Transcript Investing in Korea

Korea’s Economic Development
and Policy Directions for 2004
18 March 2004
Gwang Lim KIM
Vice Minister
Ministry of Finance and Economy
Republic of Korea
Table of Contents
I.
Recent Economic Developments
II.
Major Policy Directions for 2004
III. Current Issues & Policy Measures
IV. Mid- to Long-term Growth Strategy
Korean Economy On Track to Recovery
GDP Growth
7
Industrial Output Growth
6.3
(%)
(%)
10
8.0
6
7.8
8
5
3.7
4
6.1
3.8 (e)
6
3
2.3
1.9
3.1
4.8
3.2
3.2
03 2Q
03 3Q
4
2
2
1
0
01
02
03 1Q
03 2Q
03 3Q
034Q
0
0.7
01
02
03 1Q
Exports
50
FX Reserves
45.9
(%)
40
32.7
25.6
30
20.7
14.4
20
(US$ bn)
180 (US$ bn)
160
15.9
155.4
140
100
80
163
121.4
120
10
96.0
102.8
00
01
74.0
60
8.0
40
0
02
03 4Q Jan 04
03 1Q
03 2Q
03 3Q
03 4Q 04 Jan 04 Feb
20
0
99
02
03
Feb 04
2
Domestic Demand Remains Sluggish
Consumption
(%)
10
Investment
4
8.3
1.6
2
8
6
(%)
0
6.6
4
2
-2
-4
1.5
0
-1.7
-2
-2.5
-2.2
-2.5
-3.4
-3.1
-3.7
-4.6
-2.3
-7.0
-6
-8
-10
-4
01
02
01
03 1Q 03 2Q 03 3Q 03 4Q Jan 04
Consumer Sentiment Index
100
98
96
94
92
90
88
86
98
96
Sep 03
96.3
Source: NSO
91.5
Oct
Nov
Dec
Jan 04
03 1Q 03 2Q 03 3Q 03 4Q Jan 04
Business Survey Index
94.6
90.4
02
Feb
92
90
88
86
84
82
80
78
91
87
86
87
85
83
Oct 03
Source: BOK
Nov
Dec
Jan 04
Feb
Mar
3
Table of Contents
I.
Recent Economic Developments
II.
Major Policy Directions for 2004
III. Current Issues & Policy Measures
IV. Mid- to Long-term Growth Strategy
Expansionary Macro Policy
Fiscal
Policy
Monetary
Policy
Exchange Rate
Policy
 Frontload budget in 1H
 Maintain low interest rates
 Market determines FX rate
based on economic fundamentals
& demand and supply
5
Boosting Investment
 Remove regulations that hinder investment,
bringing real benefits to companies.
Deregulation
 Form a task force to review financial
regulations and supervision
 Strictly apply laws and principles to illegal
activities
Improve Labor
 Bring labor relations up to global standards
by easing lay-off requirements
Relations
Promote
investment
→
→
Create
jobs
→
Elevate incomeearning capacity
Resolve credit delinquents and
unemployment issues
6
Table of Contents
I.
Recent Economic Developments
II.
Major Policy Directions for 2004
III. Current Issues & Policy Measures
IV. Mid- to Long-term Growth Strategy
Resilience to Political Uncertainty
 The National Assembly Voted to Impeach President Roh
 President Roh’s executive authority has been suspended and taken over
immediately by Prime Minister Goh Kun
 The Constitutional Court will now make a final decision on the
impeachment
 The Decision has Limited Impact on the Korean Economy
 Korea has established a mature and stable economic system, and has
demonstrated its resilience to a variety of economic shocks
 The government will remain fully committed to pushing forward with its
current economic policies and structural reform
8
Credit Card Companies
LG Card
 Finalized Restructuring Plan (Jan. 2004)
- Business normalization is currently underway by KDB
 Will be sold after business normalization
Other Card Companies
 Restructuring process is underway
- Merging with affiliated financial institutions,
recapitalization, etc.
Minimize the
negative effects
on other financial
sectors and the
Strengthened Monitoring & Improved System
real economy
 Monitor the management of card companies on a
continuous basis
 Strengthen the supervisory system related to the
management of credit card companies
9
Household Debt & Credit Delinquents
Soft-landing for Household Debt
 Manage household loans at an appropriate level &
Encourage conversion of short-term to long-term loans
- Establish Korea Housing Finance Corp. (Mar. 2004)
 Develop a loan screening system based on income and
repayment ability
- Build infrastructure such as individual credit DB
Promote
stability in the
financial market
and prevent
Support for Credit Delinquents
systemic risks
 Activate systems to support credit delinquents who
borrowed from multiple financial institutions
 Carefully select candidates to prevent moral hazard
10
The North Korean Nuclear Issue
 Meaningful Progress at the Second Round of Six-Party Talks
 All parties expressed their commitment to a nuclear-weapon-free Korean
Peninsula, and to resolving the nuclear issue peacefully
 Agreement to establish a working group and to hold the next round of
talks no later than the end of second quarter of this year
 Likelihood of Peaceful and Diplomatic Resolution
 Korea and the U.S share a very clear vision for dismantlement of North
Korea’s nuclear program
 The Korean government will continue to induce a positive stance from
North Korea, while maintaining close coordination with U.S and Japan
11
Table of Contents
I.
Recent Economic Developments
II.
Major Policy Directions for 2004
III. Current Issues & Policy Measures
IV. Mid- to Long-term Growth Strategy
Expanding Mid- to Long-term Growth Potentials
Formulate Innovative Growth Strategy
- Nurture top 10 growth drivers of next generation
- Accelerate technological innovation for high value-added industry
Build Northeast Asian Business Hub
- Develop Free Economic Zones
- Focus on strategies to make Korea a financial and logistics hub of NE Asia
Foster Services Industries
- Further liberalize services market & attract foreign investment
- Ease regulations regarding services industries
Continue Market Reforms
-Execute the 3-Year Market Reform Plan, outlined late last year
13
A “Niche Financial Hub” Focusing on Asset Management
 Develop asset management
industry as a key driver
 Enhance the attractiveness of
financial markets by developing
fixed income, equity and foreign
exchange markets
 Foster regional leadership by
establishing a Korea Investment
Corporation (KIC) and developing
specialized areas (restructuring,
infrastructure financing)
Attract advanced foreign
financial institutions
Financial Hub
Reinforce
competitiveness of
domestic financial
institutions
14
Thank you!