The Wright approach to Korea

Are you impressed with the Korean attitude to foreign investment today?

Wright: I was in Korea from 1990 to 1994 and I'm hugely impressed by the changes which have taken place. I'm particularly impressed by the Korean government's willingness to take account of the views of foreign institutions and companies, and use it to mould their economic policy. This is very true in terms of the way they've welcomed foreign investment – which is quite different from the comparatively slower pace of the Japanese to accept the need to promote this.

Much has changed in Korea since 1997. Has the mentality of the executives running the chaebol changed?

When we read about SK, we saw a chaebol approach that we thought had gone. What is good is that the new president has committed himself to the policy of chaebol reconstruction and to a process of transparency within the economy.

The focus on transparency should ensure that the reform of the chaebol continues. The chaebol as such are going to remain in Korea, because they're the heart of the economy.

The word chaebol is the only Korean word many non-Koreans know. The characters for chaebol are identical to those in Japanese for zaibatsu. It means a large conglomerate. They historically had too big a hold on the banking system. But that is changing and changing to the good.

For foreign investors there's obviously a lot of uncertainty.

The president told a European and US audience of executives in February that there will be no foreign companies in Korea. Why? He said that foreign companies in Korea are Korean companies, and we will be treating them on the same basis.

In the 1980s Thatcher made the same point to foreign companies and told them she would treat them as UK companies if they set up in the UK. So that sort of message from President Roh is very encouraging.

What's your forecast of how the Korea/ China relationship will develop?

On the economic side, Korea was able to grow in the 1980s and 1990s without much competition on unit labour costs and the costs of its products. Now that is not the case. Now Korea is competing as a fairly high wage economy. China as a low wage economy creates a challenge for Korea which it didn't have pre-1997.

One of the things that gives me great confidence about Korea is that it has some extremely able researchers and a lot of them have trained in US research labs. But they will have to work harder than before and China is a challenge.

The political issue is whether the received wisdom of handling North Korea remains true. In the early 90s the received wisdom was that China could never accept a major role in dealing with the North Korean problem because the leaders of China had seen their comrades die from 1951 onwards when China entered the Korean war, and so they would not encourage a merger of the two Koreas. It was an emotional argument.

But 10 years on, with a new group of younger leaders, will the Chinese leaders still be constrained by that emotional context? Or will they become facilitators?.

Is there an issue that China fears North Korea opening up and becoming a competitor? It's one of the few places with lower labour costs than China.

I've not seen any official confirmations of that view, but if you look at it as a dispassionate observer, you have to recognize that North Korea is an important source of cheap labour for South Korea which could allow them to mitigate the economic challenge from China.

There is a good chance Korea could become a powerhouse. There is a lot of complimentarity. North Korea has Chinese-style labour costs and the South has the technology and can facilitate trade.

Is a preliminary economic merger possible without a political merger?

That addresses the issue from an important standpoint. It may be easier to deal with the political sensitivities if you talk about this in terms of a merger, rather than unification.

If it can be seen [by the North] that economic integration will end famine and poverty in the North, there is a much better chance of making progress, rather than talking in black and white stark, ideological terms.

The developed world has a real interest in trying to find a way through this process. There's a match of humanitarian issues and nuclear issues, and economic growth issue for the region.

I had a meeting with a senior North Korean trade official when I was still working for the British government. He was clearly trying to find ways in which it could be possible to persuade foreign companies to get involved in the North.

If you look back at the 1930s you'll find that there were a lot of extractive industries in the North. A good way to benefit North Korea and the West would be to try and get some of these metals and minerals out of the country once again as a tradeable good. It's a way you could start opening the North up. They are very valuable metals.

You are in Korea a lot. Does this point to Barclays optimism about the growth of its Korean business?

I am optimistic about the growth of Barclays in Asia as a whole. We have a resilient business model focusing on fixed income and risk management. Our businesses are growing throughout Asia from Korea down to Australia. We are top of the league table for bond issues from Korea.

If you look at Asia as we do, as a growing market, it's right we are putting efforts into Asia.

The development of the euro bond market has been exciting and we have been very successful in that business. And it is the Asians that are discovering the euro market and are seeing it as an alternative to dollars. That means Barclays will be a considerable player in Asia for the foreseeable future.