G-20 finance meeting ends with emphasis on fiscal soundness

The G-20 Finance Ministers and Central Bank Governors Meeting in Busan held on Jun. 4 and 5 for the first time in Korea at the Westin Chosun Hotel in Haeundae, Busan concluded with a communiqué that underlined the importance of fiscal soundness.

A total of 40 financial ministers from G-20 nations and governors from central banks participated, as well as governors of international organizations including the International Monetary Fund (IMF), World Bank (WB), Financial Stability Board (FSB) and Organization for Economic Co-operation and Development (OECD).   

The meeting mostly focused on reviewing progress on the agenda items for the coming G-20 Summits scheduled for this year, the first in Toronto, Canada, in late June and the other in Seoul in November.

Reflecting on the aftershocks of the financial market that followed the financial crisis in Europe, the latest meeting stressed international cooperation to enhance fiscal soundness. This came with an understanding that even though the global economy is recovering at a faster-than-expected pace, the variability in the market and other challenging factors still remains. 

Results of Busan G20 meeting

The Busan G20 Finance Ministers and Central Bank Governors' Meeting ended on June 5th with the presentation of the official communiqué after 2 days of discussions. The communiqué emphasized the need to improve fiscal soundness in the wake of the European sovereign debt crisis.

Held over a 2-day period between the 4th and the 5th, 40 finance ministers and central bank governors, as well as the managing director of the IMF participated in the meeting to lay a foundation for further talks at the Toronto Summit to be held 3 weeks later and the Seoul Summit Meeting to be held in November.

Korea in the G-20: A new era of leadership

Korea will host a Group of 20 summit in November 2010 according to a decision reached at the third G-20 meeting held in Pittsburgh, President Lee Myung-bak said at a joint press conference in Pittsburgh on Sep. 25 (local time).

"The decision to have Korea host the November 2010 meeting was reached by the G-20 leaders unanimously, thanks to Korean people’s keen desire for it," Lee said at the conference, which was jointly held with Canadian Prime Minister Stephen Harper.

Canada will host the fourth meeting in June 2010, and Korea will host the fifth. The previous three rounds were held in Washington, D.C. (Nov. 2008), London (Apr. 2009), and Pittsburgh, in that order.

Meanwhile, Sakong Il, a special adviser to the President, who has led the efforts for Korea to host a G-20 meeting, said that Seoul’s hosting was a historic achievement. By hosting the meeting of the world’s most powerful economies, Korea will start playing a crucial role in the international economic spheres, he said.

Peace treaty a long way off

Replacing the armistice with a permanent peace treaty on the Korean Peninsula appears to be further off than ever amid strained inter-Korean ties following the sinking of the Cheonan. 

Marking the 60th year anniversary of the 1950-53 Korean War, relations between the two Koreas have become tattered beyond recognition after a multinational team of investigators accused Pyongyang of sinking the ship on March 26. The incident killed 46 of the sailors aboard. 

“In order to achieve a permanent peace regime, both Koreas will have to take equally effective measures for defusing tension, but that seems unlikely at this point, especially in the aftermath of the Cheonan, which has eroded much of the existing trust between the two Koreas,” said Kim Tae-woo, senior research fellow of the Korea Institute for Defense Analyses.

He also pointed out that it would be impossible for the peace treaty to become realized until the North shows its intention to fully denuclearize. 

“If not, Seoul has too much to lose if it agrees to ease its military vigilance in return for a peace regime,” Kim pointed out.

Conservatives are concerned that as part of a peace treaty, the North may issue requests such as calls for the U.S. troops to pull out. 

Pyongyang has in the past made such demands -- as early as in 1962 --along with other requests such as disassembling the U.N. Command. 

There are currently some 28,500 U.S. troops in South Korea as part of the allied military forces. 

South Korea’s official stance regarding the peace treaty remains that it cannot be negotiated before the nuclear problem is resolved. 

“We will not be making any concessions or be discussing this issue until we gain impetus for completely and irreversibly denuclearizing North Korea,” said one official on the condition of anonymity.

Seoul has said the Sept. 19 agreement signed in 2005 with North Korea and other members of the stalled six-way talks that a peace regime may be discussed in a separate forum after the denuclearization issue is on its way towards resolution. 

“We have not yet discussed what the separate forum will be, but that seems a long way off considering the situation regarding the Cheonan,” said another high-ranking government official who declined to be identified. 

On Jan. 11, Pyongyang’s Foreign Ministry had indicated its willingness to return to the stalemated six-party dialogue if “related parties” put priority on signing a peace treaty.

Officials here related to the issue had accused the North of attempting to divert the attention of the multilateral talks to the peace regime, and away from denuclearization. 

(Yonhap)

[News ANALYSIS] Korea to focus on exit, jobs

Korea is officially starting an exit strategy, the government proclaimed Thursday in its economic management plan for the second half of the year. 

Unwinding crisis-fighting measures in such a way that does not hurt economic recovery is already a tough task to pull off. But the government said that it will also focus on creating jobs and improving the livelihoods of ordinary people, many of whom are still in economic pains. 

“Despite remarkable improvements in economic indicators, ordinary people are yet to feel the recovery in their everyday life,” Finance Minister Yoon Jeung-hyun said. 

“Improving the public’s livelihood is one of our top policy priorities. We will strive to create jobs, by supporting private-sector employment and enhancing public job projects,” he added. 

The government predicted that the country’s gross domestic product will expand 5.8 percent in 2010, significantly higher than its December forecast of 5 percent gain. 

It also raised the job creation target to 300,000 from 250,000. 

As the economy shows a sharp rebound, the government will gradually switch its macroeconomic management back to normal mode, scaling back or terminating economic support programs which were introduced to fight a sharp economic contraction in late 2008. 

In implementing an exit strategy, the key areas of focus are interest rates and fiscal spending. 

Finance Minister Yoon Jeung-hyun addresses a news conference on economic policies for the second half of the year at the government’s complex in Gwacheon on Thursday. Park Hae-mook/The Korea Herald

“As for interest rates, economic growth in the first and second quarters (of the year) should be taken into consideration,” Yoon said. The second-quarter GDP data will be released in late July. 

“Another important factor is how commodity and asset prices will move, which will show the risk of inflation,” he added. 

Korea’s benchmark interest rate has been kept at a record-low level since February 2009. Expectations run high that the central bank will start raising the key rate as early as in August in order to stave off inflation. 

The government plans to scale back public expenditures in the second half in order to secure fiscal soundness after aggressive stimulus spending during the crisis. 

It plans to spend 108 trillion won ($90 billion) during the July-December period, compared to the first-half budget of 163 trillion won.

Korean War retold in two new series

Sixty years have passed since the nightmare that was the Korean War broke out. 

Since the war, films, documentaries and miniseries have done their best to serve as a reminder of the war that forever changed the history of this nation.

“TaeGukGi: Brotherhood of War” (2003) drew millions to the movie theater with its melodramatic story of two siblings whose love for one another went beyond enemy lines. 

“Welcome to Dongmakgol” (2005) portrayed the tragedy of war invading the lives of a village of pure-hearted civilians. 

With such stellar blockbusters having set a precedent, this year’s retellings of the civil-turned-proxy war faces several challenges. 

MBC spent 13 billion won to create “Road No. 1,” a drama that features intense battle scenes from the Korean War. LOGOS FILM

Asians show off traditional cultures

Pyounghwa Plaza in World Cup Park in Mapo-gu was filled with unfamiliar sights on Sunday as people from different Asian countries gathered to introduce their traditional cultures. 

The annual “Asia Culture Festival,” hosted by the Asia Culture Festival Organizing Committee and supported by the Ministry of Culture, Sports and Tourism, and Seoul Foundation for Arts and Culture, was held under the theme “One Asia,” aiming to provide a venue to experience different Asian cultures and thus improve understanding of neighboring countries.

Visitors crowded at the “Asian Village” where booths representing each participating country -- Thailand, Mongolia, Vietnam, Japan, Nepal, China, Philippines, Bangladesh, Indonesia, Sri Lanka, Uzbekistan, Kyrgyzstan, Kyrgyzstan, Myanmar, Malaysia, India and South Korea -- were set up.

“This is a nicely organized festival where we can see different cultures in one place. I am enjoying how we can get first-hand knowledge about different Asian cultures,” said Lubna, a tourist from Pakistan who was learning how to play musical instruments at the Nepal booth. 

Visitors look around the Japanese booth at the Asia Culture Festival on Sunday. Lee Sang-sub/The Korea Herald

China emerges as most popular destination for Korean students

China is expected to overtake the U.S. as the most popular destination for Korean students this year thanks to Beijing’s hefty investment in education and the country’s growing international presence in many fields.

The Korean student population in China rose sharply from 29,102 in 2006 to 66,806 as of last April, according to data provided by the Education Ministry.

Whereas most Korean students went to China to learn the language in the past, an increasing number of Koreans now aim at earning degrees from Chinese universities.

The number of Koreans who went to universities and graduate schools in China nearly doubled in the three years to 28,836 last year.

Over the same period, the Korean student population in the U.S. rose less than 20 percent to 69,124.

The number of Korean students in Japan rose by only about 3,000 in the same period to about 18,000.

The sharp growth of students choosing to study in China reflects the country’s emergence as a global power with the world’s largest population and third-largest economy. 

Increased investment by the Chinese government has also greatly raised the competitiveness of the country’s institutions of higher education, analysts say.
 

(Yonhap)

3-D TV yet to hit prime time

Some Korean consumers are buying 3-D TVs amid World Cup frenzy, but most have disappointed to learn that they are not able to see the soccer matches in 3-D. 

The 3-D broadcast service is not available to cable subscribers, which amount to 80 percent of the country’s households. This is because SBS, a terrestrial network which has the exclusive right to broadcast the 2010 FIFA World Cup in Korea, does not allow cable operators to retransmit 3-D broadcasts. 

Korea has touted itself as the world’s first to launch trial 3-D broadcasts via terrestrial networks with the 2010 Colorful Daegu Pre-Championships Meeting on May 19. Korea is also one of the four countries which is broadcasting the World Cup in 3-D, which runs until July 11. 

Riding the 3-D broadcasting boom in Korea, Samsung Electronics and LGElectronics seek to jumpstart 3-D TV sales on their home turf. 

However, a limited availability of 3-D broadcasting, along with a poor 3-D image, could serve as setbacks to sales of much-hyped 3-D TV here.

The coverage of Korea’s 3-D broadcasting service will be expanded in October when the country looks to begin a pilot service for 3-D terrestrial broadcasting in HD image quality. However, the lack of 3-D content, the inconvenience of wearing glasses and the costs of enjoying 3-D in the living room remain major stumbling blocks. 

“We are getting a lot of inquiries from 3-D TV buyers about why they cannot see the World Cup in 3-D,” said Lee Joo-shik, a director general of the Korea Communications Commission. 

“There are also many issues regarding 3-D image quality. We should improve 3-D image quality to reduce tiredness and dizziness,” he said. 

Models wearing 3-D glasses watch a Samsung 3-D LED TV. Samsung

[G20 summit agenda ] Regulating credit rating agencies: An unfinished business

The following is the 12th in a series of articles analyzing the major problems that the G20 leaders should tackle to stabilize the global financial markets and rebalance the world economy. -- Ed.

Credit rating downgrades can have significant negative effects on financial markets.

This month, the euro dropped against the U.S. dollar to its lowest level since 2006. The fall of the common European currency occurred amidst market uncertainty about the effects of a $1 trillion rescue package designed to shore up Greek and Eurozone markets as well as global financial stability. At the same time, there has been a growing criticism of the role of credit rating agencies and renewed calls for their regulation.

Indeed, the judgment that the Greek budget deficit for 2009 would be significantly higher than expected led to rating downgrades of Greece’s government debt by all three major rating agencies, starting in December 2009 (to BBB+ for Fitch and S&P and A2 for Moody’s). As credit markets punished Greece with higher borrowing costs, credit rating agencies downgraded Portugal and Spain’s debt. By April 2010, Portuguese spreads reached their highest level since 1997 following its downgrade to A- from A+ while spreads for Spain increased as S&P downgraded credit rating to AA.

Hyundai ads mocking BBC ‘Top Gear’

Hyundai Motor Co., showed off two advertisements poking fun at the BBC2 program "Top Gear" as they feature a wildebeest, a tortoise and hamster mimicking Jeremy Clarkson, James May and Richard Hammond.
In commercial appears The Stag which Top Gear originally calls The Stig as the program’s top "tame racing driver."

 

Many regards Hyundai’s latest advert as the revenge for BBC’s describing Hyundai car as "Your slightly embarrassing Korean uncle. You know him - he's the one who's not quite as good at anything as most of your other relatives ... " 

The name of the advert "Top Deer," which reminds the program "Top Gear," introducesSUV ix35 (Tucson ix).

 

The videos have attracted more than 150,000 viewers on YouTube.

Wage talks make little progress

Labor and management are laboring to set the minimum wage for next year, an important indicator in deciding the average wage level across industries. 

During the fifth meeting of the Minimum Wage Council on Friday, both parties offered their compromise proposals, first in a series of meetings over the past three months. 

Management, which has insisted on freezing this year’s minimum hourly wage of 4,110 won ($3.47), offered to increase 8 won, while labor groups proposed 5,110 won, 70 won lower than their previous demand.

“Labor and management have just taken the first step toward compromise. Due to the still huge difference in their proposals, however, it seems difficult to reach an agreement that will satisfy both of them,” said a council member. 

With the deadline for the talks due on June 29, the Minimum Wage Council, consisting of representatives from labor, management and the government, will hold two more meetings on Friday and Monday.

Civic group members call for an increase of the minimum wage in Seoul on Tuesday. Yonhap News

Korea faces inflation risk: Fitch economist

A senior economist of Fitch Ratings raised concerns Tuesday that Korea may face the risk of price inflation as the country is recovering fast through stimulus measures.

Brian Coulton, head of the company’s global economics, said accommodative measures taken by emerging economies could be over-stimulating the market.

“Emerging markets, for the past year or two, introduced aggressive stimulus measures. But outside Russia and Eastern Europe, the financial crisis was less severe and concerns for inflation could emerge,” Coulton told reporters.

“If you have that aggressive monetary policy easing when your economy doesn’t slow so much, then obviously the risk turns in the other direction.”

Brian Coulton

Fitch’s sovereign rating of Korea currently stands at A plus, its fifth highest investment grade. The rating is a level below the AA minus it gave just before the 1997-98 Asian financial crisis. 

Fitch will send a delegation to Seoul next week for an annual meeting with the country’s policymakers, the Finance Ministry said. 

Analyst James McCormack is expected to have talks with officials from the Finance Ministry, Foreign Affairs Ministry and the Bank of Korea next Tuesday.

Chang Hea-kyu, director of the company’s Korean arm overseeing banks, said the recent tightening of foreign banks’ usage of currency derivatives is likely to bring minimal benefit to the market. 

Seoul hopes G20 will support action on N.K.

South Korea’s diplomatic knack will be put to test once again at the G20 summit this weekend in Toronto as the U.N. Security Council discusses whether to uphold Seoul’s accusation that Pyongyang torpedoed its naval ship.

Eyes are focused on the G8 summit, a political council that includes four of the five permanent members of the UNSC -- the U.S., Britain, France and Russia -- which is expected to deal with the Cheonan’s sinking.

Canada, as this year’s president of the G8, has reportedly circulated among the G8 nations a draft joint statement that calls North Korea to account in mid-June and is trying to get their approval. A consensus among Seoul, Washington and Tokyo has spurred such moves by Ottawa, diplomatic sources say.

Assembly panel rejects revised Sejong City plan

A parliamentary committee Tuesday voted down President Lee Myung-bak’s revision aimed at killing a former government-led project to relocate part of the government out of Seoul, thwarting the conservative leader’s determination to further pursue growth-focused policies in the latter-half of his term. 

A long-standing cross-party pledge sought by the administration of Roh Moo-hyun in 2005, the so-called “Sejong City” project was envisioned to develop a second administrative town in the long-underdeveloped Chungcheong region. 

The purported city, named after the creator of the Korean alphabet, is widely popular among residents of the province as well as progressive political forces who support balanced regional development.

Shortly after taking office two years ago, Lee, a former CEO and strong believer of the market economy, created a revised plan to build instead a corporate-oriented city in the region, creating a voter backlash that led to the ruling party’s crushing defeat in the June 2 local elections.

(Yonhap)

Japan beats Denmark 3-1 to advance

Japan beat Denmark 3-1 to advance to the round of 16 at the World Cup, while the Netherlands defeated Cameroon 2-1 to finish atop Group E. 

Keisuke Honda, Yasuhito Endo and Shinji Okazaki scored for Japan in Rustenburg, South Africa. Robin van Persie and Klaas Jan Huntelaar had the Netherlands goals in Cape Town. 

Japan's Keisuke Honda celebrates after scoring during the World Cup group E soccer match between Denmark and Japan at Royal Bafokeng Stadium in Rustenburg, South Africa, Thursday (AP)