Ambassador Speeches

"Making a Good Business Climate Even Better"

Opening Remarks by U.S. Ambassador Christopher R. Hill
at the U.S.-Korea Business Climate Roundtable

Ministry of Foreign Affairs and Trade
17th Floor Conference Room
February 1, 2005

The U.S. Embassy, and our delegation from Washington led by Ambassador Moriarty, is very happy for this chance to work together with the Ministry of Finance and Economy and the Ministry of Foreign Affairs and Trade to organize today's important discussions. My special thanks go to Deputy Trade Minister Hong for being here today to open this meeting, and to Director-General Ahn Ho-young who will chair the Korean delegation. We are also very thankful for the enthusiastic participation of friends from the Korean and American private sector, including from the American Chamber of Commerce and the U.S.-Korea Business Council.

Today's meeting is a timely one. The U.S.-Korea economic partnership continued to grow last year, with record investment and trade flows between our two countries.

According to Korean government statistics, Korea's exports to the United States in 2004 totaled $43 billion -- up over 30 percent from 2003. U.S. exports to Korea also grew nearly 16 percent in 2004, totaling almost $29 billion. Most impressively, foreign direct investment in Korea jumped nearly 50 percent in 2004, to almost $13 billion, including close to $5 billion coming from the United States.

The U.S. continues to be the leading investor in Korea, and we're proud of it. Today's meeting is aimed at discussing ways to build on that fine record.

The U.S. and Korea are military allies and close friends. We also share heartfelt democratic ideals. Over the years, however, I am struck by the fact that the U.S.-Korea economic partnership has made such an important contribution to improving and expanding our overall relationship. This economic interaction -- the products, services, and ideas we exchange -- increasingly defines how Koreans view the United States and how we Americans view Korea.

Korea continues to be an outward-looking country -- a country that is focused on international trade investment, and that actively engages on global economic and political issues. But, as today's Roundtable demonstrates, Korea at the same time has the courage and ability to look inward, to make sure its economy is organized so that it can keep moving forward even as the international marketplace changes and becomes more complex.

Your democratic system now allows for debate on how Korea can best accomplish such reform and restructuring. Using that democracy, Korea's economic leadership is asking the right questions and making some of the right decisions to ensure that economic transformation keeps Korea competitive, and moving in the right direction.

The Question of Corporate Governance

Korean policymakers realize that some investors and financial markets remain wary of corporate governance in Korea, despite the significant improvements of the recent past. The debate over how to improve corporate governance also continues in the United States, and has even accelerated in recent years. So the first topic of today's conference -- corporate governance -- provides an excellent opportunity to share ideas on this topic.

We understand that the Roh Administration is very interested in making more progress in corporate governance, and in decreasing the "Korea Discount" that foreign investors sometimes exact when dealing with Korean companies or making investment decisions. The Korea Fair Trade Commission, for example, is working to reduce the gap between ownership and control by encouraging Korean conglomerates to improve internal checks and balances, and the way companies are structured and governed.

The Korean Government is also implementing an ambitious accounting reform plan aimed at making Korean accounting standards consistent with rigorous international standards. I understand that the Korean Government is also introducing a class action lawsuit system in 2005 to assist minority shareholders. We have learned in the United States that such a system can be very effective in improving corporate governance.

I would also like to draw your attention to the Code of Best Practices for corporate governance written by a committee of Korean private sector experts in response to a request from the Ministry of Finance and Economy. The voluntary recommendations included in that code are very impressive, in line with OECD principles, and the Korean Stock Exchange has reinforced it by requiring that listed companies tell investors how well they conform to the Code. In today's meeting, the U.S. delegation will be asking whether there are additional ways to reinforce the Code's role in Korean corporate governance.

In short, when it comes to corporate governance in Korea, the U.S. message is "things are going well and keep it up." Already, many Korean corporations have embraced new ways of doing things, because they understand adopting "best practices" in corporate governance will make their companies stronger and more valuable.

Labor Mobility and Labor-Management Relations

The second topic on today's agenda concerns labor issues in Korea. As is well known, although Korea boasts a highly educated and highly productive workforce, Korea is also known for a certain level of volatility in labor-management relations. For example, Korea proportionally loses more work-days to strikes than any other OECD country. Closely related to this problem is the question of labor mobility, and the fact that is relatively difficult and uncommon for many Korean workers to move from one employer to the next.

Again, in this sector, I am happy to note that Korean policymakers have identified the problem and begun to map out solutions. The Korean government is working hard on the matter, including through the heroic efforts of the Korea Tripartite Commission. The February 2004 "Social Compact on Job Creation," and the earlier "Roadmap for Industrial Relations Reform," represented a good start in addressing some difficult issues in a fair manner.

From the foreigners' perspective, our message on labor questions is simple: "take a deep breath, stay calm, be practical and think of compromise solutions that work." I think it is clear that for any improvements to labor-management relations to be effective, they must meet the needs of both labor and management.

With that in mind, one of the topics we hope to discuss today is introducing greater flexibility into collective bargaining agreements. We also look forward to discussing the advantages of having a highly-mobile system for corporate pensions, because systems that allow workers to bring their pension benefits with them if they change employers can help make the labor market more fluid, and therefore more productive.

A Bright Future for U.S.-Korea Economic Ties

Improving corporate governance and promoting greater labor market flexibility are just two examples of structural reforms that will leave Korea better prepared to compete in the world's most exciting economic region. I know that Korea is also doing many other things -- investing in people and technology -- to make sure that it stays competitive and plays a leading role in the Asia-Pacific economy.

Korea is strategically placed between two economic giants -- China and Japan -- at the very center of the immense Northeast Asian market. President Roh and his economic policy makers plan to make Korea into a financial and logistics "hub" to strengthen Korea's economic competitiveness in this region and beyond. We wish our economic partner Korea well in this effort. Greater regional economic integration will be good for Korea. But having an economically strong and democratic Korea helping to define and lead this critical region will also be very good for the United States.

Viewed from the United States, Korea is a highly attractive and important economic partner. Events like today's Business Climate Roundtable reassure me that Korea feels the same way about the United States. By together examining and discussing the issues of the day, in a collegial and friendly fashion, this Roundtable should help deepen the already profound economic relationship between our two great countries.

I wish you every success.