Reform Measures Taken by President Kim Dae-jung of the Republic of Korea

1. Economic Indexes

The annual economic growth rate has made a dramatic turnaround from minus 5.8 percent in 1998 to plus 7.3 percent during the first half of 1999.

A rapid increase in foreign exchange reserves was recorded -- from US3.9 billion on December 18, 1997, to $64 billion at the end of July 1999.

Foreign investment in Korea reached new highs, as the figure showed $8.9 billion in 1998 and $6.5 billion during the first seven months of 1999.

The consumer price index has been stabilized at 0.6 percent during January-July 1999 compared to 7.5 percent during the same period of the previous year.

Improvement in the international balance of payment was substantial, going from a $8.2 billion deficit in 1997 to surpluses of $40 billion in 1998 and $20 billion during the first half of 1999.

Interest rates on corporate bonds have dropped to single digits from 29 percent at the end of 1997 to 9.2 percent at the end of July 1999.

Foreign debts have been restructured: the ratio of short-term loans was 54.2 percent in September 1997 but was reduced to 22.7 percent by the end of June 1999 as a result of banks agreeing to roll them over.

The foreign exchange rate to the dollar was stabilized at approximately 1,204 Korean won at the end of July 1999 compared to 1,573 won in January 1998.

Korea's international creditworthiness as evaluated by Standard and Poors was elevated to BBB- in February 1999 from B+ at the end of 1998, representing a four-step advance and a markedly improved investment environment.

The Korean stock price index at the end of 1999 was 376.3 but was hovering around 969.7 at the end of July 1999.

2. Drastic Reforms in Four Major Sectors of the Economy

Financial Institutions

Overhauling of all financial organizations was aggressively sought. As a result, five insolvent commercial banks, 16 merchant banks and six securities companies have been closed down. Sixty- four trillion won in public funding was injected into weaker banks to help them meet the 8 percent capital adequacy ratio recommended by the Bank of International Settlement (BIS).

In a move to ensure transparency of management, accounting systems and disclosure rules were revised to meet international standards. Other steps were taken to enhance the general health of the institutions and to introduce timely corrective measures when necessary. An integrated financial supervisory system has been put into place.

Capital market institutions are being nurtured as the main source of capital for the country's businesses. The KOSDAG is being revitalized; mutual funds have been introduced; the role of institutional investors is being emphasized; and the government bonds market system is being enhanced.

Corporations

Transparency of business operations is being stressed. Consolidated financial statements and other internationally acceptable systems are being enforced for business groups; unlawful funding and inside transactions are prohibited; boards of directors should appoint a certain number of its members from outside the company; and objective auditing should be implemented.

Big business groups are prohibited from making cross-loan guarantees among affiliated companies. Existing guarantees should be lifted by March 2000.

The five major conglomerates have signed an agreement to reduce their debt ratios to 200 percent by the end of 1999. Eighty-one vulnerable businesses have been placed on workout procedures. a total of 1.6 trillion won has been set aside to help speed up restructuring. The conglomerates have formulated restructuring plans in an effort to realign themselves around core businesses in the shortest time period.

Owners and major shareholders should assume legal responsibilities. Their accountability has thus been strengthened. Small shareholders can elect a representative and sue the company for wrongdoing. M&As (Mergers and Acquisitions) by foreigners are allowed.

The Public Sector

The central Government's ministries and agencies have been cut from 21 to 17, and 145, or 45 percent of all government commissions were abolished or absorbed into other agencies. The number of central Government employees will be reduced by 25,955, or 16 percent of the total; that of local civil servants will be cut by 56,100, or 19.3 percent of the total.

In May 1999, the Presidential Commission on Personnel Affairs was inaugurated with the aim of making government personnel administration more efficient. Legal grounds for hiring civilians for government posts have been prepared. Competitive salaries and incentives are in place for government jobs.

Aggressive privatization of government-invested companies are in full swing. Eleven of the 24 major state-run business groups will be handed over to private hands by 2002. Nineteen state- operated companies have been ordered to shed some 35,000 employees, or 25 percent of the total, by the year 2001.

Labor

A new paradigm is being drawn in labor-management relations. The Tripartite Committee of representatives from labor, management and the Government was launched in 1998 to steer the country through the economic crisis based on a national consensus. Laws were enacted in May 1999 to give the committee legal status as a permanent organization. In February 1998, in a milestone decision to allow flexibility in the labor market, the committee provided a legal ground for management to lay off redundant workers and to dispatched workers from their original workplaces to other sites.

3. Social Reforms

Promotion of Human Rights

On April 7, 1999, the Administration submitted to the National Assembly the Human Rights Act banning discrimination for reasons of gender, religion, age disability or color of skin. Pending passage of the law, a human rights commission will be instituted to protect the rights stipulated in the legal provisions.

Nationality and Family Laws were revised in June in 1998 in accordance with the principles of equal right between genders. According to the new laws, women married to men with different nationality and children with parents of different nationalities can choose their own nationalities. New laws make it easier for women to marry men of the same family name and place of origin (or tongsong tongbon) and for divorced women to remarry.

A series of legal steps have been taken since April 1998. In contrast to previous practices, model prisoners are allowed to make phone calls, have visits from their whole families, watch TV, work by day at locations outside the prison and stay overnight outside with special permission. The accused are allowed to wear everyday cloths instead of prison uniforms while on trial.

In accordance with a Constitutional interpretation of freedom of conscience, the Government stopped requiring prisoners involved in the violation of the National Security Law to abandon their beliefs even they are not compatible with belief systems of the majority of the population. Two-hundred-and-forty-seven prisoners were released, had their sentences commuted, or had their civil rights reinstated through Presidential amnesties after they made a pledge to comply with the law after their release.

On February 25, 1999, on humanitarian grounds, the President released in an amnesty 17 North Korean espionage agents who had been serving long-term sentences even though they refused to abandon the Communist cause. International human rights groups had long demanded that they be freed.

Revision of the National Security Law is being sought prevent its abuse and overly broad interpretation. The current Administration has made a point of making a strict interpretation of the law and banning political manipulation of its provisions. As a result, the number of suspects booked for violation of the law decreased last year by 12.3 percent compared to the previous year and the number of arrests dropped by 27.5 percent during the same period.

Promotion of Labor Rights

According to an agreement in the Tripartite Committee, the Law Governing Election of Public Officials and Prevention of Election Irregularities was revised in April 1998 to allow labor unions to participate in election campaigning, among other things. Labor laws were also revised in January this year to allow teachers to unionize and to provide for multiple unions for them. Civil servants are also permitted to organize labor councils according to a new law passed in February 1998.

4. Diplomacy and Engagement Policies Toward North Korea

Inter-Korean Economic Exchanges

In April 1998, the Government announced a set of new measures for stepping up economic exchanges between the two Koreas. Regulations concerning trips to North Korea have been drastically liberalized. The list of contraband items has been shortened substantially to 178 items. The trade volume for the first seven months of the year stood at $192.68 million, a 96.3 percent increase over the previous year's figure. The investment ceiling was abolished.

Mt. Kumgangsan Tourism Launched

The Administration approved tourists visit to Mt. Kumgangsan in North Korea in September 1998. As of August 20, 1999, a total of 146 luxury cruises had been made between ports on the two sides of the divided land to take 94,107 South Koreans to the famed mountains in the North and bring them back.

Exchange of Visits Increase Sharply

Visits to North Korea by South Koreans, excluding the Kumgangsan tourists, reached 3,317 during 1998, far surpassing the 1989-1997 nine-year total of 2,408. A South Korean labor union soccer team and the Little Angels children's choir went to Pyongyang and a number of college professors and journalists also went there.

Family Reunions Actively Sought

Family reunions in North Korea increased by 4.9 percent in 1998 over the previous year, reunions in third countries, 2.3 times and verifications of the life and death of separated family members in North Korea, 1.8 times. During April 1, 1998- July 31, 1989, a total of 100 life-or-death verifications were made and 132 families met together under the auspices of the Government and non-government agencies that absorbed expenses totaling 160 million Korean won. An organization devoted to gathering comprehensive information on separated families was set up in December 1998.

Four Powers Support the Republic's North Korea Policies

What is remarkable about South Korea's North Korea policies is that all four powers with an interest on the Korean Peninsula -- the United States, Russia, China and Japan -- support the Republic's constructive engagement policies. It is the current Administration's intention to further solidify good relations with the four countries and take the lead in securing peace and stability on the peninsula. The Government is pegging great hopes on the Four-Party Talks among South and North Korea, the United States and China and the General Officers Meetings at Panmunjom.

Open-minded Defense Administration

President Kim Dae-jung stresses the service function of the national defense structure. That is because the defense establishment would find it difficult to fulfill its primary function if it lost public favor. President Kim frequently visits military units to encourage the men and women in uniform. The conscription system is being improved to cut the paperwork for new draftees and retired soldiers. Procedures for military supply acquisition and other defense projects are being streamlined. Defense organizations are going through a restructuring process to make themselves slim and more efficient. In March 1999, a special central agency was formed to lead comprehensive defense reforms.