[KOREA REPORT] Knowledge Economy Minister Hong Seok-woo
■ A special interview with Seoul's Knowledge Economy Minister Hong Seok-woo
[ KOREA REPORT 는 대한민국 첫번째 글로벌 미디어 채널 SBS CNBC가 한국의 최첨단 기술 소개, 최고의 리더 인터뷰 등 역동적인 대한민국의 참모습을 세계 경제를 움직이는 최고의 경제 채널 CNBC의 글로벌 네트워크를 통해 전달하는 프로그램입니다. ]
[ Kim Ki-ho/ SBS CNBC : Hello and welcome to our first edition of Korea Report for 2012. I'm Kiho Kim in Seoul. The new year has begun but I'm sure many of you are not all smiles. The euro zone debt crisis is still on... while the global economy is showing no sign of pick-up. And for this country... the mood is felt throughout... since it depends heavily on exports. On top of that, there's also the geopolitical uncertainty of post-Kim Jongil era up in North Korea.]
[ Kim Ki-ho/ SBS CNBC : So how will South Korea's economy do this year? Well, for the next half hour... we'll bring you a special interview with Seoul's Knowledge Economy Minister Hong Seok-woo... to get a sense of what this year will bring... and what the government plans to do. Take a listen.]
■ Interview
- The past six weeks felt like a year for me. There were good moments like Korea becoming the ninth country in the world to see its trade volume topping one trillion dollars, while at the same I had to come up with measures to deal with power shortages following the blackout in September. So I was very busy.
- Overall, there's no big problem for the economy. But of course, we're closely watching the euro zone debt crisis which currently is casting a dark cloud. We're seeing exports slowing, and we were forced to lower the country's economic growth outlook.
- Exports to Europe is declining by a significant amount. So I think it's important to develop new markets in emerging economies. Right now, you can say Europe is at the center of the government's economic policies.
- As you know, EU countries... particularly Germany and France are actively exchanging ideas to block the situation from getting out of control. The process is not going smoothly right now and if they fail to find a solution Germany and France will also be engulfed in the crisis. So I think they will find a breakthrough in the end. The only problem is... how long it will take. I personally think the situation will remain the same in the first half but start to improve in the latter of this year. The Korean government is also expecting tough times in the first six months. But based on our experience of the global financial crisis in 2008 and the Asian financial meltdown back in 1997, I think we can overcome the difficulties. Right now, we're operating a special task force to monitor the real economy. We also plan to support companies tapping into emerging markets. For example, our trade liability insurance will be increased for such companies. We're also focusing on shifting our main export items... from manufactured goods to services... while trying to find new niche markets.
- Korea's economy, as you know, depends heavily on exports at the moment. We don't have much resource and our land is small. So it's true our economy shows higher volatility whenever external factors become unstable. Which is why I think we need to boost domestic demand and consumption. This I think is very important. Korea should take steps to strengthen its domestic economy and create more jobs.
- The government has lowered this year's growth outlook but that's still higher than what other countries are looking at. And because of the projected slower growth we're expecting fewer job openings. So our top priority goal this year is to create jobs. In particular, we plan to boost our financial support for companies in the R-and-D sector... that plan to hire new employees... by assisting up to 40 percent of their paycheck. That should create about 20-thousand new jobs. So the focus this year will be on raising the number of employed people.
- Like I said we're operating a special team to monitor and control the real economy right now. And we're also planning to forward our budget spending as much as we can so as to prop up domestic consumption.
The export-driven economy has made a long stride since 1967 when its trade sat a mere billion dollars.
■ Interview
- Until now our policies were mainly focused on the manufacturing sector but we are now looking to increase our service exports. And in order to keep our export momentum, we need more "hidden champions"... strong mid-sized companies. Our goal is to ramp up the number of them to 3-thousand in the next three years from the current 12-hundred. Next on our agenda, is finding new growth engines. Bio, renewable energy and robots are some examples. Developing the so-called "IT convergence technology" is also at the top of our list. We believe these new technologies can replace semiconductors and cars... as Korea's next key export items.
- The key is to boost the number of small and mid-sized companies. Korea's exports currently depend heavily on big-name conglomerates. I'm not saying this is bad but while exports may increase this structure does little to create jobs. Our future policy will center on supporting SMEs. Another key issue is boosting the level of technology in the manufacturing sector. For instance, South Korean chpmakers are now dominating the global DRAM chip market. But instead of just relying on that, we need to put more weight behind higher value added products like system semiconductors. The same applies to the shipbuilding sector. Companies should focus more on making cruise ships or yachts... than oil tankers or cargo vessels.
- There's no doubt about it. The benefits from the FTA will be huge. Take a look at the free trade deal with the European Union, for instance. After its implementation most sectors enjoyed a jump in exports. Of course, it works both ways and shipments of certain items did fall. But I believe the FTA with the US will contribute to Korea's export growth for sure.
- In the manufacturing space, we expect chemicals and precision machineries to suffer losses but most other industries will do well. But of course, we never know which other sectors will face difficulties. If and when we find a certain industry is hurt by the free trade agreement we have a support plan ready. It's called "Trade Support System" which offers business consulting and government funding. Small businesses are likely to be most vulnerable and could be under adverse effect. So we've alloted separate loans for them as well.
- I think it's natural that we see pros and cons because opinions always vary. What the government should have done is to have put more efforts in communicating with the public. I‘m a strong supporter of the open market system, which is in line with the idea of free trade. Such openness in the market was in fact the main driving force behind the 1 trillion dollar annual trade volume the country achieved in 2011. And as we know, South Korea is also an export-dependent country. So it's quite contradictory to oppose free trade agreements. We'll continue to persuade and listen to those who are against the deal.
- Preliminary talks are on with China and Japan right now. We are also discussing the possibility with Australia as well, although when we can strike a deal remains uncertain. While these talks are under way we're also planning to upgrade our free trade deals with India and the ASEAN which are already in place. We'll focus on solidifying the deals this year.
Observers say the geopolitical situation does not bode well for South Korea that is likely to face weaker foreign investor sentiment, a major slowdown in exports... and rising inflationary pressure this year.
■ Interview
- Well, of course Kim Jong-il's death is a big issue at the moment. But we're not seeing any significant changes so far. So the government is not thinking of a readjustment in the foreign policy. And I don't think there will be anything different on the export front at least for the time being.
- Fortunately, global credit rating agencies have maintained South Korea's sovereign rating. I think it reflects foreign investors' take on the South Korean market. The 'geopolitical risks' that you just mentioned only apply to those who are not quite familiar with the situation on the Korean Peninsula. So we plan to promote South Korea through a more aggressive investor relations management this year.
- It's quite unfortunate that the power shortage occurred because I think it could have been prevented. You know that there are hours with peak demand for electricity. That is, between 11 in the morning and noon and from 6 to 7 in the evening. Around these hours, we do try to control the demand for electricity. We are also looking to develop equipments that save electricity and to encourage businesses to use them. Creative ideas on how to save energy would also be appreciated. That is until 2014... the year when we won't have to worry about electricity supply. But until then, we will have to focus on this issue.
- Of course, more attention is on nuclear safety right now after the Fukushima incident. But basically we haven't changed our nuclear energy policy. Right now, we've chosen two candidate sites for new nuclear power plants, one in Youngduk and the other in Samchuk, where our strengthened safety standards will be applied. This is of course, in the wake of Fukushima. Our plan for this year also includes coming up with the second basic energy plan... which will be implemented in 2014. And for that we'll be gathering a lot of opinions from various fields and study foreign cases to operate our nuclear plants in the safest manner.
- I wouldn't say it has affected Korea's nuclear plant exports in a particularly negative way. It is true that many countries hesitated with their nuclear power policies after the crisis in Japan but at the same time, it's not easy to find other alternatives. And that's why many countries are still considering whether to take up nuclear power plants. In that sense, South Korea is in a good position thanks to its world-class technology. I think nuclear power will continue to be Korea's key export item.
- Korea's self-dependence rate of oil and gas last year stands at around 14 percent. It was 4 percent in 2007 so it posted an extraordinary jump over the last four years. And I think it will be around 20 percent by the end of this year. We also hope to raise the self-sufficiency rate of rare earth minerals. Another key issue is to beef up the size of the Korea National Oil Corporation so that it becomes big enough to bid for overseas resource development projects. So making KNOC bigger is an important task for us this year.
- Yes. The plan to make KNOC a bigger entity includes M&A with foreign companies. It can also mean more bidding for overseas projects by the KNOC. We're considering multiple options.
- Economic conditions are not expected to be great in the first half of this year. So I'm hoping our citizens will do their best to ride out the difficult times. And I would like to stress that the Korean government will also do its best to support the people... based on its experiences in the past. At any rate, I wish all... a happy new year.
(보다 자세한 내용은 동영상 시청을 바랍니다.)
ⓒ SBS Medianet & SBS I&M 무단복제-재배포 금지
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