Juyeol Lee: Prospects and Challenges for Sustained Growth in Asia
Welcoming Remarks by Mr Juyeol Lee, Governor of the Bank of Korea, at the 2017
MOSF-BOKIMF-PIIF International Conference "Prospects and Challenges for Sustained Growth in Asia",
Seoul, September 7, 2017
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Ladies and gentlemen, honored guests!
I am delighted to bid you all a sincere welcome to this conference, hosted jointly by the Ministry
of Strategy and Finance, the IMF, the Peterson Institute for International Economics and the
Bank of Korea. Let me first express my special gratitude to Managing Director Christine Lagarde,
who is here to represent the IMF directly despite her tight schedule. I wish to thank as well
President Adam Posen of the Peterson Institute for International Economics, and Director
Changyong Rhee of the Asia and Pacific Department of the IMF, who have worked so hard to
arrange the joint hosting of this conference starting from the initial planning stage. Appreciation
also goes to all of our moderators, presenters and discussants, including First Vice Minister
Hyoung-kwon Go, who delivered the welcome address just before, and IMF Economic
Counsellor Maurice Obstfeld, who will deliver the dinner speech tonight.
As we are all well aware, the Asian economy has sustained a rapid rate of growth over the past
50 to 60 years, and in doing so served as a locomotive driving growth in the world economy
overall. We can look at this as a result of success in the export-led growth strategy, centering
around the manufacturing industry and based on surplus labor as well as late-comers'
advantages. During this time, the economic growth pattern in Asia has been that when the
economies in the countries leading growth have entered their mature stages, the later-developing
countries have moved into their places and Asia as a whole has sustained its high growth. Japan
came first, to be followed in turn by the so-called four dragons, and then China. Now it is India
and the ASEAN countries that are emerging as new runners. In light of this, we expect going
forward that the Asian economy will sustain its role as the engine of world economic growth for
some time, while showing dynamism centering around later-developing countries.
But there are also not a few claims that this growth strategy has reached its limits. As Asian
economies have gradually entered their mature stages, it has become difficult for them to sustain
extensive growth strategies based on increasing their production factor inputs. Moreover, in the
course of export-led growth centering around the manufacturing industry, sectoral imbalances
have built up - between the manufacturing and the service industries, and between exports and
domestic demand - and these are becoming obstacles to sustainable growth. For this reason,
skeptical views about the Asian economy's future are also emerging in some corners.
Given this mix of expectations and concerns for the Asian economy's future, I think we can see
the conference here this week as a very timely and meaningful one, in having brought together
many great scholars and policy authorities from around the world, to consider the possibility of
sustainable economic growth in Asia and soberly discuss the future challenges and policy
responses.
Before discussions begin here today, I would like to say just a few words about some of the
challenging tasks now confronting the Asian economy.
The first task is to change our growth paradigm. Going forward we will have to break out of the
paradigm of extensive growth based on the expansion of production factor inputs, and move to
one of intensive growth driven by innovation. Productivity in major Asian countries has already
clearly slowed since the global financial crisis. And in response, we need to design a scheme of
social and economic incentives to modernize the old systems and practices now blocking higher
productivity growth, and to stimulate innovation. It will also be very important to promote fair
competition and revitalize R&D investment, through the restraint of rent seeking and the easing
of regulations, and to discover thereby new technologies and new engines of growth.
The second task is to push ahead with economic rebalancing. We need to move from export-led
growth to growth characterized by a balance between exports and domestic demand. To boost
domestic demand, we need to build a virtuous cycle between growth, employment, and domestic
demand by actively nurturing SMEs and service businesses that contribute greatly to job creation.
Macroeconomic policy can also be utilized to support the domestic demand expansion. But we
should bear in mind that, if expansionary fiscal and monetary policy stances become even a bit
prolonged or excessive, this can undermine fiscal soundness and cause a buildup of financial
imbalances. It will thus be necessary, while focusing on sustainability from the medium- to
longterm perspective, to implement our monetary, fiscal and macroprudential policies harmoniously,
along with our micro-structural reform policies.
The third challenging task facing the Asian economy is our response to population aging. Even if
we succeed in shifting the growth paradigm, and in rebalancing the economy, a failure in
responding to population aging will make the escape from possible structural low growth difficult.
Negative effects due to population aging are already appearing in first moving countries like
Japan. And in a considerable number of later-developing countries, their so-called population
bonus effects are expected to disappear before long. Population aging is progressing rapidly in
Asia, while preparations for it are insufficient. In response we will have to reform our labor
markets to ensure vigorous participation in economic activities by not only the aged but by youth
and women, while on the other hand implementing social and education support policies to
increase birth rate.
Ladies and gentlemen!
It is said that our greatest enemy is not something that is external to us, but rather our own
internal vanity and inattention. We cannot be content with the remarkable results that our Asian
economy has achieved over the past half-century. The challenges that the Asian economy now
faces are new ones, ones never previously experienced, but if we remain ever alert to this
situation, and make provisions, and in particular if our regional countries cooperate closely, then
we can welcome this as an opportunity for one further takeoff.
I look forward to many meaningful measures being presented here today and tomorrow, through
active expression of views and enthusiastic debates among participants, which can enable the
Asian economy to overcome the challenges confronting it. Given the difficulty of the challenges
before us, your deep and wide-ranging wisdom and insights are very much needed.
I would like to express one more time my profound gratitude to IMF Managing Director Christine
Lagarde and all of our other esteemed participants attending this conference.
Thank you.