MOCIE Turns to
Innovative and Futuristic
Policies
- Reforming the way officials perform their duties

The Ministry of Commerce, Industry and Energy (MOCIE) has repositioned itself as one of the most innovative government ministries, as MOCIE Minister Lee Hee-beom has been campaigning for innovations on a voluntary and consistent basis.
During a ceremony at the start of the 2005 ministry business earlier this year, MOCIE Minister Lee stressed his commitment to continued reforms this year. The Ministry of Commerce, Industry and Energy has become the first government ministry to introduce the so-called duty performance contract system.
MOCIE officials have been asked to enhance their work productivity and quality services under MOCIE Minister's catchphrase "Delivering customer satisfaction through high-quality administration" since any organization that has been overlooked by customers and have low-quality services and lower productivity can no longer survive, Lee said in an interview with NewsWorld. The ministry has introduced a multi-source feedback evaluation system under which all policies are assessed by customers. Take for instance the Field Experience Corps for SMEs that has received higher marks from client companies. The ministry is actively trying to build up a policy quality management system aimed at implementing quality policies and an integrated appraisal system designed to operate the ministry based on performance. Following are the excerpts of the interview with MOCIE Minister Lee.

Question: The Ministry of Commerce, Industry and Energy has become the first government ministry to introduce the so-called duty performance contract system, and you have stressed innovations in the industry and energy sector. Would you be more specific, including the significance of the introduction of the duty performance contract system?
Answer: The duty performance contract system refers to a regime under which individual public officials agree to performance targets, how to assess the outcomes and they are compensated according to the results of duties.
In its report on the ministryOs work for this year, MOCIE has set four policy goals, 12 initiatives, 47 projects and 127 detailed tasks. MOCIE officials have been given their own assignments depending on the rankings from the director level to the first-grade level. Individual performance of his or her duty targets will be assessed on a quarterly basis, and at year-end, a final assessment will be reflected in their evaluations and the amount of incentives they can receive.
I've urged MOCIE officials to enhance their work productivity and quality services under the catchphrase "Delivering customer satisfaction through high-quality administration" since any organization that has been overlooked by customers and has low-quality services and lower productivity can no longer survive. The ministry has introduced a multi-source feedback evaluation system under which all policies are assessed by customers. Take for instance the Field Experience Corps for SMEs that has received higher marks from client companies. The ministry is actively trying to create a policy quality management system aimed at implementing quality policies and an integrated appraisal system designed to operate the ministry based on performance.

Q: What would you say about the 2005 prospects for Korea's exports and imports and how to maintain the increasing export level?
A: In the first quarter of this year, Korea posted a trade surplus of $6.86 billion as exports soared 13 percent year-on-year to $67.04 billion and imports surged 14 percent to $60.17 billion. Despite the appreciation of the Korean won and raw material price hikes that have prevailed since last year, overseas shipments for March surged 14.2 percent to a monthly record high of $24.19 billion, while imports for the same month also climbed 18.3 percent to a monthly record high of $22.62 billion, maintaining a stable growth rate in terms of exports and imports.
Though external conditions, including foreign exchange rates, have been exacerbated, the economies of major countries, including the United States and China, have shown signs of stability and growth, and Korean export items have still have a competitive edge in terms of quality and technology. Korea is predicted to achieve its goal set by the government for 2005 - exports worth $285 billion, a 12.3 percent rise, and imports worth $257 billion, a 14.5 percent increase.
The government is trying to solve complaints and hindrances facing exporting companies, while seeking to implement a new trade promotion policy of creating new export opportunities. It is going all out to solve problems facing exporting companies by operating an export support checkup system on a constant basis to cope with the changing export conditions. As part of its efforts to reduce risks stemming from the appreciation of the Korean currency, the coverage scope of the foreign exchange risk insurance will rise from 6 trillion won last year to 9 trillion won this year and a consulting system on foreign exchange risks has been introduced. In a bid to stabilize raw materials prices, the ministry is taking such measures as imposing quota tariffs and providing funds for purchasing raw materials for SMEs, earmarked at 230 billion won. It has set aside 16.4 billion won for 2004 and 2005 to provide financial support for Korean exporters entering advanced and emerging markets, particularly BRICS (Brazil, Russia, India and China), and oil exporting countries.
In a bid to create new export opportunities, the ministry plans to raise the number of world-class products from 440 in 2004 to 500 in 2005 and increase R&D funds for world-class products from 1.2 trillion won in 2004 to 1.8 trillion won in 2005.
The government plans to support marketing activities to expedite knowledge-based service exports, including cultural products related to hallyu, or Korean Wave sweeping Asia while compiling service trade data.
The ministry plans to complete e-Trade network by 2007 to build an on-line trade infrastructure in keeping with global trade trends, while overhauling the Trade Automation Act into the E-Trade Promotion Act in the first half of this year. It will make efforts to maximize Korean companies' presence in overseas markets by wrapping up negotiations with Free Trade Agreements with Japan, ASEAN, EFTA and Canada so as to help Korea follow global trends on free trade.

Q: Could you elaborate on the government's plan to build an infrastructure for developing Korea into an advanced trade country?
A: Global economies have been transformed into regional blocs and global competition is becoming fiercer as the economic and trade environment is complicated and diversified. Seventy-nine Free Trade Agreements were concluded during the period between 1958 and 1995, but the number of FTAs surged to 129 during the period between 1996 and May 2004. The Free Trade Agreement of Americas (FTAA) has a population of about 800 million with $8.5 trillion worth the gross domestic product, while the European Community has a population of 460 million with $8.2 trillion.
The advanced trade country plan means a new paradigm for overcoming the challenges stemming from integration of global economies and globalization measures, which is closely linked with market-opening and internal reforms.
In an effort to realize a vision of becoming an advanced trading country, the government is seeking to overhaul domestic systems and to support management systems with global standards while working out a regime for supporting restructuring, arising from market-opening. It will standardize systems and practices to international levels in such areas as financing, foreign exchange, competition and labor, while upgrading the local industrial structure to a service industry-oriented one by opening the local service market to foreign competition. The government plans to spur overseas investments by Korean companies and attract foreign businesses and professional manpower to the nation while strengthening strategic global trade cooperation with foreign partners. The ministry will support restructuring related to market-opening, while spreading public consensus on opening the market.

Q: Would you provide the details of the so-called Global Star 100 aimed at fostering mid-size world-class companies which the government envisions?
A: For our economy's goal of raising the per capita national income to $20,000 to be realized and transforming into an innovation-driven one, it is essential for SMEs to grow into world-class corporations in today's era of globalization. Intel and Microsoft of the United States were originally medium-sized startups, but they have now evolved into large-size global corporations. Singapore has established the so-called SME 21, designed to develop one-fifth of SMEs into large corporations. In Korea, the government support for financing and tax benefits has been concentrated on SMEs, causing some hindrance to creating more jobs and getting bigger. The number of large-size corporations declined from 751 to 670 during the period between 1993 and 2002.
The government plans to draw up the Global Star 100 with the goal of fostering 100 SMEs as mid-size world-class corporations by 2010. Based on a survey of difficulties facing SMEs in the course of going global and getting bigger, to be made in the first half of the year, the government is contemplating that SMES wanting to change into large corporations may be entitled to financing, tax benefits and restrictions being applied to SMEs during a given period. In particular, SMEs contributing to creating jobs may be given a preferential treatment in supporting market exploitation and technology development.

Q: Could you tell our readers about the status on foreign direct investments and how to invigorate FDIs?
A: FDIs have surpassed the $100 billion mark on a report basis last April in about 42 years since 1962 when foreign capital was introduced in Korea. In particular, $81.9 billion worth FDIs flowed into the nation during the seven years following the 1997 Asian financial crisis, accounting for 82.2 percent of the aggregate amounts. Take a look at the $100 billion in an aggregate amount in about 29,000 cases: an average of $3.5 million per investment case.
FDIs have emerged as an essential factor not only to realize the national goal of raising the per capita national income to $20,000 by expanding our economy's growth potential but also to upgrade our economic structure to an advanced level.
The $100 billion FDIs Korea has attracted created affirmative effects on the national economic scale more than the figure itself. First, earning foreign currencies at the initial stage of the 1987 Asian financial crisis contributed to overcoming the crisis. Secondly, foreigners' domestic investments and inflow of capital have boosted investments, production, exports and job creation. Thirdly, foreign investments have brought about spill-over effects to economic sectors - introducing advanced tech and management methods, spurring competition, and raising productivity -, thus helping the nation shift its economic structure to an innovation-driven economy. Fourthly, FDIs have raised openness and transparency of the national economy and society, while contributing to balanced national development through the development of backward areas.
As FDIs have increased in terms of volume, the government has shifted its foreign investment policy to the one focusing on attracting foreign investments in high value-added industries - mainstay industrial fields, next-generation growth engine industries, and knowledge-based service industries, all related to innovation-driven economy policies. Task forces, being formed at each industrial sector with the people from the government sector, Invest Korea, business community and research circles, participate in investor relations sessions and visit prospective investors as part of their activities to attract foreign investments.
High-ranking government officials, including the MOCIE minister, capitalize on overseas trips, bilateral talks, video conferences and international conferences, including APEC, to solicit FDIs.
In an effort to actively lure foreign investments, foreign investors are given one-stop services, including support for the establishment of a corporate body, application of prior deliberation on whether prospective foreign investments belong to the high-tech sectors and proxy services for permits and licenses related to the central and local governments.

Q: Could you be specific about the government plans to expand future growth engines in relation to the goal of raising Korea into the ranks of the top four industrial powerhouses?
A: Our economy needs to expand its growth engines to maintain its competitive edge in the global market. Korea's mainstay industries have secured world-class competitiveness - shipbuilding ranking top, semiconductor placing 3rd, digital home appliance sector (4th), petrochemical sector (5th), steel industry (5th) and the automobile sector (6th).
First of all, Korea will put more energy into realizing the target of becoming a top four industrial powerhouse by strengthening global competitiveness of mainstay industries. Growing industries such as the automobile and semiconductor sectors will be encouraged to expand global market shares by concentrating R&D outlays on the development of cutting-edge products. Such mature industries as the shipbuilding, steel, petrochemical and home appliance sectors will focus on the development of state-of-the-art technologies to maintain their competitive status. Textile and footwear industries areas in which we lag behind other global producers in price competitiveness-- will incorporate new technologies like nano and IT to create added value to their products.
The government plans to foster next-generation growth engines industries, including robot and next-generation fuel cells as new mainstay export sectors to preoccupy the global market.
The ministry will make all-out efforts to spur co-prosperity and collaboration between large-sized corporations and SMEs and cope with the restructuring of division of labor in a bid to raise competitiveness of parts and materials industries. It plans to nurture 300 mid-size core companies churning out modules with 200 billion won worth of sales and $100 million worth of exports.
It will build a structure with a virtuous circle in which the knowledge-based industries can grow in step with our manufacturing industry which is rapidly transforming itself into a service-based industry.

Q: Would you tell or readers about the government's support plans to develop parts and materials as world-class export items?
A: The government has made efforts to raise competitiveness of parts and materials industries with the aim of developing Korea as a global hub of supplying core parts and materials by 2010.
It has pursed differentiating technology development strategies by taking into account the market seize of each item and changing technologies in a strategic bid to secure core technologies.
The government has taken steps designed to support commercialization of developed parts and materials and facilitate their exports.

Q: What steps is the government planning to support the business community in the wake of the entry into force of the Kyoto Protocol on climate change?
A: Korea, recognized as a developing country status under the protocol despite of its status of an OECD member country, is placed under mounting pressure to follow an obligation of reducing greenhouse gas emissions.
As part of its efforts to support the business community against this background, the government is implementing a three-year energy unit cost innovation plan for supporting the spread of innovative manufacturing processes consuming less energy in the industrial sector. Take support actions for instance: The tax credit rate for investing energy conservation facilities rising from 7 percent in 2004 and 10 percent in 2005, and strengthened support for energy service companies.
The government will build up an analysis system for potential greenhouse gas reductions by establishing a system of compiling data on greenhouse gas emissions in each industrial sector and business.
It plans to beef up the industrial sector's capabilities to brace for future obligation of reducing greenhouse gas reductions.

Q: Would you comment on the latest development of new and renewable energy resources?
A: Korea supplied new and renewable energy of 5 million TOEs at the end of last year, accounting for 2.3 percent of the total primary energy supply. The power generated by new and renewable energy stood at 4,321GWh, taking up a 1.3 percent share of the total power supply.
In this regard, the government has decided to widen the portion of new and renewable energy to 5 percent by 2011. Designating the year 2004 as the first year of the new and renewable energy supply plan, the government has strengthened its policy infrastructure, including budget, organizations and legislation, while pushing through with tech development and dissemination projects.
The government will expand tech development and dissemination projects this year as it did last year according to the mid- and long-term vision and roadmaps, while concentrating on achieving dissemination targets and commercialization by developing specialized programs for fuel cell, solar energy and power energy. It will carry out such policies as the establishment of a long-term vision for realizing a much cleaner hydrogen economy, implementation of model projects and infrastructure development.
A hydrogen economy refers to a future energy system based on hydrogen - hydrogen producing energy through its reaction with oxygen to produce water as its only byproduct. The current fossil fuel based-society has become a rising global concern due to the shortages of fossil fuels and environment issues, particularly in the wake of the entry of force of the Kyoto Protocol on climate change.
Industrial estimates show that the value of the hydrogen and fuel cell market would surge to $100 billion by 2010. Countries, including the United States and Japan, have competed for the development of key technologies for about two to three years.
Choosing this year as the first year of a hydrogen economy, the government plans to implement mid- and long-term action plans after establishing the master plan for shifting the national economy into a hydrogen economy.
Korea will concentrate its investments into developing core areas, including fuel cell cars and residential fuel cell batteries with the goal of raising Korea to a global top three powerhouse in the sector by 2011. This year, it will pursue such model projects as construction of the so-called Power Park, a complex for experimenting with a combination of new and renewable energy sources, including solar and wind energy, hydrogen energy and fuel cells, futuristic high-efficiency houses, and residential fuel cells.

Q: What's your forecast for international oil price moves during this year and what steps are in place to cope with crude oil price hikes?
A: OPEC (Organization of Petroleum Exporting Countries) agreed in its general meeting convened on March 16 to raise its oil production by 500,000 barrels per day, but global crude oil prices have stayed higher due to worry over possible crude oil supply imbalances. Dubai oil price soared to $47.9 per barrel on March 17, higher than the record high of $42.25 registered during the Second Oil Shock in November 24, 1980.
Chance are high that crude oil prices could go lower than the current levels in the second quarter, the low-demand season, but they are predicted to stay high given market uncertainties.
Oil price hikes put pressure on prices and this could affect our economy.
Offset by the appreciation of the Korean currency, prices at the pumps have remained unchanged compared to last year, thus relieving some consumer anxiety over oil prices. Petroleum consumption rose 6.8 percent in the first three months of this year over the same period of last year.
As part of its efforts to cope with crude oil hikes, the government has pushed ahead with energy unit cost revamping plans and high-profile energy conservation campaigns in cooperation with civic organizations.
The government will continue to pursue mid- and long-term energy countermeasures designed to cope with crude oil hikes, including the development of natural resources in Korea and abroad. They call for raising the portion of new and renewable energy resources to 5 percent of the primary energy supply by 2011, increasing its own development rate of crude oil from 3.8 percent at the end of 2004 to 10 percent in 2008. The government plans to raise its crude oil reserves to 135-day use by 2008 in the case of a crude oil supply crisis, while maintaining cooperative ties with international organizations and oil exporting countries on energy security.

Q: What steps are you taking to secure energy resources?
A: The government plans to follow up on the outcomes of a series of summit talks held last year with resource rich countries such as Russia, Kazakhstan, Vietnam, Chile, etc. In particular, it will beef up its diplomatic efforts for securing a stable supply of energy resources in such strategic regions as Africa and the Middle East.
The government plans to work out an inter-ministry implementation plan for securing a stable supply of energy resources, which had been overlooked before.
It will accelerate its support for the private sector's participation in securing a stable supply of energy resources and development of next-generation energy resources. Among others, the government will inaugurate a business corps for the development of gas hydrate in the first half of the year.

Q: Power plant construction projects have been delayed by public opposition. What steps are in place to minimize the damage caused by the supply-demand imbalance?
A: There are some recent cases in which neighborhood residents' protests have put off power plant construction projects, but discrepancy between power demand and supply is not foreseen at the current stage in consideration of mid- and long-term power demand and forecast for power generation capacity.
The government is soliciting cooperation and understanding from neighborhood residents and civic organizations through dialogue to push for the construction of nuclear power and other plant facilities.
In recognition of the difficulties facing the construction of power plants and a growing call for sustainable development, the government is trying to better manage power demand in order to minimize the needs for constructing power plants.

Q: Could you tell us about specific steps designed to help Korea make a foray into China's nuclear power construction market?
A: The local power construction industry, which ranks sixth in terms of nuclear power capacity, is actively working all out to enter the nuclear power construction markets in such developing countries as China, Romania, Vietnam and Indonesia.
Korean companies, including Doosan Heavy Industries and Construction Co., are trying to land orders on the construction of four replicas of the existing nuclear power plants under strategic alliances with Chinese companies. China has invited tenders for four units with the replicas of the existing nuclear reactors and four others with newly introduced reactors under the long-term nuclear power supply plan, which seeks to build 20 nuclear power units by 2020. Companies from the United States, France and Russia are bidding for nuclear power plants with new technology, but if U.S. companies win the biddings, Korea will be able to participate in the supply of some of machineries and components under a partnership with them.
The government has actively publicized to the Chinese side technical and economic merits of Korean nuclear power technologies such as verified type of reactor, shorter construction period so that our companies can build nuclear power plants for China.

Q: Could you comment on the process of designating sites for housing a nuclear waste treatment center?
A: The government has attempted to designate a site for accommodating nuclear waste treatment facilities in the past 19 years since 1986 on nine occasions, but to no avail. Analyzing problems found in the process and supplementing them, it has made efforts to ensure credibility and win public acceptance.
A nuclear waste site deliberation committee, comprising of 17 representatives, including experts from science, technology, humanities, social, judicial and journalism circles, was inaugurated on March 11. The committee, headed by Han Kap-soo, former minister of agriculture, will perform such duties as examination of procedures, determination of the area scope of residents' voting, inspecting candidate sites and designation of the final site.
A site feasibility study will be conducted at the request of a local government or an area with consensus on a preferential basis, and in other districts, the site feasibility study will have to be made before being put to vote.
The committee will conduct public opinion surveys on promising site candidates districts along with local administrative chiefs' request for conducting residents' voting, and depending on the outcomes of votes in multiple districts, it will determine the final site for housing a nuclear waste treatment center.

Q: What steps are being taken to secure a stable supply of iron ores and help Korea develop iron mines on its own abroad?
A: Korea, depending on almost all the imported iron ores, needs to secure a stable supply of iron ores on a long-term basis. Korea's domestic demand for iron ores stood at 43 million tons in 2003. Korea domestically produced 174,000 tons of iron ore, a paltry 0.4 percent of the need, from its own territory, and the nation turned to imports worth $1.08 billion form such countries as Australia (27 million tons), Brazil (11 million tons) and India (2 million tons).
As iron ore prices have shown signs of steady surge due to a growing demand on iron ore from China, supply uncertainties and weakening of competitiveness of the iron ore industry have emerged as pending issues to be tackled. Iron ore prices have surged from $30.34 per ton in 2003 to $35.99 last year and to $61.72 this year. Global top six iron ore majors, including CVRD and BHPB, account for 41 percent of global total production.
The government is required to play a leading role to achieve its goal of raising its own iron ore development target to 20 percent by 2013 under the overseas natural resources development plan. The second overseas natural resources development plan, approved last December, calls for increasing its own iron ore development portion from 5.6 percent or 2.4 million tons in 2004 to 19 percent or 8 million tons in 2008 and to 20 percent or 8.6 million tons in 2013.
POSCO imported 2.4 million tons of iron ore it produced from its investment in the MAC iron ore mine, 120 km northwest of Newman, West Australia. POSCO plans to import 3.2 million tons of ire ore from its investment project of which the steel giant invested $9.8 million for a 20 percent stake.
Korea is seeking to secure 33 million tons of iron ores during the period between 2005 and 2013 through its participation in overseas exploration investments into such mining zones as the MAC Mining Zone in Australia and one in Orissa, India.

Q: Do you have any plans to participate in the dedication ceremony for Hyundai Motor Manufacturing Alabama (HMMA)?
A: The dedication ceremony for HMMA, an automobile manufacturing facility in Montgomery, Alabama, after two years of construction is scheduled for May 20. Hyundai Motor Co. has invested $1 billion for the plant on a site of 1.96 million peyong (equals 3.3 sq. meters). Hyundai Motor's establishment of an automobile manufacturing plant in the United States, a global automotive production center, is taken to mean that it will serve as an opportunity aimed at upgrading the domestic automobile industry to one step higher. I will participate in the dedication ceremony.
The domestic automobile industry once suffered a setback as Korean cars had been branded as the "cheap models" since 1986 when Korea began to export cars to the United States. Korean-made cars have now gained recognition in terms of quality and technology prowess from U.S. consumers and media like J.D. Power and Consumer Reports. Korean automakers have made tremendous strides in the recent years as they have advanced to the automobile manufacturing markets in Indian and China where they have set up local production assembly lines.
Korea automakers now stand firm to take on automobile powerhouses from the United States and Japan, and competition between Korea and advanced countries is going to heat up over the development of hybrid cars, fuel cell models and other futuristic cars and their bid to preoccupy the future markets. Against this backdrop, Korean automakers' assault on the U.S. home turf is essential, and Hyundai Motor's establishment of a local automobile production line in the United States amounts to the start of its onslaught.
HMMC is expected to enhance not only Hyundai Motor cars' competitive edge in terms of prices by lowering its automobile production unit cost but also Hyundai's market share in the United States. HMMC, a model case of Korea's investments in the United States, will also likely serve as an opportunity to strengthen bilateral economic relations by invigorating investments between the two countries. nw