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world economy recovers, which is not sure at this moment. Furthermore, with a decreasing fertility rate, we are rapidly entering into the aging society that Japan has known for several years. The OECD expects Korea’s potential growth rate would drop to 1.29% by 2060, faster than any other countries. The problem of so-called “economic democracy” arises as it provokes

2010, making a dramatic transition from an aid beneficiary to donor, a status that only 29 countries hold.

Korea is now regarded as a country with an advanced financial system quite substantially. These achievements are attributable to enhanced transparency, greater efficiency and sweeping economic reforms made since joining the OECD. The financial sector has also contributed to national development by offering a creative solution to economic issues and ensuring efficient resource allocation. Now, Korea’s economy is facing a huge paradigm shift. In the era of jobless growth, the nation is committed to implementing a “creative economy” with an emphasis on job creation. At the centre of this strategy lie startups and venture companies. Based on innovation, such companies will be systematically supported to grow into global companies, eventually to create more jobs and drive economic development. To this end, the Korean government is promoting entrepreneurship and nurturing new growth industries. The financial industry in Korea has answered to such government policies by devising technology financing programmes and deploying platforms for FinTech, or financial technology. Only when the industry successfully adapts to the paradigm shift, can it bring about a quantum leap for the nation for the next 20 years. Visit http://eng.ibk.co.kr/

New regulations under the flag of economic democracy will quite likely impair the Korean economy

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The financial sector was one of the key areas in which Korea has worked to meet OECD standards. Through financial liberalisation and reform, Korea is now regarded as a country with an advanced financial system, especially in the areas of banking, insurance and capital markets. For instance, Korea’s financial liberalisation index, as measured by the OECD, jumped from 65% in 1997 to 85.1% in 2006. Furthermore, commercial banks have shown significant development in financial soundness over the past two decades as capital adequacy ratios and non-performing loan ratios have improved

SPOTLIGHT

OECD OBSERVER ROUNDTABLE

Celebrate, but watch for challenges ahead Kwon Tae-shin, President, Korea Economic Research Institute (KERI) A shift from “quantity” to “quality” in economic growth has taken place. Before the 1990s, the Korean economy had rapidly changed and achieved quantitative expansion. Korea finally joined the OECD club in 1996, but it was a mistake to pop the champagne too early as the Asian financial crisis hit its economy in 1997. Yet, we overcame it, and the IMF crisis turned out to be a suffering and a blessing at the same time. Some 16 out of 30 conglomerates were shut down, and people went through the agony of mass layoffs and unemployment. However, the crisis also led to a great transformation of Korea. Its economic foundation was enhanced through the reform of social and economic systems, and corporate governance became more transparent. These must be the greatest achievements over the last 20 years. The challenges we are facing today are as follows: global depression and slowing economic growth in Korea, a low fertility rate and lowering potential growth rate, and idealism in politics and social conflict. These are major concerns for the upcoming two decades in Korea. Its economic growth rate continued to decrease from 6.5% in 2010 to 2.6% in 2015, which though higher than the OECD rate last year has been lower than the global average since 2011, which includes China. Given that the Korean economy is export-oriented, its success depends on when and how the

unusual economic regulations, especially targeting large companies as well as leading to unnecessary social conflicts. Although it originates from a good intention of public interest, newly established regulations under the flag of economic democracy will quite likely impair the efficiency and vitality of Korea’s economy. I hope Korea jumps up to an advanced country level in the next two decades by clearing the aforementioned hurdles. We are standing on the threshold of achieving that status, but we still need to grow more. The OECD recently urged Korea to reform its labour market regulations. This is an inevitable prescription to revitalise the Korean economy. I look forward to popping the champagne again when we make that jump, in the hope that it won’t be too early this time. Visit www.keri.org/web/eng/home

Delivering on promises Ho Jeong Kim, Journalist and Consultant Korea’s 20 years at the OECD crowns a period of remarkable achievement, and this can be said with a hint of pride and without any remorse. Emerging from a colonial past, two wars and a geopolitically tense setting to become one of the most dynamic countries within half a century, Korea’s hard work was rewarded with its accession to the OECD in 1996. The ensuing Asian financial crisis has only proved how OECD membership is more than just a coveted trophy, but a reference frame for the Korean society. In the 20 years since it joined the OECD, Korea has replaced the pursuit of

OECD Observer No 308 Q4 2016

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OECD Observer No 308 Q4 2016  
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