South Korea’s new president has pledged to transform Asia’s third biggest economy through a mix of tax cuts, deregulation and privatisation, sticking to his promise to boost the country’s economic growth to 7 per cent a year in spite of the global market turmoil.
Lee Myung-bak, a former businessman who became South Korea’s president a month ago, vowed to create a better investment environment for domestic and international companies.
“Business is the foundation of the economy, and the economy will recover only when business activities are re-energised,” Mr Lee said in an interview over the weekend. “And business here means big and small companies, and the workers and management of the companies.”
The former Hyundai Construction chief executive was elected with a mandate to overhaul South Korea’s economy, which is beginning to lose momentum after four decades of export-led growth.
The conservative Mr Lee represents a sharp break from his predecessor, the leftist Roh Moo-hyun, and his election was welcomed by business leaders at home and abroad.
Although some analysts doubt whether the new president can make good on his bold promises, especially as the slowing US economy threatens to curtail demand for South Korean cars and mobile phones, Mr Lee remains confident that growth will accelerate from 5 per cent last year to 6 per cent this year.
By increasing inputs of labour and capital, Mr Lee added that he could boost Korea’s potential rate of growth to 7 per cent within a decade.
Mr Lee dismissed claims that he would favour the country’s chaebol as he tries to revive the economy. “The government believes that big companies have to continue to develop themselves while small and mid-sized companies should be made healthier so they have their own competitiveness,” he said.
But Mr Lee has introduced measures that will make life easier for corporate giants such as Samsung, LG and Hyundai.
In addition to his plans to scrap the restriction on conglomerates owning banks, ending a regulation intended to ensure the stability of the financial sector, Mr Lee’s government last week said it wanted to adopt “poison pill” and multiple voting rights measures to protect South Korean companies from hostile takeovers.
The justice ministry cited a “foreign funds’ hostile M&A threat” against SK Corp and KT&G – which were targeted by Dubai-based Sovereign Asset Management and US billionaire Carl Icahn respectively – as evidence of the need for such legislation.
Mr Lee told the Financial Times the government would not take any “special” measures against foreign investors participating in the management of Korean companies, stressing that the measures would be similar to those that “already exist in advanced countries”.
