President Lee Myung-Bak says tackling inflation is his top priority as South Korea faces a "global economic crisis" beyond its control. Just one month after taking office, the former business executive's election pledge to boost economic growth faces a reality check amid a Worldwide credit crunch and rising raw material prices.
"We are facing a global economic crisis, which is beyond our control," Lee told Britain's Financial Times and other newspapers in an interview published Monday. "The ramifications of what we may call the US financial crisis on the global economy are getting bigger. It is taking a toll on consumer prices, making people's lives difficult. The most urgent policy is inflation."
Inflation reached an annual rate of 3.6 percent in February, breaching the central bank's target range for the third month in a row. South Korea, the world's 13th largest economy, has few natural resources and has been especially hard hit by rising global commodity prices.
It is also grappling with a recent fall in the value of the won against the dollar, which makes imports more expensive. Last week the government said it would lift import tariffs on 70 price-sensitive products and freeze some public utility charges to try to hold down prices.
Lee, who styled himself the "Economy First!" president, won office with a pledge to revitalise the economy through tax cuts, privatisation and deregulation. He targets six percent growth this year, compared to five last year, but many analysts believe this is unrealistic.
"The only way to overcome (this crisis) is by boosting productivity through co-operation between management and workers," Lee told the FT, adding that "strategic strikes" are unacceptable in the current climate. Critics say Lee's business-friendly approach could unfairly benefit the big conglomerates known as chaebol, who spearheaded the country's dramatic economic rise but are increasingly under fire for lax corporate governance.
An independent counsel is investigating claims that the largest group Samsung had created a multi-million-dollar bribery slush fund. The group denies the allegations. "Whether it is a big company or a small one, they should be run fairly and transparently in accordance with global standards. Only that way, they can have (global) competitiveness," Lee said.
He said Samsung "will take the opportunity to make itself better" after the probe ends. Lee has said he will strive to raise foreign investment in a country often seen as ambivalent about it. The justice ministry said last week it was devising ways to stave off hostile take-overs of domestic firms by foreign investors.
"We don't intend to make any particular measures against foreign companies entering Korea or participating in management of local companies," Lee said. "We will just take minimum measures at a par with those in advanced countries."
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