Jim Sutton Speech On Korea
Speech Notes 27 June 2001
Korea-New Zealand Business Council,
Ambassador Moon, Michael Stephens, Phil Lewin and members of the Korea-New Zealand Business Council and the Wellington Chamber of Commerce, thank you for the invitation to speak to you today.
As you know, the Prime Minister visited Korea in mid May with a delegation of senior CEOs engaged in business with Korea. Following four days of meetings and discussions with top political and business leaders, the Prime Minister left excited about New Zealand's long-term prospects, and acutely aware of the potential to move the relationship to new heights.
I am no less excited.
New Zealand's trade relationship with Korea is already substantial. Korea is now our fifth largest export market, and is jostling Britain for fourth place. Bilateral trade totalled nearly $2 billion last year. Prospects are good for continued growth in commodities such as logs, hides and skins, aluminium and other inputs which Korea needs for its construction and processing industries.
The reason New Zealand's economic relationship with Korea has been so successful is that we have highly complementary economic structures. New Zealand has a strong comparative advantage in agriculture and forestry, while Korea with its small land mass and high population has well-developed strengths in manufacturing.
As the Korean economy has developed, the spectrum of Korea's economic interests in New Zealand has become increasingly broad. We are all aware of the huge growth in the number of Korean students and tourists visiting New Zealand each year.
However, as the Prime Minister pointed out during her May visit, if New Zealand and Korea are truly to realise the potential of the economic relationship, it will be crucial that we find ways to cooperate in new areas.
We need to ensure our perceptions of each other are up to date and accord with changing realities. The Government and business communities in both countries are putting a lot of emphasis on adapting to the information age. Since the Asian financial crisis Korea's efforts to accelerate its transition to a knowledge-based economy, including the launch of the Cyber Korea 21 initiative, have been most impressive, as I saw during my visit to Korea last year.
In this project, Korea has set a target of having 95 per cent of all its sixteen million households connected to the internet by 2005.
It has also established a Venture Valley in Seoul which it hopes will encompass 4,000 venture firms and small and medium sized companies. Korea has around 300 business incubators, and is setting up some for Koreans in selected third countries with the aim of making its high tech companies fully internationally viable. The Korean Government is also supporting new start-ups to the tune of US$900 million with US$45 million of that allocated to securing Nasdaq listings for 100 Korean ventures by 2005.
Recently we have seen a number of fine examples of New Zealand high technology companies penetrating the Korean market. You may have heard of the recent success of Hamilton's Deep Video Imaging and its link with LG.Philips, the world's largest producer of LCD screens. Atrax Group New Zealand Ltd took advantage of the opening of the new Incheon International Airport, supplying 240 baggage weighing systems for the passenger check-in counters and 15 heavy-duty scales to FedEx, KAL and KAS. And another New Zealand company, Glidepath, supplied a cargo sorting system for the FedEx facility at Incheon.
Over the next few months, we will be actively working to extend contacts in those ministries responsible for fostering knowledge industries. Korea's Ministries of Science & Technology and Information & Communications will each be sending a survey mission to New Zealand to look into opportunities for closer collaboration in science, and information and telecommunications technology.
Then in October we are expecting a survey mission from Korea's Ministry of Commerce, Industry & Energy to follow up on areas of cooperation identified by an industrial technology mission last year from Korea.
While the focus of the visits will be to better acquaint key Korean policymakers on possible areas of cooperation, the missions will of course include contact with relevant business in New Zealand.
As you will probably know, New Zealand has completed a Closer Economic Partnership agreement with Singapore, which came into force at the beginning of this year, and we are currently carrying out outreach consultation on negotiations for a similar agreement with Hong Kong.
Some people have asked "why these countries? Why not Britain or Iceland?".
Put simply, the Government intends to negotiate trade agreements with whatever nations we can ? where it is to the benefit of our citizens.
In practice, that means concentrating on particular countries.
The Government is thinking about this strategically. We've looked at where our trade is and where it is likely to be in the future ? with the nations of the Asia-Pacific Economic Co-operation forum and in particular, the nations of North Asia.
These nations ? in APEC and in North Asia ? have largely complementary economies to ours and have large consumer bases that will buy our products.
That's governing where the priorities are being made.
Singapore is in the vanguard of negotiating trade agreements now. Hong Kong is negotiating its first such agreement, in the discussions with us. There has been interest from Thailand. We're keen to explore an agreement with the United States and are working on incremental steps to promote an agreement with Chile.
Working with Australia, we are actively exploring the scope for a closer economic partnership between CER and member countries of AFTA, the ASEAN Free Trade Area.
Korea is not being ignored.
New Zealand's Institute of Economic Research published a report on the possibility of a CEP with Korea last month, which I hope you have all read. Essentially it concludes that a CEP would result in significant dynamic gains for both countries.
The report suggested that perhaps the largest gains would come from the removal of the huge cost of protecting Korea's agricultural sector that other industries in Korea are currently required to bear. It notes however, that adjustment costs for Korean agriculture would not be as high as might have been expected because liberalisation of most sectors, such as beef, has already taken place.
We would have liked to have been Korea's first choice of CEP partner ? Chile has that honour. We're still interested, as our Prime Minister, diplomats and officials have said.
However, while economic relations between nations develop best when they are underpinned by good governmental relations, if we are to make a real go of taking the New Zealand-Korea economic relationship to a new level, it is going to require a partnership not just between Korea and New Zealand but between government and business.
In particular, I see a real role for the Business Council in updating New Zealand and Korea's views of each other. For example, many New Zealanders perceive Korea as a difficult market for agricultural products while a useful producer of relatively inexpensive household goods and cars. Some may also recall Korea's financial difficulties in 1997 and know something about the security situation with North Korea. Those of you dealing with Korea on a regular basis will know that such perceptions are antiquated and don't tell the full story.
For a start, Korea's robust recovery from the brink of crisis just three years ago shows just how strong the fundamentals of the Korean economy are. We were encouraged by the courageous reform programme that President Kim Dae-jung embarked upon at the start of his Presidency. There was both a mandate and momentum at that time for reform across most sectors of the Korean economy. Since 1997, Korea has welcomed foreign direct investment which is in contrast with its previous policy.
Reform of the financial sector has lead to some restructuring in the corporate sector and Korea's labour markets have been made more flexible to allow companies to adapt more easily to changing business demands. In the public sector agencies have been merged and staff numbers reduced to address inefficiencies. And the government has firmly established in the minds of all Koreans the importance of the transition to a knowledge-based economy.
Another role I see for the business council is to involve more of the Korean community in New Zealand in the bilateral economic relationship. Michael Park is somewhat of a pioneer in building business linkages between our two countries. There are now thousands of other skilled and educated Koreans living in New Zealand whose expertise we should also be drawing on.
As the Prime Minister recently wrote, Korea is a tiger economy that still has plenty of roar.
With that in mind the government is committed more than ever to ensuring that relations with Korea remain warm and friendly at the political level and substantial and mutually beneficial at the economic level. Business and government will have to work closely together to ensure the vision of an evolving economic relationship with Korea becomes a reality. I look forward to hearing your views.