By virtually every measure, South Korea has stormed back from its 1998 economic collapse. Its information technology sector is booming, Seoul's major banks have been restored to health, and consumer spending and confidence are robust.
Overseeing it all has been President Kim Dae Jung, whose ever-eventful, five-year term in the Blue House ends in February, 2003. As South Korea geared up to co-host soccer's 2002 World Cup, Kim reflected on his tenure during a May 27 interview with BusinessWeek's Asia Economics Editor Brian Bremner and Seoul Bureau Chief Moon Ihlwan. Edited excerpts from their conversation follow.
Q: So much has changed since the dark days of 1998. What do you view as your biggest accomplishments?
A: We have embraced radical reforms, breaking collusive government-business ties, particularly those involving the chaebol and the banking community. Now, we have clean banks and [real competition among] companies. They are not perfect, but they are getting stronger.
And, of course, we had a lot of pain. Some 600 of 2,100 financial institutions were shuttered, and 16 of the 30 largest chaebol were either broken up or are under new ownership.
We also made a serious investment to bring the information revolution to Korea. We are in the forefront of this revolution.
Another important factor was our aggressive effort to attract foreign investment. We made changes in our regulations and business practices to attract $52 billion worth of foreign investment since my inauguration. Compare that to $24.6 billion in the previous 35 years.
Q. You received a Nobel prize for your diplomatic efforts to make North Korea less reclusive and less threatening. With terror a global threat, are you still optimistic?
A: If you look at North Korea's behavior, you are occasionally frustrated and dissatisfied. But if you look at the big picture, there has been important progress. It has set up diplomatic relations with many Western nations and joined the Asean Regional Forum [security organization], and it wants to join the International Monetary Fund.
Better South-North Korean relations require better U.S.-North Korean relations, and better U.S.-North Korean relations require better South-North ties. It's important to have progress in the dialogue between the U.S. and North Korea, if we want North Korea to be a responsible member of the international community. The North aspires to amend ties with the U.S., but at the same time it harbors distrust and fears about the U.S.
Q: What about Pyongyang: Is it really interested in normalization of relations with the rest of the world? Critics at home and abroad wonder if your "sunshine policy" of engagement still makes sense after the terrorist attacks of September 11 in the U.S.
A: I'm aware of such criticism, but it's important to seek consistent policies to promote peace and stability on the Korean peninsula. Since the 2000 summit, the North has been refraining from broadcasting slanderous statements about the South, and there has not been any military provocation. There has been no sign of unrest on the peninsula since the September 11 terrorist incident.
These are important benefits of the sunshine policy. I'm convinced North Korea will join our efforts to promote peaceful co-existence, peaceful exchanges, and eventually peaceful unification, if we persevere with our policy.
Q: What lessons are there for other developing countries in Korea's bounceback from the crisis and its foray into IT?
A: For a country to overcome a crisis, it [must have] unity and support from its own people. [It is also important to] accept the pains that accompany reforms. You have to endure until structural changes are complete. The government had to suffer a fall in popularity.
In this age of globalization, you simply have to accept that only profitable and competitive companies survive in markets at home and abroad. Also, there is no room for narrow-minded nationalism. Foreign investment is a key factor in strengthening local companies by promoting competition.
Intellectual ability, creativity, adventurousness, and a cultural [identity] are key elements of development. Ireland and Finland achieved tremendous growth, thanks to their focus on [these areas]. A developing country could quickly catch up to an advanced country if it utilized such qualities.
Q: China is the ascendant economic power in the region. Is that an opportunity or a threat to Korea?
A: The emergence of China as a global power deepens competition with Korea and with other Asian countries, but at the same time it's a huge market that represents opportunities. A China moving closer to the free-market system will contribute to the overall prosperity and stability of East Asia. We see opportunities to widen bilateral trade and strengthen complementary economic cooperation with China.
Q: Ordinary Koreans still don't think political reform has come fast enough to Korea. What is your view?
A: Regionalism has prevailed, while the [idea of] negotiations and policy discussions has yet to take root. It's true that politics is the area where changes are implemented more slowly than in any other field. But I believe changes are inevitable, given keen interest and demand for political reforms from the people. [Already], political parties recently introduced primaries for presidential elections and a bottom-up nomination processes.
Q: Going forward, you have sketched out a new development goal for South Korea -- namely, to be the major logistical and research and development center serving the North Asia region and booming Chinese consumer market. What do you have in mind, exactly?
A: Korea has one of the world's best IT infrastructures and some of the leading IT companies. Making use of these and our human resources, we aim to become a Northeast Asian business hub.
We're expanding our infrastructure for land, sea, and air. We plan to keep expanding our new Incheon Airport as Northeast Asia's hub airport, developing the ports of Busan and Gwangyang as major sea-borne distribution centers -- particularly for containerized traffic -- and adding new routes to our web of highways.
We're also seeking to lay an "iron silk road" by connecting railways between South and North Korea along the east and west coast of the Korean peninsula, one leading to the European continent through China and the other linking to the trans-Siberian route. Both North Korea and Russia are also eager to see the success of the project.
With such big markets as Japan, China, and Russia around Korea, multinational corporations from the U.S. and Europe could forge partnerships with Korean companies, using Korea as a regional base.