Lee says N. Korea has arms to sustain regime, vows to cut risks

President Lee Jae Myung speaks during the Korea Investment Summit held at the New York Stock Exchange in New York on Thursday. Yonhap

President Lee Jae Myung said Thursday that North Korea appears to have secured enough nuclear arms to sustain its regime, with its intercontinental ballistic missile (ICBM) development efforts in the final stages, but he stressed South Korea's "overwhelming" military strength and its plan to bolster defense spending.

Speaking to global investors at the New York Stock Exchange, Lee sought to reassure them, vowing to reduce security risks on the Korean Peninsula and reinforce investor confidence, as he noted that South Korea's stock market has been "undervalued" despite its elevated economic and military stature.

"North Korea seems to have secured sufficient nuclear weapons needed to maintain its regime, with only atmospheric reentry technology remaining (for Pyongyang to complete) the development of nuclear-tipped ICBMs capable of reaching the continental U.S.," Lee said at the event, called the "Korea Investment Summit."

If unchecked, Pyongyang would add 15-20 nuclear bombs to its nuclear arsenal each year, he warned.

"What's worrisome is that there is a high possibility that North Korea would export (weapons) to other countries. Wouldn't there be considerable security benefits if we could just halt the production of nuclear warheads or the development and export of ICBMs?," he said.

"That is why I have proposed stopping them in the short term, reducing them in the midterm and pursuing (the North's) denuclearization in the long term," he added, referring to the three-stage plan to foster lasting peace on the Korean Peninsula.

He underscored his administration's peace efforts as it seeks to address security uncertainties and help enhance investor confidence.

"The Korean market has been undervalued due to geopolitical risks from the inter-Korean military standoff. The new government will resolve this decisively," he said.

The president, in particular, noted that South Korea's own military strength -- apart from the support from the 28,500-strong U.S. Forces Korea, ranks in the world's top five, and that its defense spending exceeds North Korea's annual gross domestic product.

"There was a request by President Trump. But regardless of that, we plan to drastically increase defense spending," Lee said.

He went on to say, "It is difficult to say that the military issue is a threat to the Korean Peninsula given that the Republic of Korea has overwhelming defense, economic and overall security capacity, and its government has a positive stance on security matters," he said.

He also pledged efforts to improve opaque corporate governance and unfair market practices to draw fresh capital inflows to the Korean market.

"We will create a stock market where no one can even dream of opaque, unfair practices — and those who try will go broke," he said.

Lee said his government will push for a third revision of the Commercial Act to improve corporate governance, following earlier revisions that extended the fiduciary duty of boards to all shareholders and strengthened protections for minority investors.

Bank executives, including Citigroup CEO Jane Fraser; Marc Nachmann, Goldman Sachs' head of wealth and asset management; and Mary Callahan Erdoes, CEO of JPMorgan Chase's asset and wealth management division, were invited to the session, according to Kim Yong-beom, the presidential chief of staff for policy.

Top global asset managers and private equity leaders also participated, including Pacific Investment Management CEO Emmanuel Roman; Franklin Templeton CEO Jenny Johnson; Jonathan Gray, president and chief operating officer of Blackstone; and Henry Fernandez, chairman and CEO of MSCI.

From South Korea, Finance Minister Koo Yoon-cheol, Financial Services Commission Chairman Lee Ok-won and Financial Supervisory Service Governor Lee Chan-jin joined the event, along with SK Group Chairman Chey Tae-won and other Korean corporate leaders.

The engagement on the final day of his trip to attend the U.N. General Assembly came as Lee has vowed to turn the "Korea discount" into a "Korea premium" for global investors.

It was the first time in eight years that a South Korean president hosted an investor relations session for global investors.

During the session, Lee outlined Seoul's comprehensive plan to reform the foreign exchange market as part of efforts to secure an upgrade by global index provider Morgan Stanley Capital International (MSCI) in its emerging market category.

"(The government) will swiftly resolve the key issue of establishing an offshore won trading market so that foreign investors can invest without inconvenience," he said. "(The government) will also expand the currently limited domestic foreign exchange market trading hours so that there are effectively no restrictions."

South Korea was first placed on MSCI's watch list in 2009 for a potential upgrade to developed market status but was removed in 2014 due to market barriers, including restrictions on currency-trading hours.