January 2005 Ministry of Finance and Economy, Republic of Korea  Dynamic Korea : A Nation on the Move   Jinmyung Kim
<ul><li>Vision </li></ul><ul><li>Challenges </li></ul><ul><li>Responses and Strategic Initiatives </li></ul><ul><li>Future...
1. Comprehensive Plan of the Vision Dynamic Korea Regain economic vitality and  improve the welfare of the needy  Politica...
<ul><li>New and unpredictable changes in internal and external environment require dynamic responses </li></ul>2. Core Con...
Interaction between Innovation and Integration Innovation Integration Accelerating Innovation <ul><li>Synergistic  Interac...
1. Challenges to the Korean Economy Rapid  globalization  Emergence of  China Tensions on the  Korean Peninsula Slowdown i...
1. Responses  to Challenges    Following the efforts of the past year, now is the time to  accelerate change <ul><li>Need...
2. Medium and Long-Term Strategic Initiatives (I) <ul><li>Each initiative serves to overcome more than one challenge,    f...
Northeast Asian  Economic Hub Complete integration into the global economy for entering a new era of peace & prosperity  i...
Market Reform Establish a transparent and fair corporate and financial system meeting global standards <ul><li>Enhance cor...
[Box 1] Northeast Asian Economic Hub and FTA Free Trade Agreement Current Within 1∼2 years Mid to long-term plan Chile (Fe...
[Box 2] Regional and National Development Tourism, Health, BT, Animation Textiles, Electronics, Auto Machinery, Petrochemi...
3. Capabilities to Achieve the Vision (I) University Graduates as Portion of Total Population (IMD 2001) Japan 47% Interne...
Flexibility Sound   Government  Budget <ul><li>Relatively flexible to reform and change </li></ul><ul><li>- Evidenced by t...
1. Future Prospects (I) Korea’s Competitiveness & per capita GDP 30 20 10 10,000 20,000 30,000 US GDP per capita ( Based o...
9.2% 12% Foreign Investment to GDP Ratio(accumulated) 2003 2007 2002 2008 10th 8th Level of Science and Technology 2002 20...
High Living Standards Balanced Development <ul><li>Balanced development of metropolitan & provincial, urban & rural areas ...
1. Need to Manage Change <ul><li>“ Change Management” is critical to achieve “Dynamic Korea”   </li></ul>Process of Managi...
Perception on Korea’s Prospect 2. Conditions for Change (I) Source: KDI-Gallup Survey (General Public) 성장 잠재력  저하 세계화의  충격...
2. Conditions for Change (II) Foreign Investment  Inducement (Foreign Investors) Financial Reform (Experts) 59.3% 40.7% 54...
2. Conditions for Change (III) Experts General Public Source : KDI-Gallup Survey (December 2003) (Question) Do you think c...
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  • A Nation On The Move

    1. 1. January 2005 Ministry of Finance and Economy, Republic of Korea Dynamic Korea : A Nation on the Move Jinmyung Kim
    2. 2. <ul><li>Vision </li></ul><ul><li>Challenges </li></ul><ul><li>Responses and Strategic Initiatives </li></ul><ul><li>Future Prospects </li></ul><ul><li>Managing Changes </li></ul>Table of Contents
    3. 3. 1. Comprehensive Plan of the Vision Dynamic Korea Regain economic vitality and improve the welfare of the needy Political, Administrative and Social Reform Innovation Integration Northeast Asian Economic Hub Upgrading Technology & Manpower Market Reform Enhancing Social Well-being Vision Two pillars for achieving vision Seven Strategic Initiatives Short-term Action Balanced National Development Stable Labor Relations Dynamic Korea: A Nation on the Move I. Vision
    4. 4. <ul><li>New and unpredictable changes in internal and external environment require dynamic responses </li></ul>2. Core Concepts: Dynamism & Opportunities <ul><li>Why Dynamism? </li></ul>Impediments to Dynamism Vested Interests Creation of New Opportunities Individual <ul><li>Participation: Participating in major political and social decision-making processes </li></ul><ul><li>Competition: Demonstrating talents and capabilities in a fair and competitive environment </li></ul><ul><li>Innovation: Fostering ideas and creativeness in an open environment </li></ul>Region <ul><li>Balanced territorial development through productive competition among regions </li></ul><ul><li>What opportunities? </li></ul>Nation <ul><li>Stable growth of about 5% </li></ul><ul><li>An economic hub in Northeast Asia and a G-10 status </li></ul>Political Leadership Re-igniting Dynamism Dynamic Korea: A Nation on the Move
    5. 5. Interaction between Innovation and Integration Innovation Integration Accelerating Innovation <ul><li>Synergistic Interaction </li></ul><ul><li>Enhancing productivity </li></ul><ul><li>Reducing social conflicts </li></ul><ul><li>Increasing economic stability </li></ul>Inducing Integration <ul><li>Creating jobs </li></ul><ul><li>Developing human capital </li></ul><ul><li>Securing welfare resources </li></ul> For ‘Dynamic Korea’, upgrading ‘innovation & integration’ capabilities is critical <ul><li>Innovation </li></ul><ul><ul><li>Refers to individual and organizational changes to increase productivity </li></ul></ul><ul><ul><li>Refers to changes in institutions and policies affecting incentives and capabilities to innovate </li></ul></ul><ul><li>Integration </li></ul><ul><ul><li>Refers to efforts to lessen potential social tension arising from innovation </li></ul></ul><ul><ul><li>Refers to efforts to remove factors of socio-economic inequality, unleashing innovative potential of all </li></ul></ul><ul><li>⇒ Through proper policy measures, innovation and integration can be harmonized, creating synergy </li></ul>3. Two Pillars for Achieving the Vision: Innovation & Integration Dynamic Korea: A Nation on the Move
    6. 6. 1. Challenges to the Korean Economy Rapid globalization Emergence of China Tensions on the Korean Peninsula Slowdown in growth momentum Increased social tension <ul><li>Fast growth of China in both traditional and hi-tech sectors </li></ul><ul><li>China’s increasing share of foreign investment into East Asia </li></ul><ul><li>Increased systemic risk due to political uncertainty in the Korean peninsula </li></ul><ul><li>Intensified geo-political complexity in Northeast Asia </li></ul><ul><li>Financial and corporate sectors under-prepared to meet “global standards” </li></ul><ul><li>Increased pressure to liberalize agricultural and service sectors (DDA, FTA) </li></ul><ul><li>Reduction in labor and capital inputs </li></ul><ul><li>Inadequate technological and institutional capabilities </li></ul><ul><li>Intensified conflicts across regions, genders, generations and income groups </li></ul><ul><li>Insufficient social safety net for the unemployed, and worsening income distribution </li></ul><ul><li>Current problems are structural in nature and due to continuing challenges </li></ul>Dynamic Korea: A Nation on the Move II. Challenges
    7. 7. 1. Responses to Challenges  Following the efforts of the past year, now is the time to accelerate change <ul><li>Need to step up changes in the face of intensifying global competition for ‘innovation and change’ </li></ul>Understand the direction of responses and changes Integrate capacity of the society Implement counter-measures and changes swiftly Rapidly Changing Global Economic Environment (no clear global forerunner) Big Challenges, New Opportunities Dynamic Response A second-tier nation A leading nation in the 21st century Road Map Failed Response Implementation Preparation for Change Completed  Challenges demand proactive responses and decisive actions Dynamic Korea: A Nation on the Move III. Responses and Strategic Initiatives Key Strategies Prepared <ul><li>Strengthening growth momentum </li></ul><ul><li>Becoming a Northeast Asian Economic Hub </li></ul><ul><li>Market reforms, etc. </li></ul>
    8. 8. 2. Medium and Long-Term Strategic Initiatives (I) <ul><li>Each initiative serves to overcome more than one challenge, for example: </li></ul><ul><li>- Northeast Asian Economic Hub: effective in overcoming globalization, rise of China, relation with North Korea, and growth momentum </li></ul><ul><li>- Balanced National Development: effective in coping with social tension and growth momentum problems </li></ul><ul><li>- Market Reform : effective in overcoming growth momentum, globalization, and social tension </li></ul><ul><li>Strong synergies are expected among 7 initiatives to cope with challenges, for example: </li></ul><ul><li>- Political, Administrative and Social Reform: serves as the driving force for all other initiatives and guarantees policy effectiveness </li></ul><ul><li>- Cultivating Manpower: enables all initiatives by providing adequately skilled workforce </li></ul><ul><li>- Northeast Asian Economic Hub: reinforces market reform while drawing on successful market reform of its own </li></ul>Effects of 7 Major Strategic Initiatives Social Tension Rise of China Slowdown in Growth Globalization North Korean Issues Technology Manpower Northeast Asian Hub Balanced National Development Political, Administrative, and Social Reform Market Reform Reform and Integration Public Welfare Labor Management Relations Breaking through 5 Major Challenges Implementing 7 Major Initiatives Dynamic Korea: A Nation on the Move
    9. 9. Northeast Asian Economic Hub Complete integration into the global economy for entering a new era of peace & prosperity in Northeast Asia <ul><li>Achieve complete openness: Expand FTA, Open agricultural market and service sectors </li></ul><ul><li>Strategic inducement of foreign investment: Lift remaining restrictions, Improve investment incentives </li></ul><ul><li>Strengthen internal capabilities for a logistical, financial, and R&D hub in the region </li></ul>Upgrading Technology & Manpower Increase investment and consolidating institutions for the advancement of science and technology and accumulation of human capital <ul><li>Establish an advanced national system for technological innovation - Increase R&D investment, - Integrate technological, human resources, and industrial development policies - Establish a new system for industry-academia collaboration </li></ul><ul><li>Education reform: Increase diversity and specialization through decentralization & deregulation </li></ul>Stable Labor Relations Establish a cooperative system between business and labor <ul><li>New agreement in the Tripartite Committee: Initiate talks at national, local, and occupational levels </li></ul><ul><li>Strengthen preventive measures for labor disputes, Encourage resolution through private channels </li></ul>2. Medium and Long Term Strategic Initiatives (II) Dynamic Korea: A Nation on the Move
    10. 10. Market Reform Establish a transparent and fair corporate and financial system meeting global standards <ul><li>Enhance corporate governance: Introduce holding company system </li></ul><ul><li>Restructure the financial industry: Privatize financial institutions </li></ul>2. Medium and Long-Term Strategic Initiative (III) Enhancing Social Well-being Ensure minimum living standard for all, and encourage sound economic activities <ul><li>Stabilize real estate market: Implement a comprehensive plan, Rationalize tax code, etc. </li></ul><ul><li>Expand the social safety net : Extend the coverage of welfare, Reinforce welfare delivery system, etc. </li></ul><ul><li>Promote social equality: Enhance female participation and representation etc. </li></ul><ul><li>Lower private educational costs: Encourage on-line learning, etc. </li></ul>Political, Administrative, Social Reform Remove barriers to ensure fair competition and innovation <ul><li>Political and Social Reform: Abolish corruption and cronyism, Ensure transparency of NGOs and </li></ul><ul><li>non-profit organizations </li></ul><ul><li>Administrative Reform : Fiscal and tax reform for accountability, equity and increased local autonomy </li></ul>Balanced National Development Open an era of “balanced development” driven by regional autonomy <ul><li>Decentralization: Transfer of education and law enforcement, Balance national and local taxes etc. </li></ul><ul><li>Construct a new capital in Choongcheong Province </li></ul><ul><li>Pursue new agricultural policy: Promote enterprise-type farming, Modernize production and distribution </li></ul>Dynamic Korea: A Nation on the Move
    11. 11. [Box 1] Northeast Asian Economic Hub and FTA Free Trade Agreement Current Within 1∼2 years Mid to long-term plan Chile (Feb.04) Japan Singapore ASEAN Mexico Peru Israel Korea ㆍ China ㆍ Japan EU US New Zealand Panama India Australia Canada EAFTA <ul><li>Prepared Roadmap for FTA promotion & Lauched FTA Promotion Committee (Aug. 2003) </li></ul>Economic Welfare Political Stability ㆍ Cultural Unity Low High High Degree of Cooperation Northeast Asian Economic Hub Cooperation with North Korea Regional Cooperation Enhancing Internal Capabilities <ul><li>Environ- </li></ul><ul><li>ment </li></ul><ul><li>Gaesung Industrial Complex </li></ul><ul><li>FTA </li></ul><ul><li>Energy </li></ul><ul><li>Railways </li></ul><ul><li>IT </li></ul><ul><li>S&T </li></ul><ul><li>Pursue regional cooperation in political, social and cultural areas as well as in economic area </li></ul>New era of peace & prosperity in Northeast Asia Early start of negotiations agreed. (Jun. 2003) At early stage of discussion Promotion Workshop (May 2003) Joint study being conducted <ul><li>Tourism </li></ul><ul><li>Cultural Exchange </li></ul><ul><li>Monetary </li></ul><ul><li>Financial </li></ul><ul><li>Industrial </li></ul><ul><li>Logistics </li></ul><ul><li>Finance </li></ul><ul><li>R&D </li></ul>Dynamic Korea: A Nation on the Move
    12. 12. [Box 2] Regional and National Development Tourism, Health, BT, Animation Textiles, Electronics, Auto Machinery, Petrochemicals, Shipbuilding, NT Three Free Economic Zones Busan ㆍ Jinhae Gwangyang Incheon Cultural Industry, Bio, Auto Optical Fiber Cable, Machinery Honam Kangwon Youngnam Finance, Logistics, Electronics, IT, Bio Seoul Metro-Area <ul><li>Logistics, Financial Services, etc. </li></ul>Information, Bio, Tourism Jeju * 6 Industrial districts for foreign companies * 4 Free Trade Zones * 523 Industrial Complexes  Cultivating regionally specialized industries toward a multi-core, balanced territorial development BT, Telecom equipment, Semiconductor, Display Choongcheong Seoul Free International City Northeast Asian Hub Planned Site of New Capital * New territorial Development Vision announced on Jan. 29, 2004 Dynamic Korea: A Nation on the Move
    13. 13. 3. Capabilities to Achieve the Vision (I) University Graduates as Portion of Total Population (IMD 2001) Japan 47% Internet Accessibility (IMD 2003) Korea * Taiwan 3rd 7th Korea* 40% * 3rd among 30 countries with population of more than 20 million * 3rd among 30 countries with population of more than 20 million US 39% Taiwan 38% Proportion of Knowledge Intensive Manufactures (OECD 2000) Ireland 11.7% Korea 14.0% Germany 19.0% Highly skilled human resources <ul><li>Highly educated population </li></ul><ul><li>- 40% of population aged 25∼34 are university graduates (Ranked 3rd globally as of 2001) </li></ul><ul><li>Abundance of highly educated female workforce </li></ul>World-class IT infrastructure <ul><li>Rapid buildup of world-class IT infrastructure </li></ul><ul><li>- Internet accessibility (Ranked 3rd globally) - Proportion of Internet Users (Ranked 2nd globally) </li></ul><ul><li>- High-speed Internet (Ranked 1st globally) - Share of mobile users is approx. 70% </li></ul>Broad industrial base and hi-tech leading companies US Malaysia 1st 6th * High-end technology and mid-upper end technology manufacturers OECD avg 8.4% <ul><li>High proportion of knowledge-intensive manufacturing: </li></ul><ul><li>- Ranked 2nd among OECD countries </li></ul><ul><li>- global leader in IT home appliances, mobile phones, semiconductors, etc. </li></ul><ul><li>Broad industrial base with global leading firms </li></ul><ul><li>- Semiconductor (DRAM): Samsung (1st), Hynix (3rd) </li></ul><ul><li>- L C D: LG Phillips (1st), Samsung (2nd) </li></ul><ul><li>- Automobiles: Hyundai-Kia (9th) </li></ul><ul><li>- Shipbuilding: Hyundai (1st), Samsung (2nd), Daewoo (3rd) </li></ul><ul><li>- Steel: POSCO (4th) </li></ul>Dynamic Korea: A Nation on the Move
    14. 14. Flexibility Sound Government Budget <ul><li>Relatively flexible to reform and change </li></ul><ul><li>- Evidenced by the extensive reform efforts and innovative policies </li></ul><ul><li>following the financial crisis of 1997 </li></ul><ul><li>Balanced and sound government budgeting </li></ul><ul><li>- Accumulated Budget Deficit/GDP(%) = 22.1 (OECD Average = 73.0) </li></ul>3. Capabilities to Achieve the Vision (II) National Debt/GDP Ratio (2001) Korea US Finland OECD Average Source : OECD 22.1% 51.5% 59.7% 73.0% Locational Advantage <ul><li>Strategically located at the center of Northeast Asia, one of the three largest economic zones in the world </li></ul><ul><li>- accounting for nearly 20% of world GDP </li></ul><ul><li>Gateway to major markets - Proximity to China, Japan, Southeast Asia, Central Asia </li></ul>World GDP Share of 3 Economic Zones 4 Northeast Asian Economies 20.0 EU NAFTA 25.5 36.7 Source : DRI-WEFA 19.8 25.1 33.3 2001 2016 ~ 2020 Dynamic Korea: A Nation on the Move
    15. 15. 1. Future Prospects (I) Korea’s Competitiveness & per capita GDP 30 20 10 10,000 20,000 30,000 US GDP per capita ( Based on US$,2002) WEF National Competitiveness Ranking (2002) Singapore Japan Germany UK France Taiwan Malaysia China Spain Korea, 2002 India Canada Australia Sweden Ireland 1997  Narrow the gap with advanced economies and become a G-10 nation 2008 approx. 2010 Dynamic Korea: A Nation on the Move IV. Future Prospects
    16. 16. 9.2% 12% Foreign Investment to GDP Ratio(accumulated) 2003 2007 2002 2008 10th 8th Level of Science and Technology 2002 2008 20th 10th Corporate Management Efficiency Ranking Economic Hub in Northeast Asia <ul><li>Developing into a logistical, financial and R&D hub - Gwangyang and Busan: maritime hubs in Northeast Asia; Incheon International Airport: 3rd largest international airport in the world </li></ul><ul><li>- Come up as one of three Asian financial centers, specializing in asset </li></ul><ul><li>management </li></ul><ul><li>- Utilizing the economic free zones as international business centers </li></ul><ul><li>* Accumulated foreign investment to GDP ratio: 9.2%(2002) -> 12%(2007) </li></ul>Science and Technology Forerunner <ul><li>Consolidation of science & technology research capability, and transition to an open reform system </li></ul><ul><li>- R&D investment: </li></ul><ul><li>approximately KRW17 trillion(2002) -> over KRW30 trillion(2007) </li></ul><ul><li>- Research personnel: approximately 180,000(2002) -> 250,000(2007) - Level of science and technology: 10 th (2002) -> 8 th (2008) (Source: IMD) </li></ul><ul><li>- Competitiveness of higher education: 28 th (2002) -> 10 th (2010) (Source: IMD) </li></ul>Global Business Environment <ul><li>Establishment of a transparent & fair market, and a business- friendly environment </li></ul><ul><li>- Elimination of restrictions limiting competition; establishment of an advanced corporate governance model </li></ul><ul><li>* Corporate Management Efficiency Rate: </li></ul><ul><li>20 th (2002) -> around 10 th (2008) (Source: IMD) </li></ul><ul><li>* Market Concentration Rate: 43%(2002) -> Under 40%(2006) </li></ul>1. Future Prospects (Ⅱ) Dynamic Korea: A Nation on the Move
    17. 17. High Living Standards Balanced Development <ul><li>Balanced development of metropolitan & provincial, urban & rural areas </li></ul><ul><li>- Select a site and initiate construction for the new capital </li></ul><ul><li>- Open the 1st phase of the Seoul-Busan express railway system in April 2004 </li></ul><ul><li>- Balance the budget ratio between the central and local governments - 55:45 </li></ul><ul><li>- Increase farm household income by 50% until 2008 </li></ul><ul><li>Improving the quality of life </li></ul><ul><li>- 5-day work week </li></ul><ul><li>- Construction of more than 2.5 million homes and 700 thousand rental apartments </li></ul><ul><li>- Development of new suburbs near Seoul metro area </li></ul><ul><li>- Decrease of the unemployment rate to 5% for the young workforce within five years </li></ul><ul><li>- Increase of national expenditure on the raising of children (30% as of 2003) </li></ul>2003 2008 7.7% 5% Youth Unemployment Rate Major Trading Economy <ul><li>Export structure based on High-tech & high value-added brands </li></ul><ul><li>- The 8th largest trading nation by 2010 (trade amount: US$750 billion) </li></ul><ul><li>- Number of global leading products: 353 (2003) -> approx. 1,000 (2008) </li></ul><ul><li>- 10 next-generation businesses will significantly contribute to exports </li></ul>2002 2010 12th 8th Trade Volume 2002 2008 90% 100% Farm/Urban Income Ratio (per capita) 1. Future Prospects (Ⅲ) Dynamic Korea: A Nation on the Move
    18. 18. 1. Need to Manage Change <ul><li>“ Change Management” is critical to achieve “Dynamic Korea” </li></ul>Process of Managing Change <ul><li>Awareness of crisis </li></ul><ul><li>Consensus to overcome difficulties </li></ul>Recognizing the Need to Change Entrenching Change <ul><li>Sharing the vision </li></ul><ul><li>Establishing principles and procedures </li></ul><ul><li>Cultivating change-leading group </li></ul><ul><li>Fostering and sharing success cases </li></ul><ul><li>Recalibrating policy, procedure and system </li></ul><ul><li>Fair compensation and rewards </li></ul><ul><li>Feedback on change management process </li></ul>Current Stage of Korea ▶ Clarifying Objectives and Establishing Vision Implementing Change Dynamic Korea: A Nation on the Move V. Managing Change
    19. 19. Perception on Korea’s Prospect 2. Conditions for Change (I) Source: KDI-Gallup Survey (General Public) 성장 잠재력 저하 세계화의 충격 Source: KDI-Gallup Survey (General Public) (Unit: %) Increased Social Tension Rapid Rise of China Tensions on the Korean Peninsula can overcome challenge Challenge is severe 73.3 58.9 68.3 69.6 90.4 90.1 67.3 87.0 55.1 56.3 Slowdown in Growth Momentum Rapid Globalization Better 26.0 Same Worse 29.3 44.7 (Unit: %) Perception of the challenges and potential to overcome Many indicated a positive view on the prospect of the Korean economy Many indicated a positive view on the potential to overcome challenges despite the severity  Positive perspective on Korea’s future Dynamic Korea: A Nation on the Move
    20. 20. 2. Conditions for Change (II) Foreign Investment Inducement (Foreign Investors) Financial Reform (Experts) 59.3% 40.7% 54.8% 45.2% Positive Negative Positive Negative Decentralization (Experts) Expanding Welfare for the Needy (Experts) 80.2% 19.8% 68.3% 31.7% Positive Negative Positive Negative  Shared view on the direction of change and key policies Source : KDI-Gallup Survey (December 2003) Survey on the key policies Dynamic Korea: A Nation on the Move
    21. 21. 2. Conditions for Change (III) Experts General Public Source : KDI-Gallup Survey (December 2003) (Question) Do you think change-leading groups have been formed in each of the following sectors? Foreign Investors NGOs 56.4 60.7 Percentage of Positive Response 52.5 Perception on the formation of change-leading groups  Formation of change-leading groups in various sectors Dynamic Korea: A Nation on the Move Government Officials 26.5 23.4 19.2 Politicians 4.2 15.2 6.2 64.2 Business sector 46.8 81.9 46.5 Academia 39.8 49.7
    22. 22. Thank you Thank you!

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