Korea in Focus

A People and History in Harmony

      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.

      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
      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).

      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 occuðy 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.

      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.

      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 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 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.

      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.

      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$   |2.3  |8.1  |60.5 |91.1 |251.8|305.7|328.7|
|                 |bil.  |     |     |     |     |     |     |     |
|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$   |0.5  |2.8  |39.8 |61.4 |134.9|158.4|166.0|
|                 |bil.  |     |     |     |     |     |     |     |
|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
      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   |Growth Rate in |9.1    |5.1    |5.0    |       |
|Sector             |%              |       |       |       |10.0   |
|   Private         |Growth Rate in |9.5    |6.6    |5.7    |7.2    |
|Consumption        |%              |       |       |       |       |
|   Investment      |Growth Rate in |       |0.8    |3.6    |       |
|                   |%              |12.6   |       |       |10.3   |
|   Equipment       |Growth Rate in |       |1.1    |0.2    |       |
|                   |%              |12.1   |       |       |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
      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-’9|
|                  |    |    |    |    |    |    |    |    |8     |
|GNP growth, %     |8.4 |4.7 |6.0 |7.1 |7.2 |7.1 |7.0 |7.0 |6.9   |
|Per capita GNP,   |6,51|6,74|7,30|8,19|9,33|10,7|12,3|14,0|14,076|
|US$               |8   |9   |6   |6   |9   |16  |05  |76  |2)    |
|Rise in producer  |4.7 |2.2 |1.8 |1.8 |1.7 |1.6 |1.5 |1.4 |1.6   |
|prices, %         |    |    |    |    |    |    |    |    |      |
|Rise in consumer  |9.3 |6.2 |4.9 |4.3 |3.7 |3.6 |3.2 |2.9 |3.7   |
|prices, %         |    |    |    |    |    |    |    |    |      |
|Rise in GNP       |11.2|6.3 |5.3 |5.3 |4.8 |4.5 |4.1 |3.8 |4.6   |
|deflator, %       |    |    |    |    |    |    |    |    |      |
|Balance on curren |8.7 |4.6 |1.4 |0   |0.9 |2.1 |3.7 |5.3 |5.32) |
|account,          |    |    |    |    |    |    |    |    |      |
|US$ billion       |    |    |    |    |    |    |    |    |      |
|Exports 1) ,US$   |69.6|75.1|82.3|82.3|99.3|110.|122.|136.|136.32|
|billion           |    |    |    |    |    |1   |6   |3   |)     |
|   Rate of        |(10.|(7.9|(9.5|(9.5|(10.|(10.|(11.|(11.|(10.4)|
|increase, %       |2)  |)   |)   |)   |2)  |9)  |3)  |2)  |      |
|Imports, US$      |76.6|77.3|81.3|81.3|95.8|105.|116.|128.|128.12|
|billion           |    |    |    |    |    |3   |1   |1   |)     |
|Rate of increase, |(17.|(1.0|(5.1|(5.1|(9.3|(9.9|(10.|(10.|(8.8) |
|%                 |5)  |)   |)   |)   |)   |)   |2)  |3)  |      |

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

      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


      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
      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

                 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
      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
      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
      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.

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