Laying a foundation for a second nation-building

1. Declaration on Second Nation-building and Implementation of New Philosophy of the Kim Dae-jung Administration'.

Marking he 50th anniversary of the Republic of Korea, President Kim Dae-jung declared a second nation-building. Declaring that real reform will begin from now, President Kim presented a blueprint for reform and the image of the Republic in the future. The blueprint is based on the basic philosophy of the nation, namely, democracy and a free market economy and globalism. Under this philosophy, the Administration will establish "fair rules and regulations", "fair competition" and "fair opportunities for all". He wants to translate these three goals into action and institutionalize them, citing freedom, justice and efficiency as the three major principles for the implementation of the goals.

The six major tasks for national reform are the realization of 1) an advanced democracy by moving from authoritarianism to participatory democracy, 2) a democratic market economy by moving from a government-controlled economy to a market economy, 3) universal globalism by moving from democracy to globalism, 4) a nation based on creative knowledge by moving from materialism and industrialization to the enhancement of information and knowledge, 5) a society for all by moving from division and confrontation to reconciliation and cooperation, and 6) cooperative inter0-Korean relations by moving from South-North confrontation to security and reconciliation.

The basic philosophy of the second nation-building is a democratic free market economy and globalism. It is based on fair, free market principles. However, it allows government intervention as long as such intervention does not violate free market principles. As for globalism, it means progress from a "closed" democracy to an "open" democracy. For that purpose, President Kim says we must raise all our standards to the world level and be able to compete with other nations around the world.

2. Surgery on the Social Structure-Pushing Substantial Reform in Four Sectors: Financial Institutions, Corporations, Labor Unions and the Government.

President Kim is carrying out major surgery in all sectors of society by first undertaking reform in four major areas: financial institutions, corporations, labor unions and the Government.

His Administration is pushing the restructuring of banks and other financial institutions as a first step toward the restructuring of the economy. Five banks have been closed and seven others were ordered to improve their management.

The Administration is pushing hard for the restructuring of large corporations. It is calling for unifying the supervisory function of financial institutions; the early introduction of consolidated financial statements; the elimination of cross-loan guarantees among subsidiaries; the institutionalization of a legal basis for employment adjustment; and the privatization of selected government-invested corporations.

The Kim Administration has increased flexibility in the labor market. The Tripartite Committee of representatives from labor, management and the Government has been established to pursue rational reform based on agreements worked out in the Committee.

3. Social Security for the Unemployed

Since the Administration set up on March 26 comprehensive measures to deal with unemployment problems, it set aside a budget of 8.5 trillion won and, as of August 18, 3.4 trillion won had been spent. As a result, 1,547,000 jobless people received benefits.

The Administration is supporting companies to help them maintain their current employment levels. Specifically, to help protect medium and small companies from going bankrupt and maintain their current level of employment, the Administration spent 875 billion won of a budget of 1.68 trillion won to expand credit guarantees and roll over foreign-currency denominated loans extended to them.

The Administration has expanded public works projects and has increased investment in such projects to create new jobs. Out of he budget of 1.94 trillion won, the Administration spent 1.56 trillion won. It has thus hired 266,000 unemployed workers for public projects.

The Administration has also strengthened job training programs. Trying to help turn the period of unemployment into a creative period for new opportunities, the Administration has expanded job training programs by spending a total of 358.7 billion won of the total fund of 819.5 billion won. Some 177,000 unemployed workers are receiving job training. The Administration is also setting up practical training courses in universities to prepare people for specified types of work.

The Administration is also working o provide security for the unemployed through a number of measures including the protection of those who lost their jobs in the process of restructuring. From Oct. 1, 1998, 860,000 workers in all work places will be covered by unemployment insurance.

4. A Foundation to Overcome the Foreign Exchange Crisis and Induce Foreign Capital.

Ever since he was elected President last December, President Kim has exerted utmost efforts to overcome the national crisis.

The Administration has secured the liquidity of foreign currency and stabilized the foreign currency market. the nation drew support funds from international financial organizations, including the IMF, totaling US$26 billion as of August 1998.

Conditions for the supply and demand of foreign currencies, as well as the balance of current account, have improved. Specifically, the nation's foreign currency market has stabilized with foreign currency reserves rising to $41 billion as of August 1998 from $3.9 billion at the end of 1997. Financial institutions have rolled over short-term loans totaling $21.8 billion. The percentage of short-term foreign loans in total loans was 24.9 percent as of the end of July 1998, down from 44.3 percent at the end of 1997. the exchange rate of the won currency was quite stabilized at 1,324 won to the dollar as of August 1998, down from 1,415 won a the end of 1997.

The interest rate on one-day call loans fell to 9.48 percent as of August 1998 from 31.44 percent at the end of 1997. Three- year corporate bond earning fell to 12.90 percent as of August 1998 from 28.98 percent at the end of 1997.

The nation, meanwhile, continued to maintain current account surpluses. The trade surplus in the first seven months of 1998 amounted to $23.1 billion. Thus the current account surplus in the first six months of 1998 rose to $22.4 billion, while that of 1997 registered a deficit of $8.9 billion.

Consumer prices were also stabilized with the consumer price index registering 7.3 percent in July, down from 9.5 percent in the same month a year earlier.

The Administration has also laid the foundation for the inducement of foreign capital, by improving the investment climate for foreigners and revising the foreign exchange transaction law. Specifically, the Administration decided to allow full mergers and acquisition by revising the law on foreign investment in May 1998.

The Administration has expanded the number of lines of business in which foreigners could invest. They include real estate related businesses stock transactions and finance. In addition, the Administration formed a committee for the promotion of trade and investment on March 27, 1998, and revised the law on the promotion of foreign investment.

5. North Korean Policies and the National Security System

The Government's North Korea policies stress consistent, long- term objectives and are assured of support from major world powers. The President is striving to open an age of exchanges and cooperation with North Korea on the basis of a strong security posture. The Administration is determined to put an end to the state of confrontation that has characterized South-North relations for the past 50 years.

the three basic principles are as follows: first, we will never tolerate any armed provocation; second, we do not want to absorb or hurt North Korea; and third, we will actively push exchanges and cooperation with the North. Based on those principles, the Government is separating politics from economics to promote economic, cultural and religious exchanges and to break the wall of distrust between the two sides.

The Government has prepared a set of guidelines for the realization of the three basic policy goals. The Administration believes consistency is very important in dealing with the North. To successfully carry out the "sunshine policies", or reconciliatory approaches, the Administration believes that the nation's strength and willpower are of the utmost importance and that the diverse views of citizens should be reflected harmoniously in the course of policy implementation.

President Kim's guidelines on his North Korea policies include the following: the strengthening of national security and South- North cooperation should be carried out simultaneously; the two sides should maintain channels of dialog to implement the Basic Agreement between the South and the North; reunion of separated families should be given priority; steadily increasing contacts, dialog and cooperation should be realized to allow the North to change by themselves; and North Korea policies should be carried out based on a national consensus.

As for security issues, President Kim is striving for the promotion of a favorable international environment for national security and the settlement of permanent peace on the Korean Peninsula in cooperation with various international organizations and regional security councils. At the recent Korea-U.S. summit, President Kim solidified the comprehensive security arrangements between the two countries. Multilateral diplomacy has been effective in deterring Pyongyang's development of nuclear weapons.

6. Integration of Society

In the spirit of the first peaceful transfer of power from the ruling to an opposition party in the 50-year history of the Republic, President Kim granted amnesty to 5,527,327 prisoners, ex-convicts and those charged with lesser violations of the law. The sweeping amnesty was motivated by the need to rally all the people to overcome the economic crisis and further promote the cause of democracy. The new Administration believes that the transfer of power should develop into national conciliation.

In celebration of the 53rd Liberation Day on August 15, the President released from prison or commuted the sentences of hundreds of prisoners, including those who were convicted of violations of the National Security Law. Even though the Government received a pledge from the released prisoners that they would comply with the Law, the amnesty is a big step forward from the past practice of refusing o give any lenience unless prisoners renounced Communist ideology. Because of that practice, Korea was accused of infringing on the individual right of freedom of conscience.

It is significant that the second Tripartite committee of representative from labor, management and the Government was launched amid many difficulties in an effort to have it play the central role in the current reform movement. The Committee was organized at the urging of the President, who emphasized that reform can be successful only if the three entities share the pain of reform fairly. He said that the Committee is justified despite the cost and time involved because it is the most effective way to form a public consensus.