, which was put into

effect by an emergency presidential decree on August 12, 1993 is the core

of the entire reform movement, “the reform of all reforms.” This reform is

helping eradicate misconducts and realize economic justice by rectifying

the distorted economic structure and income distribution caused by

underground economic activities and real estate speculation and by cutting

shady financial ties between politicians and businessmen. In order to join

the ranks of advanced countries, Korea must eradicate the corruption and

irregularities stemming from certain aspects of past administrations’

pursuance of rapid growth-oriented economic development.

With the introduction of the real-name financial transaction system,

all financial dealing have become transparent, underground economic

dealings have diminished, and nonproductive land speculation has been

curbed. The funds that were channeled into political circles in the past as

a result of government-business collusion are now being invested in

business activities.

As a result drastic changes are occurring in political, economic and

social activities in virtually every sector of Korean society. Business

investment is actively increasing, and the past distorted economic

structure and income distribution is being rectified.

President Kim’s declaration not to receive any money from businesses

so as to maintain a clean government and to build a clean society, combined

with his political philosophy, laid the foundation for the introduction of

the real-name financial transaction system. The success of the real-name

financial transaction system is serving as a stepping-stone to a New Korea.

Reform Legislation Promoting Clean Polities and Participatory Democracy

As President Kim’s urging, a package of three political reform bills

was unanimously passed by the National Assembly on March 24, 1994. Marked

by heavy penalties for offenders, the Law for Electing Public Officials and

Preventing Electoral Irregularities is designed to ensure the transparency

of campaign financing, limit campaign expenditures while encouraging freer

campaigns, and ban “premature electioneering,” as well as all other

electoral misconduct. The amended Political Fund Law is intended to control

fund raising by political parties and individual politicians with the aim

of stamping out “money politics” and “politics-business collusion,” while

encouraging relatively small contributions by individuals and groups to the

coffers of the parties or politicians that they support. Together, these

two laws are aimed at ensuring free, fair, clean and frugal politics in

general. The revised Local Autonomy Law provides for the election of the

chief executives of local governments in addition to the local councils

already instituted in 1991 to restore local autonomy after a 30-year

hiatus.

Under the new Local Autonomy Law, four kinds of local elections are

scheduled to be conducted on June 27, 1995, to choose 15 provincial

governors and metropolitan mayors, 866 members of provincial and

metropolitan councils, 260 city mayors, country executives and municipal

district chiefs, and 4,304 members of lower-level local councils - for a

total of 5,445.

In line with the key goals of President Kim’s political reform, the

enforcement of these new laws will enhance the ability of Korean citizens

from all walks of life to more fully participate in the democratic

political process.