Mr. Chairman,
Excellencies,
Ladies and Gentlemen,

(Introduction)

It is a great honour and pleasure for me to be here with you at this important forum. I would like to express my profound appreciation to the chairman of this conference, His Excellency Domingo Siazon, Foreign Secretary of the Philippines, for the excellent preparations and arrangements for this meeting.

This year we gather here in Manila facing quite a different economic situation from what we experienced at the Kuala Lumpur PMC last year.

Looking back upon the past twelve months, East Asian econmies, which until very recently had been characterized as the world’s most dynamic and robust, have gone through drastic changes. They are now confronted with economic and financial difficulties that are plaguing the region to such a degree that the very foundation of the Asian economies is being shaken.

As you are well aware, the accelerating pace of globalization is deepening the interdependence of the international community and promoting goodwill competition, offering an opportunity for further growth and contributing to the establishment of a stable international order.

On the other hand, these trends are creating a new reality: now, a problem in a particular region or country transcends national boundaries and can spread easily across the globe.

Asia and the Pacific still face possible territorial conflicts and, in some places, a legacy of the Cold War.

How Asians manage to build an effective mechanism of dialogue for regional peace and security while successfully overcoming the current economic crisis will also be one of the crucial factors in determining the future of the region.

(The Economic Crisis in East Asia and Korea’s Policy of Reform and Openness)

The current economic crisis is the most daunting challenge facing East Asia.

The lack of a financial surveillance system to monitor the flow of speculative hot money is often cited as a cause of the current situation.

Yet, the reasons behind each individual crisis are most likely domestic. I think that the main cause of the crisis, across Asia, was structural weaknesses in the respective economies in adapting themselves to changes in the international financial environment where globalization and integration are increasingly becoming the norm. Collusion between politics and business and unsound business ethics should not be kept off the list.

It is encouraging, however, to note that the Asian countries affected by the financial crisis are trying very hard to overcome the difficulties by undertaking intensive economic reforms and opening up their economies.

In addressing the current crisis, concerted efforts and cooperation among Asian countries as a whole are needed as much as the efforts of individual economies, precisely because of the deepening economic interdependence, that I have mentioned.

One concern that may arise in relation to the economic crisis is the possible emergence of protectionism. We should guard against protectionism, since it will slow the recovery process in ailing economies. If the current crisis drags on, the entire world will feel the pain.

Now let me turn your attention to Korea.

Throughout the last three decades the Korean economy has grown at a rapid pace. During this period, however, there has been extensive government intervention in the economy, which has had the side effects of nurturing government-directed lending practices, as well as collusion between politicians-and business leaders. These two factors are at the root of Korea’s economic crisis.

To regain economic dynamism, the new government in Korea is undertaking intensive structural reforms. In this effort the Korean government is adhering to the twin principles of democracy and the market mechanism, because structural reforms founded on these principles will root out unhealthy government interference with banking process, collusive and corrupt ties between the government and businesses and inefficiency in the business and financial sectors.

With our commitment to reform, the Korean economy will in due course graduate from the IMF assistance program.

The East Asian economic crisis will be a good lesson for us all, and I am sure it will serve as a catalyst for us to soar once again. Once East Asia has managed to overcome this crisis, it will emerge stronger than ever.

(The Security Environment Surrounding the Korean Peninsula)

Along with financial difficulties, we also face a long-standing challenge in East Asia: the instability of the security environment.

While most of the world has transformed from a time of ideological confrontation to an age of mutual cooperation, the security environment on the Korean Peninsula is at a standstill in a Cold War-style confrontation.

The task of establishing peace and security on the Korean peninsula is the most vital element of our foreign policy.

To progress toward that goal, President Kim Dae-jung has laid out three principles on which his new government is basing its policy toward North Korea : First, no military threat or armed provocation by North Korea will be tolerated under any circurmtances. Secondly, unification will not be achieved by absorbing North Korea. Lastly, substantive improvement in South-North relations will be pursued through exchanges and cooperation.

Under these principles, the Korean government is pursuing a policy of engagement towards North Korea, called the “sunshine policy,” aiming at enhancing reconciliation and cooperation between the North and the South.

In order to promote interactions and cooperation, we have eased almost all restrictions on private business cooperation with the North. For instance, the recent cattle drive into North Korea by a Korean businessman, and his joint venture projects to develop an international tourist zone, signalled the dawning of a new relationship between the two Koreas.

Regrettably, amid our sincere efforts to expand inter-Korean exchanges and cooperation, two extremely unfortunate incidents recently took place. In June, a North Korean submarine was captured inside the South Korean territorial waters, and, in July, the dead body of a North Korean agent was found on a beach on our East coast.

These are clear violations of the Armistice Agreement and the 1991 South-North Basic Agreement on peace, reconciliation, exchanges and cooperation. Also, it is a flagrant breach of North Korea’s pledge, made two years ago after the submarine incursion on our east coast, that “such an incident will not recur”. Recurrence of such provocative infiltration attempts calls for strong condemnation.

On the other hand, we regard these incidents as the direct outcome of the North Korean regime’s fear that its society may possibly be opened up as a result of our sunshine policy. This can be seen as an evidence of the effect of the sunshine policy.

Thus, despite these provocative events, our government is determined to continue with its current policy towards the North while strengthening our defense posture for the security of our nation and safety of our people.

Korea will also keep up its efforts to resume South-North dialogue and work for the success of the Four-Party Talks.

Moreover, the Korean Peninsula Energy Development Organization (KEDO) project will be implemented without delay to ensure the security of the Northeast Asian region and work for global nuclear non-proliferation.

As peace and stability on the Korean Peninsula is closely linked to security in the Asia-Pacific region, we sincerely hope that our neighbors, such as the ASEAN countries, will provide their unreserved support and assistance as we carry out this difficult but important task.

As you are well aware, the economic prosperity of the Asia- Pacific region is only possible if it is based on a stable security environment. Taking this into consideration, we should exert our utmost efforts to establish a framework of cooperation and peace in the region.

Korea will make continuous efforts in contributing in this area at various regional forums. This is why we have attached special significance to the ARF since its launch in 1994 as the only inter-governmental security dialogue mechanism in the Asia-Pacific region. The Korean government will continue to commit itself to this important forum.

(Conclusion)

Until recently, it was widely accepted that the 21st century would be characterized as the era of the Asia-Pacific. However, optimism about the future has been replaced by doubts about the long-term vitality Of the East Asian economy. Yet, despite the current financial woes, East Asian economies still have great potential for further growth and development.

As the saying goes, “Bitter pills may have a blessed effect”. By overcoming the current financial crisis, East Asia will be equipped with a more competitive economic structure that will serve as a solid foundation for its future economic take-off. Once recovered from their financial difficulties, East Asian countries, with their rejuvenated economic dynamism and resilience, will surely make themselves, once again, the main engine of world economic growth.

A stable security environment is vital to achieve such regional and world-wide economic development. In this light, bolstering the regional security mechanism inclucding ARF is essential for Northeast Asia, to build confidence among the member countries and promote common interests. Korea will contribute to ensuring regional Peace and security in Northeast Asia by easing the residual Cold War tension on the Korean peninsula.

The road ahead, both economically and in security matters, will not be easy. But I am confident that with the support of our Asian neighbors-increasingly crucial in our interdependent world-we will make solid progress toward peace and prosperity.

Thank you.