The UK-Korea Forum for the Future
Communique from the Twelfth Annual Meeting
The Korea-UK Forum for
the Future held its twelfth annual meeting from 3-5 June 2004 at the Sheraton
Park Tower Hotel, Knightsbridge, London. The co-Presidents, Lord Richard and Dr
Han Seung Soo, introduced the proceedings which were chaired by the
co-Chairmen, Dr Kim Sang-woo and Sir Paul Newall. Before the meeting
representatives of the Korean delegation called on the Lord Chancellor at the
House of Lords
The Foreign & Commonwealth
and the Ministry of Foreign Affairs and Trade presented coordinated responses
to the recommendations from the previous meeting.
Session 1: The
Korean Peninsula
Part I: South
Korea: Political and Economic
There had been a
profound change in the political landscape as a result of the recent National
Assembly Election. Some two-thirds of the members were new. There had been
almost a generational shift in the average age of Assembly members. The
percentage of women had doubled to thirteen per cent. The election had been the
first held under the new law governing electoral funding. The draconian
punishments prescribed for breaches of the new regulations had been effective
in deterring illegal funding of the political parties and individual candidates.
The conclusion to be drawn was that business no longer had a major role in the
political process.
The election result
would have a very positive impact on international perceptions of South Korean
democracy. It would also lead to substantial reforms in many areas, bringing
South Korean regulations in the economic sphere into line with international
practice.
The South Korean
economy was in somewhat better shape. It was benefiting from growth elsewhere,
in particular, in China which had become KoreaÕs largest trading partner.
Inflation was relatively low. The banking system was healthier; foreign
ownership of some of the major banks had stimulated reform and streamlining.
Non-performing loans had decreased substantially and capital adequacy ratios
were well above the minimum international requirement. The worst of the
household credit crisis was past. The new Government would introduce a number
of reforms aimed at enhancing the business environment, for example, in the
regulations on the use of land and those governing the labour market.
One significant
initiative was the intention to create a ŌKorean Investment CorporationÕ
modelled on its Singapore equivalent, whose role would be to manage KoreaÕs
foreign exchange resources and public funds. It would invest a significant
proportion of these with global asset management firms. The new government
would also seek to promote the development of ten strategic industries of the
future, with particular concentration on new technology and service industries.
Plans to turn Korea into a North East Asian business hub would be pursued. The
region now matched the US and Europe in terms of its size and economic
potential. There were some problems. South KoreaÕs population growth was the
lowest of any large economy (1.13). This would create problems in the funding
of pensions. Job creation was another area of concern; the creation of
employment in the service sector had not kept pace with the decline in
manufacturing jobs. Domestic savings were the lowest in Asia; despite the
passing of the crisis, household credit remained a matter of concern. The high
proportion of stock market assets held by foreign investors had become a
political issue. However, the government regarded this as a positive sign and
reckoned that the electorate would come to recognise the benefits.
Part II: North
Korea
Despite differences of
approach to the problem among the participants, it was generally recognised
that the only way forward was through negotiation. Divergences between the
political parties arose mainly over the line to take in negotiations. The South
Korean population was overwhelmingly in favour of long term reunification and
strongly supportive of the PresidentÕs peace and reconciliation policy. A
further round of six-party talks was expected soon, but substantial early
progress was not likely before the US Presidential Elections in November.
The meeting urged the
British Government to adopt a more flexible approach. For example, it was urged
to consider seriously the apparent North Korean willingness to send students
and officials for short term study and training in the UK. The effect on them
of this kind of exposure to Western society might be substantial. Experience
showed that the returnees from such programmes had not been penalised.
Session 2
Part I: Creative
Industry
In Korea creative
industries were enjoying a boom. The background to their success was much
greater freedom of expression in Korea. Several years of sustained growth had
led to the creation of a dynamic new sector of the Korean economy. Fortunes
were being made by those who had been successful. The popularity of Korean pop
culture in other Asian countries had boosted exports. There was, moreover, an
abundance of venture capital funds available for investment in these
industries. But there were some
problems. While Koreans were world class software technicians, they lacked
creative talent. The Korean education system might be to blame. Young Koreans
might benefit from study in the UK. There were certain centres of excellence
(Abertay/Sunderland).
In the UK, too, there
were problems; there was much latent creative talent but it was not finding
outlets. The industry was under-funded. British banks took a very cautious
attitude to the sector. There was strong encouragement from the meeting for all
those concerned to make efforts to develop cooperation between British and
Korean firms in this sector. There was marked complementarity of strengths.
Part II:
University/Private Sector Cooperation
The Vice-Chancellors
of City and Surrey Universities made presentations on the funding position of
modern British universities and the reasons for the great efforts and ambitious
initiatives they were making to integrate with local communities and the
private sector. This entrepreneurial approach was essential to the survival of
universities. British universities had been forced to abandon their generalist
academic approach and now played to their strengths. This was in turn the only
way that they could hope to generate the funds to develop and sustain their
position as centres of excellence. These changes had led to some tensions eg
among the academic staff, which had required careful management. The key to
success was leadership. Vice-Chancellors were now multi-skilled chief
executives.
The pressures in Korea
were not fundamentally different, but the environment was. Regulations
governing the employment of academic staff were a strong disincentive to
reform. Korean universities had reacted to the pressures by establishing
extensive exchange arrangements with foreign universities, including those in
the UK. It was noted that the new government, recognising the crucial
importance of knowledge industries, was introducing radical policy changes
aimed at stimulating university/private sector partnerships. In this new
climate there was considerable scope for cooperation between British
universities and Korean firms and between British and Korean universities and
the private sector generally.
Session 3
Part I: Bilateral
Trade & Investment
The meeting noted the
major reorganisation that had taken place in the trade and investment promotion
services in both countries. Sector prioritisation was the key in these new
arrangements.
Both countries were
facing huge competition for FDI which had dropped from its earlier peaks. While
bilateral trade and investment were satisfactory there was considerable scope
for improvement.
It was noted that
there were still barriers to investment in Korea. One was psychological:
perceptions of market conditions were obsolete. In legal services it was noted
that the Korean government had made an offer on market opening in the Doha
Round. However, referring to the response to the recommendation formulated at
the previous meeting, participants felt that earlier implementation of this
offer could assist in the attraction of FDI without endangering the position of
Korean lawyers. Foreign investors were always much more comfortable when they
could use their regular legal partners when making international investments.
It could affect their choice of investment destination. Protection of
intellectual property rights was also seen as an area of concern by potential
British investors. The problem was seen to be one of more effective
implementation of new regulations. The introduction of new standards of
corporate governance backed by stiff penalties for breach of the regulations
was generally welcomed.
Part II: Britain
and Korean as Business Hubs
In a presentation of
the key factors behind the success of London as a leading global financial
centre emphasis was laid on innovation and international competitiveness.
Regulation of the LondonÕs huge financial services sector was based on these
principles which had much to do with LondonÕs attraction as a global financial
centre. For example, it helped to explain why there were more US banks than in
New York and more Japanese banks than in Tokyo. A sound and trusted legal
system was one essential prerequisite for success as a financial centre.
Another was high standards of corporate governance. Yet another was a respected
system for the arbitration of international commercial disputes. Others
included a multi-cultural, multi-ethnic, multi-skilled workforce, a living
environment that attracted well-paid, high spending executives and, finally, a
very stable labour market. In the latter case it was stressed that any
perception of a threat of disruption was a deterrent to investment. Another
fundamental principle was that regulators needed to monitor, not control, the operations
of the market place. Above all, an international financial centre needed to
have excellent global communications.
In discussion it
emerged that a lingering and serious challenge for Seoul in its quest to become
a regional business hub was the damage done by outdated perceptions of market
conditions. There had been welcome changes in the regulation of corporate
governance and financial services, but negative perceptions of the past were
difficult to eradicate
Session 4:
UK Economic & Political Situation,
including European Union Issues
There was a broad
discussion of the economic and political situation in the United Kingdom and of
the many issues, domestic, European and international, which affected it.
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