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Korea’s Economic Development and Policy Directions for 2004

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. Recent Economic Developments II. Major Policy Directions for 2004 III. Current Issues & Policy Measures

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Korea’s Economic Development and Policy Directions for 2004

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  1. Korea’s Economic Development and Policy Directionsfor 2004 18 March2004 Gwang Lim KIM Vice Minister Ministry of Finance and Economy Republic of Korea

  2. Table of Contents Recent Economic Developments II. Major Policy Directions for 2004 III. Current Issues & Policy Measures IV. Mid- to Long-term Growth Strategy

  3. Korean Economy On Track to Recovery GDP Growth Industrial Output Growth (%) (%) 3.8 (e) Exports FX Reserves (US$ bn) (%)

  4. Domestic Demand Remains Sluggish Consumption Investment (%) (%) Consumer Sentiment Index Business Survey Index Source: NSO Source: BOK

  5. 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

  6. Expansionary Macro Policy Fiscal Policy • Frontload budget in 1H Monetary Policy • Maintain low interest rates Exchange Rate Policy • Market determines FX rate based on economic fundamentals & demand and supply

  7. Boosting Investment Deregulation • Remove regulations that hinder investment, bringing real benefits to companies. • Form a task force to review financial regulations and supervision Improve Labor Relations • Strictly apply laws and principles to illegal activities • Bring labor relations up to global standards by easing lay-off requirements Elevate income-earning capacity Create jobs Promote investment → → Resolve credit delinquents and unemployment issues →

  8. 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

  9. 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

  10. Credit Card Companies LG Card • Finalized Restructuring Plan (Jan. 2004) - Business normalization is currently underway by KDB • Will be sold after business normalization Minimize the negative effects on other financial sectors and the real economy Other Card Companies • Restructuring process is underway - Merging with affiliated financial institutions, recapitalization, etc. Strengthened Monitoring & Improved System • Monitor the management of card companies on a continuous basis • Strengthen the supervisory system related to the management of credit card companies

  11. 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 systemic risks Support for Credit Delinquents • Activate systems to support credit delinquents who borrowed from multiple financial institutions • Carefully select candidates to prevent moral hazard

  12. 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

  13. 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

  14. 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

  15. A “Niche Financial Hub” Focusing on Asset Management Attract advanced foreign financial institutions • Develop asset management industry as a key driver • Enhance the attractiveness of financial markets by developing fixed income, equity and foreign exchange markets Financial Hub • Foster regional leadership by establishing a Korea Investment Corporation (KIC) and developing specialized areas (restructuring, infrastructure financing) Reinforce competitiveness of domestic financial institutions

  16. Thank you!

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