Seminar on the 20th anniversary of Korea’s OECD membership
Remarks by Angel Gurría
Seoul, Korea, 25 October 2016
(As prepared for delivery)
Dear Vice-Minister Lim, Ambassador Yoon, Ladies and Gentlemen,
It is an honour to be in Seoul to celebrate this milestone: 20 years of Korean membership of the OECD. I would like to thank the Ministry of Foreign Affairs for hosting us today.
The invitation for Korea to join the OECD represented the culmination of 35 years of extraordinary growth, which transformed Korea into a major industrial power with a leading innovation capacity. Korea has been among our most rapidly growing members over the past two decades, achieving a GDP growth rate of 4.2%, double the OECD average, and boosting per capita income from 57% of the OECD average in 1996 to 87% in 2015.
The OECD will continue to support Korea on this journey as it confronts a number of long-term challenges.
Perhaps the most difficult is population ageing. The transition from the fourth-youngest country in the OECD today to the third oldest by 2050 creates challenges, notably for public finances. Public social spending is projected to rise from around 10% of GDP in 2013 to as high as 29% by 2060. Which is why we welcome Korea’s commitment to raise the country’s employment rate to 70% by 2017.
As our latest Economic Survey of Korea shows, policies should aim to raise the employment rate of women, which is 20 percentage points lower than that of men, the fourth-largest gap in the OECD! In fact, if the female participation rate for each age cohort were to match the rate for men by 2050, the labour force would be nearly one-fifth larger.
Narrowing the gap requires addressing issues like the low take-up of maternity and parental leave, the availability of high-quality childcare, long working hours, and the large gender wage gap – the highest in the OECD.
Korea also needs to make better use of older workers, who leave companies at an average age of 53, in a country with a life expectancy of 82 years. Extending their careers requires increasing life-long learning to boost skills and shifting away from the seniority–based wage system. So the adoption of the wage peak system is a positive step.
Labour market dualism is another key challenge. A third of employees are non-regular workers, such as fixed-term, part-time and dispatched workers. In 2014, non-regular workers were paid 38% less than regular workers per hour, even though the skills of temporary workers match those of permanent prime-age workers. This makes labour market dualism a driver of income inequality but also relative poverty, which is now the seventh highest in the OECD.
Breaking down labour market dualism requires a comprehensive strategy of relaxing employment protection for regular workers and making it more transparent, increasing the minimum wage and expanding social insurance coverage and training for non-regular workers. There are also serious equity implications for future generations: spending on education in non-regular households is only 60% of that of regular households!
The OECD is also supporting Korea to overcome its large productivity gaps between manufacturing and services, and between large and small firms. Overall labour productivity is only 50% of the top half of OECD countries.
The size of the gap is surprising, given Korea’s large investment in education and innovation. For example, the share of young people with a university education in Korea and R&D expenditure as a share of GDP are the highest in the OECD! Korea needs to get more out of this investment with policies to strengthen competition and improve resource allocation. Priorities are to reduce the stringency of government regulation, which is one of the highest in the OECD, and remove barriers to trade and investment, which were the second highest in the OECD area in 2013.
But the country also needs to address the skills mismatch between those skills acquired in school and those needed by firms. The OECD conducted a diagnosis of Korea’s Skills Strategy and stands ready to help Korea move from diagnosis to action in order to address this mismatch.
Finally, Korea’s future prosperity also rests on the transition to a low-carbon, climate-resilient economic model. Yet GHG emissions continue to rise, coal is set to remain a core part of the energy mix, and road transport continues to be supported as the dominant form of mobility. The OECD’s Environmental Policy Review of Korea will offer policy recommendations to curb emissions and improve the quality of air and water. The OECD also published in 2014 the first ever country-specific case study – Compact City Policies: Korea – which focuses on green growth policies in urban areas. We can’t deliver on the SDGs or on the Paris Agreement without effective, co-ordinated urban policies.
In the area of global development, Korea continues to make a major contribution. Korea’s economic transformation, known as the “Miracle on the Han River”, is a source of inspiration for developing countries.
Indeed, Korea has played a key role in extending the impact of the OECD to developing countries. Just a year after Korea joined, we established the OECD Korea Policy Centre, helping share best practices and policy experience with partner economies in the region. This was followed by the creation of a Regional Centre for Competition in Seoul in co-operation with the Korea Fair Trade Commission.
And I should also mention Korea’s strong support for the launch of the OECD’s Southeast Asia Regional Programme in 2014, which has strengthened the policy exchange between ASEAN and OECD Members.
But Korea’s role in promoting development is also global. Korea hosted the Fourth High-Level Forum on Aid Effectiveness in Busan in 2011, launching the Global Partnership for Effective Development Co-operation. The OECD and UNDP provide a joint Secretariat. Every year since 2014 Korea has organised the Busan Global Partnership Forum to support the implementation of the Busan commitments at the country level. And this is just the tip of the iceberg!
Ladies and Gentlemen, this level of engagement speaks of our strong friendship; our deep mutual respect and the promise of our shared future. On behalf of the whole OECD community I congratulate Korea on the 20th anniversary of its accession, and I look forward to enriching our partnership in the years ahead.