NIKITA DESAI:

Good morning, everyone. My name is Nikita Desai. I am the Director of Policy and
Corporate Programs, and I am so excited to welcome you to our Corporate
Program Kickoff.

Today's presentation looks at the remarkable rise of Seoul as a global financial

center. In March of 2009, Seoul ranked 53rd among global financial centers. By
March of 2012, it skyrocketed to No. 9. Here to discuss the factors that have led
to Seoul's marked rise is Dr. Yoon-shik Park of George Washington University's
School of Business.

Prior to joining the academe, Dr. Yoon-shik Park was a Senior Economist at the
World Bank. He has served as a Financial Adviser to the Chairman of the
Samsung Group in Korea as well as serving on Samsung's Board of Directors. Dr.
Park has an MBA in finance, a master's in economics, a doctorate in business
administration in international finance from Harvard and a PhD in economics
from George Washington University.

Please join me in welcoming our esteemed guest, Dr. Yoon-shik Park. [Applause]

YOON-SHIK PARK:
Thank you very much for your very generous introduction. I apologize for taking
up your Friday morning like this, but I believe the topic suggested by The Korea
Society is very important. I am very grateful for all the work done by The Korea
Society to introduce Korea to the American audience. In fact, I had the pleasure
some years ago of attending the Van Fleet Award dinner at the Pierre Hotel in
honor of the chairman of Samsung, and I am proud that Samsung has funded
this conference center.

Today I am here to share my view of Seoul's rise as a global financial center. In

fact, Seoul's rise has been accompanied by a general rise over the last several
decades. Global trade, measured in terms of total exports, accounted for $18
trillion of all world trade volume in 2011. The daily foreign exchange trading
volume in 2010 is estimated to have been about $4 trillion, over fifty times that
of the New York Stock Exchange.

I started my studies in finance close to fifty years ago. At that time, discussions
about finance were mostly about corporate finance. In the last half century,
compared to the real sector of the economy, the financial sector has increased
far more rapidly. Fifty years ago, international finance was a service industry for
international trade, and trade financing was the major activity. Nowadays,

international finance has grown so large in comparison to trade that it seems like
the tail is wagging the dog rather than the dog wagging its tail.

In terms of the relative contribution of the financial sectorin the 1950s, the
GDP share of value-added by the U.S. finance industry was about 3% of GDP.
Now it's about 9%, a threefold increase over the last half century. The U.S.
financial sector accounted for about 10% of total business profits in the early
1980s, but grew to 40% in 2006, right before the financial crisis. So, both in
relative and absolute terms, the financial sector has grown. Both quantitative
and qualitative growth has been impressive.

When I started my training in finance fifty years ago, we didn't have derivatives.
We didn't have products such as a mortgage-backed securities, CMOs, or
collateral debt obligation securities (CDOs). We didn't have active trading. The
stars of Wall Street were corporate finance types or investment bankers. These
days, the stars of Wall Street tend to be the traders, who make tens of millions of
dollars for their firms.

The quantitative and qualitative increase in finance has also been accompanied
by the rise of international financial centers. The most authoritative data I have
found is provided by the annual Global Financial Centers Index published in
London. As you can see, the top five international finance centers largely stayed
the same; but what is interesting is the rapid rise of Seoul's ranking as an
international financial center. I will talk about some of the factors leading to
Seoul's rise in international financial centers in a few minutes.

Before doing that, let's look at the roles that international financial centers play.
In addition to providing a place for the headquarters or regional offices of large
international banks, international financial centers are home to many other types
of financial service firms who specialize in services such as insurance, shipping,
mutual funds, and hedge funds. Multinational corporations also are attracted to
international financial centers for either their corporate offices or regional
headquarters. International financial centers have also become the center of
trading in foreign exchange, equities, loan syndications, M&A and other financial
operations.

Most importantly, international financial centers are becoming the centers for
financial innovation, not just with new financial products such as CDOs, CDSs,
and others; but also new financial services and new techniques. Financial
innovation is much more than simply creating new financial products.
International financial centers are playing a primary role in driving this
innovation.

We classify financial centers into roughly four types. The first type is primary
centers that service clients globally. Then there are financial centers that serve
as funding centers (like Hong Kong and Singapore) which are normally
surrounded by very dynamic, fast-growing economies. Their role is to collect
funds from around the world and then use those funds to finance regional
economic development.

Conversely, collection centers (like the Middle East) store surplus savings. Rather
than having individual countries like Kuwait or Saudi Arabia try to manage their
assets globally, they put funds in the collection centers of Bahrain or Dubai. The
collection centers then invest these funds globally. Finally, there are the booking
centers or shell branch locations.

Some scholars classify international financial centers as global players, regional

players, niche players and offshore centers. Global players have a global
clientele. Regional players cater to a regional clientele. Niche players specialize
in servicing certain types of clients and certain types of financial services (like
Liechtenstein's tax management and Zurich's asset management). Offshore
centers carry out a similar function as booking centers.

In addition, many financial centers maintain symbiotic relationships between

primary financial centers and surrounding satellite financial centers. New York is
an example of a global financial center or global player. New York's satellite
centers are Bermuda, the Cayman Islands, Panama and the Bahamas. These
centers feed off the global New York financial center. We see the same
relationship between London, the Channel Islands, and the Isle of Man. In
Singapore, you have Labuan as a satellite financial center and Seoul has Busan
as a satellite financial center. Busan provides specialized financial services for
industries such as ship financing, because of all the major shipbuilding
companies in the surrounding areas.

International financial centers each have their own particular functional

specializations. Functional specializations take advantage of the competitive
strengths of the centers, largely determined by the location economics and
regulatory environments. The two major international financial centers in Asia
are Hong Kong and Singapore, and there are many similarities between the two.
They are both former colonies of Great Britain. They both have dynamic
economies with political stability, excellent transportation networks and
communication facilities, advanced service infrastructures, English-speaking
workforces and British-influenced efficient civil services.

There are also differences between Singapore and Hong Kong, and each city
depends upon their unique strengths in order to gain advantage. Singapore is
located between Europe and Asia; so during one business day, their business
hours overlap with Asian cities such as Tokyo, Seoul, and Hong Kong. The Middle

East and Europe have business hours that overlap with cities such as London and
Zurich. Because of this, Singapore has developed into a thriving trading
operation center; trading in foreign exchange, non-deliverable forward (NDF)
contracts, Asian dollars and other international money and bond market
operations.

Alternatively, Hong Kong is close to the dynamic East Asian economies of China,
Korea, and Taiwan. This makes Hong Kong better known for project financing and
loan syndications. In addition, Hong Kong hosts the headquarters of several
multinational Asian corporations. So, one can see international financial centers
taking advantage of their relative strengths, as well as the functional
specializations of their members.

Now you may wonder why, in the day of the Internet and advanced IT services,
we need to have specific geographic financial centers. Well, having these
financial service firms in one location (in a particular regional financial center)
makes a lot of sense. For example, by having all these financial centers in one
place, we have economies of scale in terms of overhead costs. Additionally, you
can manage a team of financial professionals in one place. You can easily reach
critical mass. There are many advantages to having financial institutions in one
location, and this is why international financial centers are continuing to develop
and grow.

This concept is not unique to finance. Michael Porter of Harvard Business School
made his name discussing international competitive advantage theory
demonstrated by the combination of industry and geography. He talks about the
important role of "clustering" firms (and not just financial firms). For example,
textile-related companies are clustered in North and South Carolina. Fashion shoe
companies are clustered in Northern Italy. My wife bought me a pair of
Ferragamo shoes. They're really very comfortable. [Laughter]. There's the
entertainment industry in Hollywood, IT-related firms in Silicon Valley, and the
wine industry in Napa. In other words, clustering is not unique to finance. It
happens with many other industries, as well.

However, in order for international financial centers to develop and thrive, they
need active promotion by their host countries. Host countries, in turn, encourage
the development of financial centers because it provides enormous benefits. The
most important advantage is the promotion of globalization and modernization.

Korea has many smart people, but they are divided into two groups: the
bureaucracy and corporate executives. Some have a more domestic orientation;
others have a more globalist viewpoint; and there is ongoing friction between the
two parties. This does not only occur in Korea. During my ten-year career at the
World Bank, I visited many developing countries. Some countries want to

become more internationalized and to embrace modern economic concepts.

These are the internationalists.

Then there are many others who are equally smart and dedicated, but more
oriented internally towards their domestic roots. I believe that hosting an
international financial center strengthens the hand of the globalist or
internationalist. I am not promoting internationalization for the sake of
internationalization. I believe that any economy, which is more open to a global
standard, will grow much more quickly than those countries wishing to remain
closed. Again, one of the primary benefits of hosting an international financial
center is this concept of globalization and modernization.

International financial centers also promote the development of a financial

infrastructure. International financial centers are not just an assembly of banks.
There are many types of global financial services, including global legal and
accounting practices, modern hotels, and modern housing. Financial
professionals from all over the world need modern housing, modern
transportation, up-to-date medical services, and even cultural facilities. All types
of financial services can make up the infrastructure of an international financial
center and induce faster development.

Then there are the jobs. These are not hamburger-flipping jobs. These are high
value-added, professional, high-paying jobs; the kind of service sector jobs that
any modernized country would promote. Additionally, there are enhanced
government revenues derived from taxes, dues, and fees. They encourage
foreign direct investment and foreign portfolio investment. They attract the
regional headquarters of MNCs. The hosting of a global financial institution brings
access to the latest global financial intelligence and new trends, and it's easier to
attract direct investment. They encourage greater cultural activities and a higher
quality of life, similar to the standard of living in Seoul.

Finally, international financial centers enhance international security. Lee Kuan

Yew, in his autobiography, promoted the development of international financial
centers in the late 1960s. Mr. Lee emphasized that Singapore had just gained
independence from Malaysia, but was surrounded by huge Muslim countries.
Singapore is a tiny city/state. In the late 1960s, it was composed of close to 90%
Chinese immigrants, with Indonesia in the south and then Malaysia in the north.

Lee Kuan Yew thought that attracting the branch office of a major U.S. bank like
Citibank or J.P. Morgan would be the equivalent of attracting one military division
of the U.S. Army. In other words, the United States, Great Britain or other
developed countries would never look kindly on any foreign invasion forces
taking over their financial institutions. An additional benefit is the addition of jobs
and other contributions to economic activities for the host city. So, there are
many benefits to hosting an international financial center.

Korea will derive unique benefits from becoming an international financial center.
The Korean economy's development model has been, to this point, exportcentered and almost neo-mercantilist in nature. However, as Korea develops
further, there will be a greater resistance towards this kind of mercantilistic
model.

We need a new economic development paradigm, one with less emphasis on

Samsung's electronics or Hyundai Motors. We also need domestic, servicerelated economic developmentnot hamburger-flipper service jobs; but more
professional, high value-added service jobs. What could make a better
contribution to economic development than the expansion of financial services?
Unfortunately, Korea is relatively backwards in the service sector, despite the
impressive Korean multinational firms.

The share of service sector value added for G-7 countries is about 72% of the
GDP. Korea's share is only 60%, a much smaller segment. Additionally, the share
of total employment in the service sector is 75% for the G-7 countries, while
Korea's share is 67%. There is a lot of room for improvement. If you look even
more deeply, the productivity of the Korean service sector is estimated to be only
one-third of that of Switzerland and only one-half as much as the productivity of
the United States. Yes, the productivity of Samsung Electronics, Hyundai Motors,
and POSCO is truly world-class (they are as competitive as any big boys in the
world) but Korea's share of the service sector is very small.

Why? It is because the Korean service sector is concentrated in wholesale and

retail sales, food services, and lodgings. I consider these services almost
primitive. More advanced countries have service sectors dominated by more
knowledge service industries like banking, finance, insurance, medicine,
telecommunications, and research and developmentand at the forefront of the
knowledge and service industry is financial services.

Now, in order for Korea to develop as a major international financial center,

Koreans have to determine the requirements necessary to do so. First, you need
political and social stability and a business-friendly government. See, we are
talking about international money and hosting international financial centers,
and international money is very sensitive to foreign instability. Money can be
moved with just one click of a mouse. Therefore, in order to attract and house
international money, you have to have macro, stable political and governmental
development.

In line with this, financial regulation should be kept to a minimum, because

financial institutions hate undue regulation. Some of this is certainly necessary,
but there are also unnecessary bureaucratic regulations. In addition, modern

financial centers require a stable infrastructure, comparative in both cost and

quality. They're looking for a liberal visa system. It would be good to have some
kind of time zone advantage like Singapore. And let's face it. The language of
international finance is Englishnot French and not Chinese. Therefore, you need
a significant pool of English-speaking professionals in addition to modern legal
and accounting service firms. A host country should have a dynamic economy.

Now, what comparative advantages does Korea have to attract, nurture and
develop an international financial center? Why has Korea's ranking risen to No. 9
of all global financial centers? The most important reason is the dynamic Korean
economy. Korea's economy is the 13th largest in the world and the fourth largest
in Asia. Seoul has probably one of the most efficient international airports
(Incheon International Airport). About one-quarter of the world's GDP is produced
within two-and-a-half hours of flying time from Seoul, and by the year 2020, it is
expected that 30% of the world GDP will be produced within that region. Korea is
experiencing dynamic global economic development.

Korea's financial assets account for eight times Korea's GDP. This is even higher
than the U.S. The financial assets of the United States are about four-and-onehalf times U.S. GDP. The U.K.'s financial assets are equivalent to five times their
GDP. Korea is almost twice as much, so Korea is already a well-developed market
financially.

Korea is also, as I said, home to world-class multinational corporations, and

Korea's IT infrastructure is world-renowned. I think Korea's IT infrastructure is on
par with Singapore and far more advanced than the U.S. and other countries. We
have a very vibrant and deep-rooted democracy with a modern governance
structure. I think these assets are what led Korea to become the ninth largest
global financial center. This is not something that happens overnight, but there is
an environmental competitive advantage.

In addition, a major effort has been put forth by both the private and government
sectors to develop an international financial center in Korea. About ten years
ago, a group of financial practitioners (scholars, bankers, and other thinkers)
formed the Seoul Financial Forum. In 2002, they published Korea as an
International Financial Center: Vision and Strategy. It's a road map. Soon after,
the Roh Moo-hyun administration came into power in 2003. They adopted the
First Financial Hub Roadmap. That was strengthened, revised and updated in
2005 and renamed the Second Financial Hub Roadmap. Statistics show that
during the Roh Moo-hyun administration, Seoul was relatively low in the ranking
of global financial centers.

In 2008, the Lee Myung-bak administration came into power, and the
determination to become an international financial center was promoted far
more energetically. I saw it with my own eyes. On February 25, 2008, Lee Myung-

bak became president. Two months later in April 2008, President Lee and I had
lunch in his private residence just behind the Blue House.

In the late 1990s, he spent one-and-a-half years in Washington as a visiting

scholar at George Washington University. I was his faculty sponsor. So, I know
him personally, and my family knows his family. (He liked Washington so much,
he asked George Washington University to grant him a visiting scholarship for an
additional yearso he stayed for two years.) While President Lee was at GWU, he
well understood the impact an international financial center would have on
Korea's growth, and how it would move Korea to the next level.

One-and-a-half years later, he returned to Korea to run as mayor of Seoul. Once

he became mayor, one of his main promises was the development of Korea as an
international financial center. Korea's Wall Street in Seoul, on Yeouido Island, is a
brand new, huge international financial center. This is the product of Lee Myungbak.

When I had lunch with him in April of 2008, I again reminded him of the
importance of developing an international financial center, and he fully agreed
with me. In fact, during the lunch he placed a call to Dr. Il Sakong, who was at
that time his key economic adviser and the chairman of Korea's Comparative
Commission. He said to Dr. Sakong, "By the way, Dr. Park is in town. Why don't
you get together and discuss some matters?"

The next day, Dr. Il Sakong and I had lunch, and I intentionally invited Kim
Kihwan, who was the founder and chairman of the Seoul Financial Forum. As we
talked, I realized I was part of the choir. Both Il Sakong and Kim Kihwan
understood the importance of having an international financial center, while the
Lee Myung-Bak administration really pushed the notion of Seoul as a truly
competitive global financial center. I think they succeeded somewhat, as the
latest data now ranks Korea at No. 9.

However, my opinion is that this still is not satisfactory, because Korea has far
greater potential. I think they can be on par with Singapore or Hong Kong. Why
hasn't Korea been as successful as Hong Kong or Singapore? I think there is still a
lot of bureaucratic and interest group resistance to the regulations and other
measures necessary to promote an international financial center.

The attraction of entities like for-profit hospitals and international schools is one
case for development of international financial centers. If you want to attract topnotch international bankers and professionals in legal, accounting and other
services, you have to provide the latest, most modern medical services and
facilities for their families and themselves. This also requires modernized schools.
The Korean government has been talking for the last ten years about introducing

for-profit hospitals. What can a for-profit hospital do? Generate enough revenue
to introduce innovative medical services.

In this regard, Korea has failed miserably. Korea is far less advanced than
Thailand. The latest data I have is as of 2010. Thailand attracted 1.56 million
foreign medical patients. Korea attracted only 80,000. China (a socialist
economy) has 8,440 for-profit hospitals accounting for 10% of all the Chinese
medical facilities.

Korea has still shown no movement. The Korean government tried very hard to
introduce a for-profit hospital in Incheon Song-Do's free economic zone, as well
as Je-Ju Island. It hasn't happened yet. Look at our competition, Singapore. They
are a successful international financial center, and medical tourism is a major
service industry there.

Many rich patients from the Middle East and South Asia go to Singapore. When I
visited Jakarta, many people told me that they travel to Singapore's hospitals
quite often, even when their child only has a cold. It is very easy to get from
Jakarta to Singapore. Having for-profit hospitals not only upgrades your medical
services; it generates other businesses. Korea has failed so far.

Therefore, you can see that despite all the government effort to develop Seoul as
a major financial center (and it has succeeded in some areas) they have a lot of
room for improvement, and I do think improvement is coming. At least 10-20% of
the hospitals should be for-profit hospitals so that both foreign and local patients
will pay additional monies to get better medical care.

The true development of a successful financial center does not happen naturally.
Do you believe that London and New York became financial centers organically?
No! It did not happen that way. In 1975, New York took major steps to liberalize
financial regulations and deregulate brokerage fees. This was known as the
"Mayday" development, because on May 1, 1975, there was a sea change of
deregulation on Wall Street. That introduced a host of new services.

In the mid-1980s, London began falling behind in international financial center

rankings; so in 1986, the city of London engaged in a major deregulation known
as the "Big Bang." The premier global financial centers of New York and London
did not emerge naturally. There was a lot of effort by city fathers and
government leaders to nurture those centers.

Look at some of the areas with successful regional financial centers. I think the
best example is Singapore. Singapore became independent in 1965. At that time,

they had a 14% unemployment rate, and 20% of their GDP was derived from
British military services. However, in 1968, the British government announced
that they were going to shut down their military presence in Singapore.
Suddenly, 20% of the GDP was gone. It was a disaster.

The Singapore of 1968 was a poor, backwards developing country, far poorer
than the Philippines, for example. However, in 1968, Lee Kuan Yew was able to
persuade his colleagues to take the first step to turn Singapore into an
international financial center. Why? Because in 1968 (this is from Lee Kuan Yew's
own autobiography) he received a memo through his adviser from the manager
of the Singapore branch of Bank of America. The Bank of America executive
recommended that the Singapore government abolish the withholding tax (I
think it was a 25% withholding tax).

Remember in 1968 (the middle of the Vietnam War) many GIs in Vietnam took
R&R in Bangkok, Manila and other places, while Asian merchants brought in a lot
of revenue. Rather than depositing the dollars in the Singapore branch of Bank of
America or Citibank, they sent their money to London. Why? Because nonSingaporean and foreign depositors were subject to a 25% Singapore withholding
tax. If you deposited that money in Zurich or London, there was no withholding
tax. Therefore, a lot of money was bypassing Singapore and going to London.

As an alternative, Bank of America recommended to the government of

Singapore that they remove that tax. That would attract more dollars, and that
would help to develop Singapore's economy. Lee Kuan Yew had a hard time
persuading his colleagues, but eventually he was successful, and that was the
beginning of the development of Singapore as a global financial center. My
Korean friends tell me they consider us a backwater country. I disagree. The
Korea of 2012 is a million miles ahead of the Singapore of 1968.

Bahrain started to develop their international financial center in 1975. The

Bahrain of 1975 was filled with mud villages. There were no modern office
buildings. There was no Internet. When the ruler of Bahrain decided to develop
Bahrain as an international financial center, many people laughed at him.

Korean leaders have a lot left to do in the promotion and development of Korea
as a globally competitive international financial center. I do not believe that
Korea should try to become another New York or London (both major global
financial centers) but should specialize. Korea should try to become a regional
financial center similar to Hong Kong or Singapore. We have already generated a
lot of savings. Financial assets in Korea are equivalent to 8% of the Korean GDP.
Asset management and project financing would be excellent areas in which
Korea could specialize and develop a competitive advantage.

With that, let me stop and answer questions. Thank you very much. [Applause]

NIKITA DESAI:
Thank you so much, Dr. Yoon-shik Park. One more time, please, with a round of
applause. [Applause]

As the moderator, I would like to ask the first question. You noted earlier that
there are four different kinds of international finance centersone of them being
collection centers. I noticed that they were in Qatar and Bahrain. Do Islamic
banking rules play a factor in their profile as collection centers? In addition, this
year Seoul is ranked No. 9 of all global financial centers. In reference to the
Korea-U.S. FTA that passed this year, do you think that ranking will improve in,
say, the next three years? If you had to make a prediction, what would that
ranking be?

YOON-SHIK PARK:
I think both of those are excellent questions. Islamic finance, as you know, does
not allow the levying of interest. So, financial practices are centered on profit,
loss and the sharing of principal. During the last ten years, or so, Islamic finance
has become far more important, particularly the Islamic bond called the sukuk.
They are not only popular in the Middle East, but in Malaysia, Indonesia, and
elsewhere. Islamic finance is up-and-coming.

Now, Islamic financial services are developing not only in the Middle East, but
also in other places like Indonesia. They are experiencing exceptional growth in
Malaysia, and these days even the West is embracing Islamic financial
institutions. Therefore, it is becoming a global phenomenon. However, in terms
of being a sophisticated financial service, they are still relatively small, and
therefore, the development of Islamic financial services will not be enough to
absorb all the surplus savings and petro dollars generated in the Middle East.

Despite the development of Islamic finance, I think the Middle East still needs
professional assistance in globally managing the trillions of petro dollar savings
that they have accumulated. Therefore, I think the Middle East financial centers
like Dubai, Qatar, and Bahrain will continue to play a dominant role as collection
centers, collecting the surplus savings and professionally managing and
investing that money abroad. That is the first question.

As to your second question, KORUS or the Korea-U.S. free trade agreement

brings up a very relevant point. In Korea, they have the National Economic
Advisory Commission, and I am a member of that commission. In the last
commission meeting, I complained (because despite all the progress, I am never

satisfied. I am always pushing and pushing). Korea's service sector is still far
behind, and we have a lot left to do in this area. Moreover, if I were sitting next
to President Lee, he would agree.

When he first became president, he pushed for liberalization, deregulation, and

the promotion of service sectors; and all the bureaucrats said, "Okay, yes, sir. We
will study that." He thought that "we will study" means that the bureaucrats
would research the issue and try to find ways to promote it. However, after three
years, he found out that when bureaucrats say, "We'll study," that means, "We'll
study and then ignore everything we learned." [Laughter] So, even a president
learns on the job.

He believed that the two major free trade agreements (the Korea-U.S. FTA and
Korea's FTA with the European Union) would be catalysts to promote the Korean
service sector. I think it is up to the next president to use the substantial
progress made during the Lee Myung-bak administration. Jobs are important,
whether you are dealing with a democracy or chaebols. There is a lot of room to
improve the practices of chaebols; but for the next president, the most important
goal should be the creation of more jobs so that our highly educated young
people do not get menial service jobs, but high-class, high value-added
professional jobs in the service sectors. Having these FTAs will truly promote
that.

GARY MIZEL:
My name is Gary Mizel. My company is called 7200 to 30 Securities. It is the ratio
of mainstream to minority public companies. In Korea, how many IPOs do you
have on an annual basis, and how much money does that comprise?

YOON-SHIK PARK:
I do not have that statistic, but you are right. I think your implicit assumption is
correct. IPOs and M&As are a much undeveloped area of Korea. Korea's financial
sector has a lot of catching up to do.

GARY MIZEL:
So do we.

YOON-SHIK PARK:
Well, perhaps compared to Hong Kong. Many IPOs seem to be taking place in
Hong Kong.

SIGURD ULLAND:
What factors do you believe led to the increased ranking of Seoul in the index
you showed us?

YOON-SHIK PARK:
There are many factors. As I said, the Korean government for the last four years
has considered the development of an international financial center as one of
their top priorities. I understand I have criticized the Korean government quite a
bit; but compared to other countries, the government from the Blue House down
has really pushed this idea. So changing the attitude of the Korean government
is number one.

Number two, I think there is a growing realization (even among the Korean elite)
that we need a new economic development paradigm, and that is the
development of the service sector. As I said, the term "medical services" is still
very unpopular. The legal sector only recently opened up because of the FTA. The
knowledge service industry (including the financial service sector) is on the
forefront. I believe there is a developing consensus between the government and
the elite of Korea that this is the next new frontier. The Korean economy can truly
join the ranks of advanced countries. The government sector alone is not
enough. It has to be a combined effort with the private sector.

YEON JEAN YOON:

According to your explanation, Shanghai was ranked No. 5 in 2011, but it was
ranked No. 8 in 2012. What happened to Shanghai? In addition, you
recommended Seoul as a specialized regional financial center like Hong Kong
and Singapore. In what sectors or areas do Hong Kong and Singapore's regional
financial centers specialize?

YOON-SHIK PARK:
I'll answer the second question first. As I said, Hong Kong is lucky in terms of
their geographical location. They played the role of gateway for mainland China
until China opened up. For many decades, to do any business you normally used
Hong Kong. Even Taiwan used Hong Kong to do business with China.

However, in the last two decades, the Chinese government has made a
conscious effort (particularly the city fathers of Shanghai) to develop Shanghai
as a major international financial center. Yes, it is a friendly competition with
Hong Kong. Nevertheless, Shanghai city fathers thought that China is big
enough, and we should not rely only on Hong Kong for our Chinese financial
service requirements. Therefore, the city fathers of Shanghai put a lot of effort

into regulating and developing the infrastructure of Shanghai. If you visit

Shanghai now, you will see a very modern, metropolitan city.

When I visited there in the 1980s, it still was a very backward city. Even the hotel
services were bad. Earlier this year, there were about twenty-five officials sent by
the Shanghai government to the United States. They stayed two months in this
country and spent a lot of money in New York and Washington. I spent two days
with them discussing Shanghai's strategy for continued growth as a prominent
international financial center.

The role of government is critical to developing a country like China into an

international financial center. The Chinese government has acted very wisely.
They said that manufacturing is not all there is. In order to develop China further,
they need a service sector as well, particularly financial services. Shanghai
traditionally has been far more developed than Hong Kong (at least they were
before the revolution). They will now regain Shanghai's former glory and become
an international financial center. The aid is decent, but China has a long way to
go, and Seoul has to compete aggressively with Shanghai. Shanghai has many
more advantages than Seoul in many areas; but, on the other hand, Seoul has its
own advantages, like the free enterprise economy.

As to Shanghai's fall in the ratings, I think that moving between being ranked No.
5 to No. 8 and back again is not that relevant. I believe this is based upon
various financial and economic factors. What is clear is that Shanghai is not at
the top of the international financial centers, but is definitely an up-and-coming
second tier financial center. However, a change from five to eight is not that
important.

NIKITA DESAI:
If there are no further questions, I would like to thank Dr. Yoon-shik Park again.

YOON-SHIK PARK:
Yes. Thank you so much. [Applause]

NIKITA DESAI:
Thank you so much for coming. For your train ride up to Washington, D.C., we
would like to give you this book, From Pusan to Panmunjom by General Paik.

YOON-SHIK PARK:
Thank you so much.

NIKITA DESAI:
Thank you all for attending. [Applause]