Impetus for Growth

By Ram Garikipati

The Financial, Energy and Food sectors in South Korea are dynamic engines of growth that hold huge potential for foreign investors. The country is implementing economic policies and projects to develop the country into a Northeast Asian business hub country. This economic model shifts the economic goals and focus of a country away from the manufacturing sector to the financial sector, with the primary goal of becoming a player in the global capital markets.
South Korea is also a major energy consumer, and is completely reliant on imports to meet its oil, natural gas and coal demand. As for the agriculture and food sectors, they are being encouraged to evolve into an efficient, modern enterprise that provides a positive economic contribution to society in line with other sectors of the economy.
This handbook gives brief snapshots of each sector that will enable you to understand the ground reality in the country. The information is not new, and the same can be got from numerous studies, as also the reference list at the end of each section. However, if you are pressed for time, but at the same time, want to get a wind of the sectors, this is the ideal choice for you.
Also included are three exclusive interviews with the Minister of Strategy & Finance, Governor of Financial Supervisory Service and Chairman of Fair Trade Commission, which I was granted as Chief Editor of Infomag, the flagship publication of the European Union Chamber of Commerce in Korea. They have already been published earlier in Infomag, and are reprinted here.
The book takes off with the interview with Mr. Bahk Jae-wan, Minister of Strategy and Finance. This is followed by the second section on the Financial sector which gives an overview of policies and industry in South Korea, we also have an exclusive interview with Mr. Kwon Hyouk-se, Governor, Financial Supervisory Service. The third section gives you an overview of the Energy policies and industry, which is followed by the Agriculture & Food Sector. The last section concludes with an exclusive interview with Mr. Kim Dong-soo, Chairman, Korea Fair Trade Commission.

• Language: English
• Publisher: Ram Garikipati
• Release date: Sep 28, 2012
• ISBN: 9781301022342

Ram Garikipati

With 26+ years experience in Business Journalism/ Corporate Communications, I am now a freelance business writer and editor based in Hyderabad, India. I regularly contribute to newspapers and journals on economic issues. Prior to this, I was a Copy Editor/ Columnist with The Korea Herald, the leading English-daily in South Korea. I was based in Seoul for 17 years. Before that I was Chief Editor of a bimonthly magazine published by the Ministry of Agriculture, Food & Rural Affairs in Korea.Earlier, I worked as Chief Editor/ Corporate Communications of EUCCK, where I was responsible for Press Relations, which includes interacting with the media on a regular basis, clarifying their story inputs, issuing press releases and arranging media interviews for the President Group (President, 2 Vice-Presidents, Treasurer and Secretary General) of EUCCK.I was also responsible for the in house business magazines- INFOMAG and INFOMAG REAL ESTATE. From start to finish, I was in charge of planning, interviews, writing, editing, design and marketing of the magazines, heading a team of six.Even before, I worked in The Hindu Business Line newspaper (www.thehindubusinessline.com) at New Delhi from 1995 to 2004. I was responsible for Telecom & IT coverage of both government policy and corporate sectors and a fortnightly columnist and editorial writer. Earlier in my career at the same organization, I covered banking, macro-economic issues and infrastructure.I am currently working on two novels- a sequel to SCATTERED FATES, and a fiction on 5 global religious icons (Jew/Christian/Islam/ Hindu/Buddhism) meeting together at Central Park New York.

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Introduction

The Financial, Energy and Food sectors in South Korea are dynamic engines of growth that hold huge potential for foreign investors. The country is implementing economic policies and projects to develop the country into a Northeast Asian business hub country. This economic model shifts the economic goals and focus of a country away from the manufacturing sector to the financial sector, with the primary goal of becoming a player in the global capital markets.

South Korea is also a major energy consumer, and is completely reliant on imports to meet its oil, natural gas and coal demand. As for the agriculture and food sectors, they are being encouraged to evolve into an efficient, modern enterprise that provides a positive economic contribution to society in line with other sectors of the economy.

This handbook gives brief snapshots of each sector that will enable you to understand the ground reality in the country. The information is not new, and the same can be got from numerous studies, as also the reference list at the end of each section. However, if you are pressed for time, but at the same time, want to get a wind of the sectors, this is the ideal choice for you.

Also included are three exclusive interviews with the Minister of Strategy & Finance, Governor of Financial Supervisory Service and Chairman of Fair Trade Commission, which I was granted as Chief Editor of Infomag, the flagship publication of the European Union Chamber of Commerce in Korea. They have already been published earlier in Infomag, and are reprinted here.

The book takes off with the interview with Mr. Bahk Jae-wan, Minister of Strategy and Finance. This is followed by the second section on the Financial sector which gives an overview of policies and industry in South Korea, we also have an exclusive interview with Mr. Kwon Hyouk-se, Governor, Financial Supervisory Service. The third section gives you an overview of the Energy policies and industry, which is followed by the Agriculture & Food Sector. The last section concludes with an exclusive interview with Mr. Kim Dong-soo, Chairman, Korea Fair Trade Commission.

Interview

Mr. Bahk Jae-wan, Minister of Strategy and Finance

The Korean government, in its economic policy directions for 2012, projected that the Korean economy grew by 3.8 percent in 2011 and will have a slightly lower 3.7 percent growth for 2012. The nation’s consumer inflation will drop to 3.2 percent, trade will see $16 billion in surplus, and jobs will expand by 280,000, the government further predicted. In order to act preemptively against external threats caused by a slowing global economy, it promised to boost the domestic market to stimulate the economy. Meanwhile, Europe’s debt problem and slowing global recovery are expected to hold back Korea’s export and import growth from last years 19.2 percent and 23.2 percent to 7.4 percent and 8.4 percent, each. Though growth in exports tapers off, private consumption will fill in the slack by rising from 2.5 percent last year to 3.1 percent this year. In early December 2011, Minister of Strategy and Finance, Mr. Bahk Jae-wan, announced that the government will focus on boosting the economy and stabilizing people’s livelihoods this year in order to build a ground for ‘eco-systemic development’ or shared growth. However following the death of North Korean leader Kim Jong-il, the government has now changed its economic policy priority for 2012 to risk management and discovering new growth engines from job creation. MOSF cited the euro-zone debt crisis, and the geopolitical risks of the Korean peninsula and the Middle East crisis as the three largest risk factors that will threaten the Korean economy this year. Korea’s contingency plan initially included the euro-zone debt crisis only, but North Korea and the Middle East were added in the list. Foreign investors are aware of the risks and are confident that the Korean government will put in place suitable policies to minimize the fallout. They believe that despite the risks, domestic businesses can turn the current difficulty into an opportunity. In the end, relative to its neighbors, Korea was able to benefit from the Asian crisis in 1997 and 1998. It is sure to happen this time too. In an interview, Minister Bahk outlines the government’s strategies for this year.

What are the risk factors to the Korean economy this year? And what are the government priorities and plans to manage them?

I do believe that there are many risk factors for the year 2012. The biggest would be the European financial crisis. Secondly, Korea has a high reliance on international markets, especially the import of raw materials. Therefore, the developments of the Iranian situation and its impact on the international crude oil prices will impact Korea. Internally, in Korea, for the first time in 20 years we have the presidential elections and the general elections being held at the same time. Just like the eurozone decision, we may find that it is very difficult to make timely decisions. Decision-making may be delayed, which will create more risk factors. Concerning the European financial crisis, as you are well aware the maturity for the Italian sovereign bond is between February and April and until June many EU banks will be securing their core capital rates which may lead to de-leveraging, which may impact trade finance for Korean companies, leading to instability. However, as you are aware, within the European zone there is to be the EU summit in the end of January. And at the end of February, we will expect to be holding the G20 financial ministers meeting. There is also the agreement between the heads of Germany and France. As the crisis escalates, we look forward to a faster decision-making process. And therefore, our expectation is that we will be able to find the key to the solutions within the first quarter of this year. We do believe that we are considering the possibility of the impact of the European financial crisis on the Korean financial market. We have contingency plans in place and we are responding according to our plans. For example, there was the issuance of bonds by EXIM bank of $2.5 billion and there was a booking of over $9 billion. We do believe that our foreign reserves are adequate and we also have various plans for worst-case scenarios. Concerning the developments of the Iranian situation. I don’t believe it is within our control. However, we are coming up with various measures to mitigate the impact of the development. The reminder of the issues are diplomatic issues and I am not in a position to reveal the details. Concerning the two major elections to be held this year, unlike the EU, we do not have a system centered around the parliament. And it is centered around the president. Therefore, the traditional bureaucracy within our government bodies including the ministry of finance are quite patriotic in our work, and traditionally we believe that these patriotic status of our bureaucrats impact the decision making of the state and therefore I do not think there is too much to worry about the contingencies following the 2 elections. As we rely on our mature media in Korea and our opinion leaders in Korea, we will make sure that we keep a balance against populism. And difficulties in decision making as well as confusion in government policies. I have very optimistic views for this year. Over the last couple of years, the foreign exchange rate has been very volatile. Is the government planning to implement measures for making them more stable? The volatility of the exchange rate has been there since 2008, and it now reducing. It was 0.94 in 2008 which reduced to 0.48 percent last year. This is better than the European figures of 0.57 percent. As you are well aware the later half of last year saw a high degree of volatility in international markets and I do believe that in Korea it was relatively stable. Today I saw that there was a trend of depreciation in the morning but we do believe that any extreme change in any one direction is not ideal, therefore we will work to mitigate the volatility of our exchange rates What the government is considering is that our foreign exchange market is quite small at the moment and so we will work on adding depth and width to our market. As for capital market we will provide incentives to encourage long term investments we will continue to enhance the size of our capital market so that it will be able to absorb any shocks in the future. Concerning the inflow and outflow of capital, we believe that any rapid change is not ideal and we are therefore looking at ways to mitigate....so that is why we have come up with three regulations for foreign currency. We will continue to analyze the pluses and minuses of these regulations and work on any improvement as necessary. As for the bond market, many of the central banks outside Korea, are well interested in the Korean market. And they believe that the forecast is positive. So, we will continue to collaborate closely with some central banks of other countries. And we will also continue to work to make sure that there is a virtuous cycle to reduce the volatilities.

The biggest burden on household finances this year is