: 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$ bil.	2.3	8.1	60.5	91.1	251.8	305.7	328.7
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
Ratio
Trade Volume	US$ bil.	0.5	2.8	39.8	61.4	134.9	158.4	166.0
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 Sector	Growth Rate in %	9.1	5.1	5.0	10.0
Private Consumption	Growth Rate in %	9.5	6.6	5.7	7.2
Investment	Growth Rate in %	12.6	0.8	3.6	10.3
Equipment	Growth Rate in %	12.1	1.1	0.2	17.7
Prices
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
Export	US$ bil.	69.6	75.1	81.0	43.1
Imports	US$ bil.	76.6	77.3	79.1	44.7
Current Account
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-’98
GNP growth, %	8.4	4.7	6.0	7.1	7.2	7.1	7.0	7.0	6.9
Per capita GNP, US$	6,518	6,749	7,306	8,196	9,339	10,716	12,305	14,076	14,0762)
Rise in producer prices, %	4.7	2.2	1.8	1.8	1.7	1.6	1.5	1.4	1.6
Rise in consumer prices, %	9.3	6.2	4.9	4.3	3.7	3.6	3.2	2.9	3.7
Rise in GNP deflator, %	11.2	6.3	5.3	5.3	4.8	4.5	4.1	3.8	4.6
Balance on curren account,	8.7	4.6	1.4	0	0.9	2.1	3.7	5.3	5.32)
US$ billion
Exports 1) ,US$ billion	69.6	75.1	82.3	82.3	99.3	110.1	122.6	136.3	136.32)
Rate of increase, %	(10.2)	(7.9)	(9.5)	(9.5)	(10.2)	(10.9)	(11.3)	(11.2)	(10.4)
Imports, US$ billion	76.6	77.3	81.3	81.3	95.8	105.3	116.1	128.1	128.12)
Rate of increase, %	(17.5)	(1.0)	(5.1)	(5.1)	(9.3)	(9.9)	(10.2)	(10.3)	(8.8)

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 register a US$600 million trade

surplus last year for the first time in 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 Region	Trade (US$ bil.)		Investment (US$ mil.)
	1987	1993	1987	1993
U.S.A.	27.1 (30.7)	36.1 (21.7)	165.3 (40.3)	380 (30.3)
Japan	22.1 (25.0)	31.6 (19.0)	1.4 (0.3)	6 (0.5)
EU	11.2 (12.7)	19.6 (11.8)	6.5 (1.6)	157 (12.5)
China	1.7 (1.9)	9.1 (5.5)	6.0 (1.5)	260 (20.7)
Southeast Asia	8.9 (10.1)	27.8 (16.7)	130.5 (31.8)	179 (14.3)

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.