The media are quick to pounce on South Korea for being slow with its economic reforms. The most recent case in point is criticism of the South Korean government for helping to arrange a creditor bailout for Daewoo. Critics called it backsliding and questioned the nation's commitment to economic reform.
We believe the government's action-to require that Daewoo initiate a major asset restructuring to rectify its financial problems-shows the nation's deep commitment to beginning the comprehensive corporate reforms necessary to sustain our long-term competitiveness.
The IMF crisis of 1997-98 forced a fundamental change in the thinking of the South Korean people about what must be done to regain lost momentum and to develop the capabilities needed to build a value-added, high-tech economy. Growth in industrial production and foreign investment in 1999 indicates the nation is on the road to recovery.
In the second quarter, South Korea registered a 9.8 percent growth rate. In June, industrial productivity rose 29.5 percent, shipments grew 30.7 percent and manufacturing increased 79.8 percent, approaching precrisis levels. Foreign direct investment in South Korea rose 250 percent in the first quarter, compared with the same period of 1998, to $2.04 billion. That followed a record $9 billion in foreign investment in 1998.
This break with the past indicates the willingness of Korean executives to open their operations and economy. This is one of the most significant events in our nation's development, helping not only to introduce capital, but also to breed fresh ideas and management practices.
But change can't happen overnight. South Korea is being asked to accomplish in a handful of years what the United States completed over many decades.
It's often forgotten that the United States went through a long and arduous process to create a working market economy. The powerful U.S. economy of today evolved through decades of reform, corporate upheavals and stock market crashes, as well as periods when conglomerates were worshiped as the most competitive of U.S. corporations.
South Korea's reform process is difficult and its impact has been tough on the Korean people. What is being attempted in South Korea-a radical shift from an economy stage-managed through a close working relationship among government, large companies and labor unions to a market-driven economy-is a significant change.
Despite problems, which we readily acknowledge, public- and private-sector reform is occurring, new methods of business are being introduced and productivity is coming back. At the end of the day, investors-both South Korean and foreign-will be the ones to decide whether the transition that is now under way is successful.
Thus far, the verdict appears to be that reform is sticking and that South Korea represents one of the most attractive investment opportunities in the world.
Young Man Kim is President of the Korean Chamber of Commerce and Industry in the USA and Vice Chairman of SK Global America Ltd.
