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Home  Corporate Affairs
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Corporate Affairs
Our corporate affairs project area provides the international business community with unique access to the issues and individuals that define U.S.-Korea business relations in a rapidly changing global environment. The programs offered in this project area include conferences, seminars and forums that help Americans and Koreans meet the challenges of doing business together. These programs bring together Korean and American leaders from government, business, the media, academia and international organizations for frank and interactive discussions of the current economic, political and security topics that affect U.S.-Korea relations in a global context.
The focus of this project area is to explore and clarify the major issues affecting the economic partnership between the U.S. and Korea by providing opportunities for interaction between major players in both the private and public sectors of both countries. The objective is to promote a better understanding of the potential for mutually beneficial collaboration within a rapidly changing global environment.
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Noting that a number of key challenges have emerged as the South Korean economy embarks on the New Year, Chin Dong-Soo, deputy minister for international affairs in South Korea’s Ministry of Finance and Economy, discussed recent macroeconomic performance and the adoption of several long-term initiatives aimed at ensuring future prosperity. He outlined the government's Comprehensive Investment Plan and other policy measures that are intended to achieve the goal of a 5% growth rate and the creation of 400,000 jobs. As he noted, these policy measures also reflect a strong commitment by the South Korean government to transform Korea into a financial hub of Northeast Asia with an emphasis on the asset management industry. |
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President Roh Moo-hyun has made it his goal to reach $20,000 per capita GDP. South Korean stock market expert and CEO of International Investment Advisers Henry Seggerman thinks this goal can be achieved, but only if South Korean policymakers do some serious restructuring. South Korea's economy has been on a steady course since it emerged from the '97 Asian financial crisis, he said, but the threat of stagnation remains real and is growing every day. A punishing regime of overregulation has come along with the country's master-planned economic success. Rules that set artificial market share rates for newspapers and seemingly arbitrary government interventions in the real estate market are what economists refer to when they say South Korea has "one foot on the accelerator and one foot on the brake pedal." To instigate real, sustained growth, Seggerman argued that President Roh and others should make deregulation a priority-especially in the labor market. Dozens of chronically unprofitable corporations that the government encouraged the chaebol to start during the boom years should be allowed to go under. Cheap North Korean labor should be utilized to return big corporations to profitability and large, unnecessary infrastructure projects-like moving the capital from Seoul-should be scrapped. "Once these changes are made," Seggerman concluded, "$20,000 per capita GDP won't seem like nearly so ambitious an objective." |
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Moody's Sovereign Risk Group has given South Korea one of its highest sovereign debt ratings, A3, and doesn't foresee lowering that rating anytime in the immediate future. This good news was delivered by Thomas J. Byrne, vice president and senior credit officer, Moody's Financial Institutions and Sovereign Risk Group, during a Business Roundtable luncheon. Byrne explained that his company's assessment, which places Korea's ability to repay its borrowing as one of the highest in the developing world, is based on the country's strong fundamentals. Currently, good governance and regulatory regimes, a dynamic export sector, low levels of public debt and high levels of foreign direct investment (FDI) all make South Korea a good risk for lenders and bond buyers, he said. However, long term concerns could slow growth and throw public balance sheets out of order, putting downward pressure on Moody's rating. Economic success and globalization have created backlashes in Korea. On the cautionary side, he noted that anti-business sentiment, growth-retarding government policies and negative feelings about foreign companies doing business in Korea have been on the rise recently. Taken too far, he said, these trends might slow rates of FDI. Similarly, North Korea represents a unique "contingent liability" for South Korea. Should engagement between the two be ramped up, or the DPRK's economy falter, the percentage of South Korea's budget allocated for aid to the North could jump from the current level of .03 percent to 5 percent, stretching the ROK's finances. |
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To look at the numbers one would be hard pressed to call South Korea's current economic situation a crisis. Since the 1997 financial collapse and the more recent consumer credit turbulence, the economic situation has stabilized. Interest rates are low. Spending and exports have reached record levels, as have corporate profits. But on the ground, says David Chon, a principal at Discovery Capital Management, a silent crisis is playing out. Koreans have lost confidence in their economy and have become dangerously risk averse, he said, and the country may fall permanently behind the rest of East Asia if this pattern continues. The tempo of economic development in Asia has never been faster. If Korea could plug into the region's phenomenal growth it could easily reach its goal of $30,000 per capita GDP. In Chon's view, however, the business risk that South Korea thrived on for 50 years has become much less palatable to Koreans burned by their losses in the late '90s. Older managers have shifted gears; instead of seeking new profits they're paring back, he argued, trying to avoid any meltdowns on their watch. The Roh administration has shifted gears as well, focusing on redistributing Korea's wealth instead of spurring new development and sending inconsistent signals to the business community. Still, all is not lost, Chon assured his audience. He remains bullish on Korea in the long term, he said, since the country just needs to change its thinking. Leaders in the public and private sector need to abandon their mercantilist mindset, which focuses exclusively on manufacturing and exports, and cultivate domestic consumption and growth in the service sector. Above all, Chon concluded, they need to re-acquaint themselves with risk. |
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