## Securing the Future for Korea-An Address to Seoul National University, By Christine Lagarde, Managing Director, International Monetary Fund

_IMF News, December 5, 2013_

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## Bibliographic details
- Authors: Christine Lagarde
- Published: December 5, 2013

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### Korea’s recent achievements and strengths
- Korea transformed from one of the poorest countries in 1960 to the world’s thirteenth most prosperous economy, with an income per capita higher than the EU average.
- Strong macroeconomic fundamentals built after crises: low inflation, healthy public finances, ample foreign reserves, healthier bank capital buffers, and lower external debt.
- Proactive macroprudential policies have been deployed to tame financial risks.
- Korea’s manufacturing sector is highly dynamic; innovation and cultural influence (the “hallyu”) are global strengths.

### Global trends shaping Korea’s future
- Two clear global trends identified:
  - Asia is rapidly becoming the economic center of gravity; the 21st century will be an increasingly Asian century.
  - The world is becoming more linked and interconnected, requiring invigorated multilateralism and closer economic cooperation.
- These trends play to Korea’s strengths and position Korea to play an increasing leadership role in the global economy.

### Growth outlook and demographic risks
- Short-term: “Growth is strengthening and should pick up further—to about 3¾ percent—in 2014.”
- Demographic risk: “Korea’s population is projected to become one of the oldest in the OECD by 2050.”
- Long-term growth risk: “Without action, Korea’s long-term growth could fall to 2 percent by 2025, down from around 5 percent at the start of the century.”

### Labor market challenges and social equity
- Duality in the labor market: non-regular (temporary or part-time) workers face low wages, little employment security, inadequate training, and weak social insurance coverage; non-regular workers “make up about a third of the labor force.”
- Youth employment: “The employment rate in Korea is only 24 percent, versus an OECD average of 40 percent.”
- Women’s participation and earnings:
  - “Women’s labor force participation in Korea is about 60 percent—23 percentage points below Korean men and among the lowest in the OECD.”
  - “The gender earnings gap in Korea is the highest in the OECD.”
  - “Only 9 percent of managers in Korea were women, against an OECD average of 29 percent.”
- Elderly poverty: older people are “three times more likely to be poor than the population as a whole.”
- Social spending is low: “Public spending on childcare and pre-primary school is five times higher in Sweden than in Korea, in percent of GDP.”

### Policies to sustain growth and increase equity
- Labor market inclusivity:
  - Reduce duality by boosting social insurance coverage and training for non-regular workers.
  - Increase youth employment by investing more in active labor market policies and vocational education.
  - Boost female labor force participation through policies that help women balance work and family, including investing more in childcare and offering more flexible working conditions; such policies “can reduce the gender gap by one third.”
- Service-sector productivity:
  - Raise productivity in services (currently “around half that in manufacturing”) by:
    - Bringing more competition to areas like utilities.
    - Boosting investment.
    - Re-aligning small and medium-sized enterprises along commercial lines, liberated from dependence on government guarantees.
- Reform sequencing:
  - Implement a stronger social safety net before embarking on deeper and more difficult reforms.
- Fiscal capacity:
  - Korea can afford many reforms given prudent budgeting and low taxes.

### Expected gains from reform
- By implementing the right package of reforms, Korea could see “long-term growth of 3½-4 percent over the next decade.”
- Reforms come with fiscal costs, but are judged affordable given Korea’s fiscal position.

### Multilateralism, IMF role, and Korea’s global contribution
- Korea’s openness and commitment to multilateralism position it to take on growing global responsibilities.
- IMF adaptation to modern global economy:
  - Greater focus on interconnections and spillovers across countries, sectors, and markets.
  - Emphasis on the jobs and growth agenda and on protecting social safety nets.
  - More flexible lending—examples include allowing longer periods of fiscal adjustment and zero-interest loans to the poorest members.
- IMF crisis response: “Because of them, we were able to provide more than $300 billion to help ease the hardship of adjustment across the membership, and make 150 new commitments—including zero-interest loans to our poorest member countries.”
- Korea’s contributions:
  - Korea agreed to contribute “$15 million over the next five years to bolster IMF capacity development.”
  - Korea has supported IMF governance reforms (the “2010 reforms”), which “give a greater voice to dynamic countries like Korea.”
  - Appointment noted: Changyong Rhee named as director of the IMF’s Asia-Pacific Department.
- Call for continued enhanced cooperation to address the “new frontier of risk”—advancing climate change, major demographic shifts, and widening inequality.

### Conclusion and call to action
- Dual responsibility for students and future leaders: keep one eye on domestic reforms needed for Korea to stay competitive, and the other on global cooperation.
- The IMF framed as an instrument of service to support collective international economic stability.
- Closing exhortation: “Together, we can win the future.”

*Speech by Christine Lagarde, Managing Director, International Monetary Fund, Seoul, December 5, 2013. As Prepared for Delivery.*

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## References

- [Republic of Korea and the IMF](http://www.imf.org/external/country/KOR/index.htm)
- [Speeches](https://www.imf.org/en/news/searchnews)
- [Christine Lagarde](https://www.imf.org/external/np/omd/bios/cl.htm)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/sp120513b_