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Q. What’s your view on North Korea nuclear issue as an investor?

A. The North Korea issue does affect foreign investors but I don’t think it will have any impact on Korean economy. North Korea has stated that they will not develop nuclear weapons, and I believe this is true. The real issue here is that North Korea needs to export weapons without US interference, in order to sustain its weak economy. The US has known of North Korea’s weapons export all along but after 9/11 they’re worried that weapons might go to terrorist organizations. The US did nothing at all when an inappropriate North Korean weapons sale to Egypt was discovered recently.

Q. It seems you’re optimistic about North Korea nuclear issue.

A. I am. I don’t think North Korea will launch their nuclear weapons at South Korea or Japan if they develop them. It’s a shame North Korea doesn’t have any viable industries. If they can’t export weapons, their export options are basically non-existant.

Q. How do you expect it to be settled?

A. It’s very hard to tell at the moment. However, I think it’ll benefit everyone if the US and North Korea sit down to talk with each other.

Q. Any ideas on replacing North Korea’s weapons export business?

A. I believe there’s a development plan going on around Gaesung special economic zone. Like Mexico, North Korea can develop itself with economic ties with South Korea, especially utilizing its labor force. 

Q. What’s your view on the recent financial scandal regarding North Korea?

A. I don’t think it should be an issue. There is little value in the ongoing investigation. I think Hyundai went into the agreement because they had a strong relationship with the ruling party. But the problem lies in the fact that they invested a huge amount of money for unprofitable Geumkangsan project.

Q. Can we see the payment as a part of re-unification expenses?

A. Yes, we can. The government’s involvement in complicated deals such as this one is inevitable. They should have clearly designated a business partner and led the deal. The 20-year costs of re-unification could reach $3-4 trillion. Korea should not waste time squabbling over a tiny $223 million payment. Its real task is to get the US, Europe, China, and Russia to pay the $3-4 trillion.

Q. South Korea has many problems to solve at the moment. What do you think the current and new government should do regarding re-unification?

A. The ruling party should persuade Korean people, telling them the road to the unification is not an easy one and it will cost a lot. They should let the people know it will be complicated and very expensive.

Q. As a long-time investor, what are your views of the new government’s policies?
A. I’m very enthusiastic about its intention to implement class action lawsuits. It’ll be a great system if the Roh government does actually introduce it. The bottom line here is it should be substantial, not just lip service and powerless bureacracy. It’ll have a revolutionary impact on managerial responsibility once the courts judge – and collect -- large, personal financial penalties against bad managers, and outside shareholders who lost money get paid these rewards.

Q. What’s your view on US economy?

A. Once the uncertainties are gone, North America will see more business investment in IT sector, which will decrease unemployment rate, stabilize real-estate market and boost the stock market.

Q. What’s your view on the growth potential of Korean economy at the current stage?

A. The Korean economy is very solid. Following the last year’s 6% growth, I expect it to grow 6% this year. It can go up to 7-8% next year. I am confident Korea will remain Asia’s second fastest-growing economy for many years.

Q. What do you think of pensions’ investment in stocks?

A.It is overdue. In case of UK, 60% of the total assets of pensions are in stocks while in Korea, it’s only 1%. The new government should immediately increase pensions’ investment in stocks. When it reaches the average level of that of OECD countries, it will bring great results. I expect the KOSPI index will reach 1,500, or higher, within two years.

Q. What are there to improve regarding the stock market?

A. First, all Korean and foreign investors and fund managers should be able to short-sell individual stocks as easily as this can be done in US stock markets, with no more red tape. Second, regulations should prohibit “Equity Funds” from investing any money whatsoever into corporate bonds, call loans, or commercial paper. Currently, regulations permit “Equity Funds” to invest 30% of the client’s money into corporate bonds, call loans, or commercial paper. This is patently unfair, and has led to substantial abuses.

Q. What’s your view on consumer debt situation in Korea?

A. Basically, there is no consumer debt “crisis” in Korea. There were hardly any credit cards in Korea five years ago, which caused a huge amount of sales to go to the “underground economy,” with zero tax revenues. The government promoted credit card usage to prevent tax evasion, which rapidly increased usage and card issue. This resulted in a few defaults, but it will smooth out soon. The bottom line here is that there are no revolving credit lines in Korea; all credit cards operate on 30-day terms. If basic revolving credit lines were introduced, the “problem” would evaporate instantaneously. US and other Western countries have revolving credit lines. As for mortgage loan and real estate “bubble” in Korea, both the loan-to-value ratio and mortgage debt-to-discretionary income ratio are still extremely low, relative to the rest of the world. Once again, the pundits have created irrational fears about fast growth, despite the obvious fact that current consumer debt levels are very reasonable.



Jin-gun Chung (Maeil) and Henry M. Seggerman (IIA)