G20 will surpass Olympics in global impact

Despite the government’s efforts to promote the G20 Seoul Summit, many people have doubts about the impact the international gathering will have on the Korean economy and its reputation as they believe it is not expected to attract as much global attention as — for example — the Seoul Olympics in 1988.

Kim Ki-hwan
Chairman of Seoul Financial Forum

“In the case of the G20 Summit, the world will watch Korea in terms of Korea’s ability to lead the global community in finding solutions for many economic problems facing the world today.”

By Kim Jae-kyoung

Despite the government’s efforts to promote the G20 Seoul Summit, many people have doubts about the impact the international gathering will have on the Korean economy and its reputation as they believe it is not expected to attract as much global attention as — for example — the Seoul Olympics in 1988.

In fact, President Lee Myung-bak and his administration have so far failed to brighten up the mood of Koreans. Not so many people here are excited about the country hosting the global event.
However, one noted international expert dismissed such concerns, stressing the significance of the world’s policy forum for Asia’s fourth largest economy.

“The G20 Summit has the potential to be the most significant international event Korea has hosted since the founding of the Republic in 1948,” Kim Ki-hwan, chairman of Seoul Financial Forum, said in an interview with The Korea Times.

“In terms of its impact on the international community and domestically, it will probably surpass the 1988 Olympic Games,” he added.
Kim pointed out that the Seoul Summit will provide an opportunity for Korea to become a real force in the global community.

“In the case of the G20 Summit, the world will watch Korea not just in terms of its ability to provide first rate logistics for a major international event, but, more importantly, in terms of Korea’s ability to lead the global community in finding solutions for many economic problems facing the world today,” he said.

“The solutions Korea will help find need to be effective and acceptable to the majority of the member countries. There is little question that if Korea indeed succeeds in meeting these challenges, it will emerge as a major force in the global community,” he added.

Kim, who served as vice chairman of the National Council for Economic Policy from 2008 to 2010, said that the Seoul Summit is indicative of two inter-related major changes that have recently taken place in the world.

“One is the re-emergence of East Asia as a major economic power. The other is the increasing weight of emerging countries in the world economy. Under these new circumstances, Korea, as the host country, should exercise its leadership in setting an appropriate agenda for the meeting and delivering an outcome that is in the interests of both advanced and emerging countries,” he said.

He stressed that Korea should make the utmost efforts to deliver two key messages to the world through the gathering.
“The message it should deliver for the future is basically two-fold. First, Korea will soon become a mature democracy based on the rule of law. Second, economically, Korea will emerge as the premier center not only for business and finance, but also for technology, education, culture, tourism and medical services in Asia,” he said.

Deregulation

The visiting scholar at the Korea Development Institute (KDI) stressed that in order to make the event successful, the most urgent task is to improve the nation’s business environment through large-scale deregulation.
“On the occasion of the G20 Summit, many global business and financial leaders will be visiting Korea. They will no doubt want to
find out what the business environment in Korea is first hand,” he said.

“In spite of many efforts the Korean government has made to improve the business environment in Korea, in my opinion, there are still many outdated rules, regulations and policies in Korea that adversely affect its business environment,” he added.

Kim suggested that for the purpose of finding out what these rules, regulations and policies are, the Korean government should invite the leaders of the foreign business community in Korea for a full-day, high-level meeting, engaging them in a frank exchange of views prior to the summit.

“Participants at this meeting from the government side should include at minimum the heads of such agencies and organizations as the Presidential Committee for the G20 Summit, the Ministry of Strategy and Finance, the Ministry of Knowledge and Economy, the Ministry of Employment and Labor Affairs, the Financial Services Commission, the Financial Supervisory Service and the Bank of Korea,” he said.

The following is the complete transcript of the interview

Q: Korea has vowed to represent voices of emerging countries at the G20 Summit and initiated programs to share its growth experience with less-developed nations around the world. How do you evaluate such efforts?

I value highly Korea’s initiative not only to represent the voices of emerging countries, but also to share its development experience with these countries for two reasons. The G20 Summit itself was launched out of the recognition that the voices of emerging countries need to be heard if an effective global response was to be made to the financial crisis that started in the U.S. and other advanced countries but soon engulfed the entire world including emerging countries.

If for some reason the voices of emerging countries are not heard at the G20 Summit, and if advanced countries are to dominate the summit agenda, there will be no difference between the G20 and G7 or G8; thus the G20 will lose its raison d’etre.
It should also be recognized that long-term global economic and political stability cannot be obtained unless the currently growing income gap between advanced economies on the one hand and emerging economies on the other is narrowed.

This income gap can best be narrowed if developing economies are to grow as rapidly as Korea has over the past 50 years or so. To this end, Korea’s own development experiences may provide useful lessons to current developing countries.
We should also bear in mind that until recently the most popular approach to narrowing the income gap between advanced and developing countries was to increase economic aid from developed to less developed countries.

Unfortunately, this approach has not proven to be effective. Based on Korea’s own development experience, the most useful approach to closing the gap seems to be sharing the knowledge acquired through experience.

Q: Korea expects the G20 Seoul Summit to help improve the undervalued image of Korea and its products. Do you think that the so-called Korea discount will disappear after the international gathering?

A successful hosting of the G20 Summit will go far toward improving the image of Korea and its products. Although Korea has come a long way, Korea is not yet as well known to the world as it should be. Surveys have shown that many high-quality hi-tech products made in Korea are often perceived to be those from Japan.

For that matter, many technologically leading Korean firms such as Samsung and LG are misperceived as Japanese companies. These problems will be alleviated once Korea proves that it is capable of successfully hosting international meetings as important as the G20 Summit, just as the successful hosting of the 1988 Olympic Games went far towards upgrading Korea’s image in the world.

I cannot, however, be so sanguine as to believe that what has been called the Korea discount will literally disappear after a successful G20 meeting. At its core, the so-called Korea discount is the risk premium international financial institutions apply to their financial transactions with Korea.

As such, it reflects not only the economic and business risks in South Korea but also the geo-political risks associated with the entire Korean Peninsula. For this reason, unfortunately, the Korea discount will fall, but it will not disappear entirely as long as the North-South tensions on the peninsula remain unresolved.

Q: Why do you think Korea’s brand and image are undervalued in the global community?

For one thing, Korea’s economic and social development is still not fully appreciated throughout the world. In addition, Korea still lacks strong, visible cultural icons. Also, many people are not familiar with Korea’s strengths in technology, culture, arts and its achievements in education.

For example, they still do not know such basic facts as that Korea ranks fourth in the world after the U.S., Japan and Germany in terms of triadic patents. Nor do they know that college graduates comprise over one third of Korea’s workforce. For that matter, they also do not know that currently over 83 percent of Korean high school graduates go on to college and university.

I should also mention another important factor responsible for the undervaluation of Korea’s brand and image. Although we have come far, Korea has yet to reform many rules, regulations and policies that militate against improving the business environment and strengthening Korea’s competitiveness. A case in point would be the labor militancy that is still with us, and another would be the entry restrictions in many services sectors in the economy.

Q: What kind of steps should Korea take to upgrade its global brand?

As mentioned earlier, it’s important to increase Korea’s cultural icons. There must be more cultural icons that come to the mind of people when they think of Korea. In addition, Korean citizens at home and abroad should be involved in the efforts to improve Korea’s image.

Korea should also continue to improve its business and living environments for both Koreans and foreigners. In addition, Korea should increase its participation in international efforts to alleviate such urgent global problems as hunger and disease in underdeveloped countries and environmental degradation.

Apart from these general suggestions, I have one more suggestion to make. Younger people — high school and university students —are quite aware of the Korean Wave or the “Hallyu” in many parts of Asia and even in North America.

Many of them follow Korean dramas, movies and gaming culture through the Internet. From a broader social perspective though, I think the government needs to make a concerted effort to increase Korea’s cultural profile by creating curricula for primary and secondary students in other countries.

I find that Japan is really good at this sort of thing. That’s why many elementary or high schools in other countries have lots of material and information on Japan including books that project a favorable image of Japan’s actions during World War II and they regularly receive student tour proposals from Japanese airlines.

I have not been able to find a single tour of Korea targeted at secondary international students offered by the Korean government or Korean airlines. Generally, student tours organized by the Korean government or Korean organizations are targeted at second-generation Koreans. The same may be said for student exchange programs for high school students. The world doesn’t know about Korea because Korea has not sought to inform them. This situation should be remedied without delay.

Q: President Lee Myung-bak has recently criticized local conglomerates, forcing them to follow the government’s win-win policy in favor of smaller firms and those in the low-income bracket. Some said that it is a kind of populism. What do you think of the Lee administration’s sudden shift in business policy?

I don’t think a sudden shift has occurred in the policy of the Lee government toward business. You must remember that unlike the previous government the Lee government has been favorably disposed toward business, not just big business.

One should also remember that there are at least two major reasons why in the recent weeks the government has become more concerned with the plights of SMEs and low-income citizens. For one thing, during the recent crisis, SMEs and low-income citizens were much harder hit than large companies and high-income earners because the former relied more on meeting domestic demand for consumption that fell sharply, while the latter depended more on meeting external demand for Korea’s exports that was largely sustained thanks in no small measure to China’s stimulus policy.

For another, with overall economic recovery under way, the government is now forced to pursue an exit strategy that will more adversely affect the income prospects of SMEs and low-income citizens.
There is one more fact to consider in this regard. In recent weeks, global economic forecasts for the coming year have become more and more pessimistic. In other words, the world economy is forecasted to undergo a significant slowdown next year. Under such forecasts, it is difficult to expect large companies to increase their investment spending.

Given these observations, it does not seem wise for the government to simply jawbone large companies into undertaking more investment. Nor does it seem efficient to tell large companies that they should refrain from engaging in monopsonistic practices vis-à-vis SMEs. As far as monopsonistic practices are concerned, they can best be dealt with through more rigorous enforcement of anti-competition laws.

Q: Following the global financial crisis, the gravity of economic and political power is slowly shifting from the West to the East. How should Korea position itself to emerge as a winner in the post-crisis world?

Korea should turn itself into the premier business, financial, cultural, educational and medical services center in Asia. Given Korea’s strategic geopolitical location in East Asia, its advanced IT, highly-qualified human resources and sizable economy, it is not at all impossible for Korea to turn itself into the premier business and cultural center of Asia, or ‘the Seoul of Asia’.

Who is Kim Ki-hwan?

Kim Ki-hwan is chairman of the Seoul Financial Forum. He is also currently a visiting scholar at the Korea Development Institute (KDI).
From October 2008 to January 2010, Kim served as vice chairman of the National Council for Economic Policy that is chaired by the President.

During the 1997-1998 financial crisis, he was Korea’s ambassador-at-large for economic affairs, playing a key role in the resolution
of the crisis.

Educated at Grinnell College (B.A., History, 1957), Yale University (M.A., History, 1958) and the University of California at Berkeley
(Ph D., Economics, 1971), Kim taught economics for more than 13 years at a number of American universities, including the University of California, Berkeley, before returning to Korea in 1976.