1. Development of Korea As An International Financial Hub SEOUL FINANCIAL FORUM November 20, 2003

2. What ? Why ? When ? INTERNATIONAL FINANCIAL CENTER

3. WHAT ? Domestic Financial Center ? International Financial Center ?

4. ... ALLOCATING IT TO PRODUCTIVE USES RAISING CAPITAL... FINANCIAL INTERMEDIATION

5. WW DEPOSITORS COMPANIES FINANCIAL INTERMEDIATION

6. WW COMPANIES USESSOURCES DEPOSITORS FINANCIAL INTERMEDIATION

7. WW DOMESTIC COMPANIES USESSOURCES DOMESTIC DEPOSITORS DOMESTIC FINANCIAL CENTER

8. WW INTERNATIONAL COMPANIES USESSOURCES INTERNATIONAL DEPOSITORS INTERNATIONAL FINANCIAL CENTER

9. FINANCIAL CENTERS

10. INTEGRATED FINANCIAL CENTER

11. WHY ? Because We Can... Because We Must... Because We Will Benefit...

12. BECAUSE WE CAN... We Have The Basics... We Have Been Making Progress... We Are Very Close To Realization...

13. MARKETS FOR CAPITAL DEBT MARKETS EQUITY MARKETS FX MARKETS DERIVATIVES MARKETS VISION INTEGRATED STRATEGY

14. DEBT MARKETS EQUITY MARKETS FX MARKETS DERIVATIVES MARKETS INTERNATIONAL FINANCIAL CENTER DEBT MARKETS EQUITY MARKETS FX MARKETS DERIVATIVES MARKETS COMMERCIAL BANKS INSURANCE COMPANIES ASSET MANAGERS VISION BROKERAGE & SECURITIES HOUSES INVESTMENT BANKS SERVICE PROVIDERS INTEGRATED STRATEGY

15. DEBT MARKETS EQUITY MARKETS FX MARKETS DERIVATIVES MARKETS DEBT MARKETS EQUITY MARKETS FX MARKETS DERIVATIVES MARKETS COMMERCIAL BANKS INSURANCE COMPANIES ASSET MANAGERS VISION BROKERAGE & SECURITIES HOUSES INVESTMENT BANKS SERVICE PROVIDERS INTEGRATED STRATEGY TRANSACTION INFRASTRUCTURE ACCOUNTING STANDARDS - DISCLOSURE - CORPORATE GOVERNANCE ROBUST CONTRACT LAW - EFFICIENT DISPUTE RESOLUTION MECHANISMS - PREDICTABLE ENVIRONMENT SKILLS - EXPERIENCE - LICENSING - LANGUAGE FIDUCIARY RESPONSIBILITY - PROFESSIONAL STANDARDS & PRACTICES - COMPLIANCESOUND REGULATORY INFRASTRUCTURE - EFFECTIVE SUPERVISION - INDUSTRY CONSULTATION INTERNATIONAL FINANCIAL CENTER

16. BANKING REFORMS IN KOREA

17. TOP 100 ASIAN FINANCIAL INSTITUTIONS

18. Development Relative to Best Possible LEGEND RELATIVE POSITIONS DEBT MARKETS SHANGHAI EQUITY MARKETS FX MARKETS DERIVATIVES MARKETS OPTIMAL HONG KONGTOKYOSINGAPORE KOREALONDON MARKET PARTICIPANTS STRUCTURAL BASE

19. Development Relative to Best Possible LEGEND RELATIVE POSITIONS DEBT MARKETS SHANGHAI EQUITY MARKETS FX MARKETS DERIVATIVES MARKETS OPTIMAL HONG KONGTOKYOSINGAPORE KOREALONDON MARKET PARTICIPANTS STRUCTURAL BASE

20. BECAUSE WE MUST... Global Environment... Regional Environment... Domestic Environment...

21. THE “GLOBAL ECONOMY” All the rest is only 16% NORTH AMERICA 400 million people 1999 GDP = $10.4 trillion 34% of World GDP EUROPE 580 million people 1999 GDP = $9.4 trillion 30% of World GDP NORTH ASIA 1,470 million people 1999 GDP = $6.3 trillion 20% of World GDP

22. NORTH AMERICA 400 million people 1999 GDP = $10.4 trillion 34% of World GDP EUROPE 580 million people 1999 GDP = $9.4 trillion 30% of World GDP NORTH ASIA 1,470 million people 1999 GDP = $6.3 trillion 20% of World GDP THE “GLOBAL ECONOMY”

26. GLOBAL CHALLENGES Poor Returns For Investors –Interest Rates Low –Stock Markets Weak –Bond Markets Under Pressure Corporate Governance Issues... Accounting Practices... Fund Management Issues... Mature Economies... A Lot Of Money Looking For More Trust, Less Danger, and Better Returns

27. WHERE THE ECONOMY IS...

31. CHINA – WHERE THE ECONOMY IS...

32. CHINA – WHERE THE PEOPLE ARE...

33. CHINA – ECONOMIC REGIONS... ?

35. THE GLOBAL ECONOMY

36. FOREIGN CURRENCY RESERVES Top 4 Countries in the World Japan$ 460.7 billion China $ 258.6 billion Taiwan$ 157.0 billion Korea$ 116.7 billion ____________ TOTAL :$ 993.0 billion Source : Korea Ministry of Finance & Economy, September 2002 REGIONAL FINANCING

37. KOREAN ECONOMY

39. LITTLE BALLERINA ON A TIGHTROPE

40. THE ELEPHANT HAS AWAKENED... 8% PER ANNUM GROWTH RATE

41. DANCING ON THE BACK OF THE ELEPHANT 8% PER ANNUM GROWTH RATE

42. I’d like to talk to you about your mother...

43. KOREAN INDIVIDUALS Krw 1,152 trillion

44. KOREA - INTEREST RATES 11% – 15% 7% – 11% 5% – 8%

45. RELEASE OF THE CAGED TIGER ?

46. KOREA LARGE AMOUNT OF ASSETS WITH FINANCIAL INSTITUTIONS LARGE, ACTIVE DOMESTIC STOCK MARKET LARGE, ACTIVE DOMESTIC GOVERNMENT BOND MARKET LARGE DOMESTIC CORPORATE BOND MARKET LARGE AND GROWING DOMESTIC DERIVATIVES MARKET MANY DOMESTIC AND INTERNATIONAL FINANCIAL INSTITUTIONS IN ALL SECTORS SIGNIFICANT EFFORTS TO REFORM DOMESTIC MARKET PRACTICES AND BEHAVIOR

47. KOREA MASSIVE LIBERALIZATION OF FOREIGN INVESTMENT HUGE INCREASE IN FDI SUBSTANTIAL FOREIGN PORTFOLIO HOLDINGS CONTINUING IMPROVEMENTS IN “HONEST ACCOUNTING” BUT : MANY CORPORATES STILL FAIL TO EARN SUFFICIENT RETURNS TO REPAY THEIR DEBT – “INSOLVENT” MANY CORPORATES FAIL TO GENERATE SUFFICIENT RETURNS TO JUSTIFY EQUITY INVESTMENT RISKS CONTINUE INADEQUATE RETURNS

48. DOMESTIC INTERNET USERS UNBALANCED YIN AND YANG

49. DOMESTIC CHALLENGES Poor Returns For Investors –Interest Rates Low –Stock Markets Weak –Bond Markets Under Pressure Corporate Governance Issues... Accounting Practices... Fund Management Issues... Maturing Economy... A Lot Of Money Looking For More Trust, Less Danger, and Better Returns

50. FINANCIAL INTERMEDIARIES MUST CHANGE SIGNIFICANTLY CHANGING WORLD – To Survive in the Future World – To Better Serve Korean Families – To Create Real Value

51. DOMESTIC INTERNET USERS RE-BALANCING YIN AND YANG

52. KOREA’S FUTURE Achieving the economic level that Korea deserves over the next decade

53. BECAUSE WE WILL BENEFIT... GDP... Employment... Knowledge-Based Economy... Survive The Global Storms...

54. GDP... + Krw 33 trillion in 2002 Equivalent + 5.6% Value-Added Impact NOTE : Only reflects primary effects – does not include secondary benefits from improved domestic capital allocation and enhancement of corporate sector

55. + 450,000 Jobs (2.0)% Reduction in Unemployment Rate EMPLOYMENT...

56. KNOWLEDGE-BASED ECONOMY... Intelligent Financial Intermediation is a Vital Component of a Knowledge-Based Economy Other Sectors of Knowledge-Based Economy Can Only Be Fuelled by Advanced Financial Intermediation

57. SURVIVING THE GLOBAL STORMS... A Strong Financial Sector is Vital to Survive The Coming Global Storms

58. Creates Strength and Stability in All Financial Markets Creates Long Term Stable Investment Opportunities for Insurance Companies, Banks and other Financial Institutions Strengthens Pension Systems Improves Corporate Balance Sheets Benefits of an International Bond Market

59. Attracts high-quality personnel to Korea Establishes new bench-marking in credit control, analysis, portfolio management, ethical conduct Gives domestic companies greater access to foreign capital Benefits of International Asset Management

60. Expands access to the global capital pool Allows internationalization of the Bond Market Allows expansion of the fund management market Expands the internationalization of the Equity Market Enhances Korea’s advanced image and attractiveness to foreign corporations and regional headquarters Benefits of Liberalized FX Market

61. Increases the pool of available legal talent in Korea (reduces conflicts) Increases GDP and tax revenues from legal services Permits fair competition among domestic and international law firms Benefits of an Open Legal Market

62. Permits financial institutions to operate in a consistent predictable environment Improves Competitiveness of Domestic Financial institutions Improves Competitiveness of Domestic Corporations Creates an environment where foreign financial institutions will want to operate Benefits of an Regulatory Globalization

63. Internationalize the Bond Market Internationalize the Asset Management Market Liberalize Foreign Exchange Controls Internationalize the Legal Market Bring Global Standards to Regulations and Regulatory Oversight SPECIFIC ACTIONS NEEDED

64. Government must regularly issue more bonds at differing amounts and maturities Activate Municipal Bond Market with long maturities Must have Secondary Market trading actively, i.e., let issues go forward without limitation DO NOT Interfere with maturities or defaults Permit Dual (Foreign & Domestic) Ratings for Foreign Issues HOW TO ACHIEVE

65. Fix old ITCs now Permit direct selling of funds by ITCs Permit sale of domestic funds by overseas distributors of funds Permit external sale of foreign funds to institutional investors without registration Eliminate foreign investor ID number system Offer tax incentives to work in Korea Provide tax advantages for investors in long-term funds and municipal bonds HOW TO ACHIEVE, continued

66. Extend trading hours to match other markets (and stay open during lunch) Eliminate and reduce administrative reporting, documentation and authorizations for FX transactions Expand the KRW funding limits for non-residents Eliminate most of the criminal implications for technical reporting violations Ensure equal treatment for foreign and domestic brokerage houses HOW TO ACHIEVE, continued

67. Permit foreign law firms to practice in Korea Permit foreign law firms to hire domestic lawyers and give Korean legal advice HOW TO ACHIEVE, continued

68. Bring in outside experts from London and New York (FSA and SEC, etc.) to work side by side with MOFE, FSC, FSS and Tax Office Recruit regulators with work experience from the private sector Adopt and publish solutions for issues not covered by regulations Hold explanatory sessions for entire industry after enforcement actions involving sanctions Minimize rotations of regulators Publish all laws, regulations and any communications with the financial industry in English HOW TO ACHIEVE, continued

69. Hold hearings to seek industry input before creating new rules Ensure that foreign and domestic financial institutions have equal treatment in all areas Eliminate discretionary acceptance when matters are subject to report Clarify what is subject to approval requirements and the standards of approval Move to a “negative” regulatory system Firewall restrictions now implemented should be written into regulations HOW TO ACHIEVE, continued

70. Permit some of the firewalls to be withdrawn so as to permit cross-selling of products and services Modify the Real Name law to permit foreign financial institutions to operate on a realistic basis similar to that permitted in other jurisdictions Clarify outsourcing restrictions HOW TO ACHIEVE, continued

71. A Realistic and Achievable Goal And A Benefit to All Sectors of the Korean Economy An International Financial Center in Korea Is :

72. WHEN ? Change Will Take Time... Others Are Not Standing Still... WE MUST START RIGHT AWAY... With The Same Energy And Vigor That We Give To Other Core Initiatives !

73. KOREA – VISION OF THE FUTURE Enough of The Speeches... – IT’S TIME FOR ACTION ! We Can Make The Speeches Again Afterwards

74. SEOUL FINANCIAL FORUM

75. CLIMBING THE MOUNTAINS OF THE FUTURE

76. HELPING KOREA TO REACH THE TOP

79. Development Relative to Best Possible LEGEND DEBT MARKETS Domestic Government SHANGHAI Domestic Corporate International Government International Corporate OPTIMAL HONG KONGTOKYOSINGAPORE KOREALONDON

80. Development Relative to Best Possible LEGEND DEBT MARKETS Domestic Government Domestic Corporate International Government International Corporate OPTIMAL KOREALONDON

81. Development Relative to Best Possible LEGEND DEBT MARKETS Domestic Government SHANGHAI Domestic Corporate International Government International Corporate OPTIMAL HONG KONGTOKYOSINGAPORE KOREALONDON

82. Development Relative to Best Possible LEGEND EQUITY MARKETS Large Domestic SHANGHAI Small Domestic Large International Small International OPTIMAL HONG KONGTOKYOSINGAPORE KOREALONDON

83. Development Relative to Best Possible LEGEND EQUITY MARKETS Large Domestic Small Domestic Large International Small International OPTIMAL KOREALONDON

84. Development Relative to Best Possible LEGEND EQUITY MARKETS Large Domestic SHANGHAI Small Domestic Large International Small International OPTIMAL HONG KONGTOKYOSINGAPORE KOREALONDON

85. Development Relative to Best Possible LEGEND FX MARKETS Domestic Currency SHANGHAI Cross-Currency Domestic Traders International Traders OPTIMAL HONG KONGTOKYOSINGAPORE KOREALONDON Globally Linked FX Swaps and Hedges

86. Development Relative to Best Possible LEGEND FX MARKETS Domestic Currency Cross-Currency Domestic Traders International Traders OPTIMAL KOREALONDON Globally Linked FX Swaps and Hedges

87. Development Relative to Best Possible LEGEND FX MARKETS Domestic Currency SHANGHAI Cross-Currency Domestic Traders International Traders OPTIMAL HONG KONGTOKYOSINGAPORE KOREALONDON Globally Linked FX Swaps and Hedges

88. Development Relative to Best Possible LEGEND DERIVATIVES MARKETS Interest Rate Futures SHANGHAI Stock Derivatives Stock Index Futures ______________ OPTIMAL HONG KONGTOKYOSINGAPORE KOREALONDON ______________ (Puts, Calls, Rights, Warrants)

89. Development Relative to Best Possible LEGEND DERIVATIVES MARKETS Interest Rate Futures Stock Derivatives Stock Index Futures ______________ OPTIMAL KOREALONDON ______________ (Puts, Calls, Rights, Warrants) PRELIMINARY

90. Development Relative to Best Possible LEGEND DERIVATIVES MARKETS Interest Rate Futures SHANGHAI Stock Derivatives Stock Index Futures ______________ OPTIMAL HONG KONGTOKYOSINGAPORE KOREALONDON ______________ (Puts, Calls, Rights, Warrants) PRELIMINARY

91. Development Relative to Best Possible LEGEND MARKET PARTICIPANTS Commercial Banks SHANGHAI Insurance Companies Asset Managers Securities Houses OPTIMAL HONG KONGTOKYOSINGAPORE KOREALONDON Investment Banks Service Providers

92. Development Relative to Best Possible LEGEND MARKET PARTICIPANTS Commercial Banks Insurance Companies Asset Managers Securities Houses OPTIMAL KOREALONDON Investment Banks Service Providers

93. Development Relative to Best Possible LEGEND MARKET PARTICIPANTS Commercial Banks SHANGHAI Insurance Companies Asset Managers Securities Houses OPTIMAL HONG KONGTOKYOSINGAPORE KOREALONDON Investment Banks Service Providers

94. Development Relative to Best Possible LEGEND STRUCTURAL BASE Transaction Infrastructure SHANGHAI Transparency Skills Professionalism OPTIMAL HONG KONGTOKYOSINGAPORE KOREALONDON Regulatory Structure Judicial

95. STRUCTURAL BASE TRANSACTION INFRASTRUCTURE ACCOUNTING STANDARDS - DISCLOSURE - CORPORATE GOVERNANCE ROBUST CONTRACT LAW - EFFICIENT DISPUTE RESOLUTION MECHANISMS - PREDICTABLE ENVIRONMENT SKILLS - EXPERIENCE - LICENSING - LANGUAGE FIDUCIARY RESPONSIBILITY - PROFESSIONAL STANDARDS & PRACTICES - COMPLIANCESOUND REGULATORY INFRASTRUCTURE - EFFECTIVE SUPERVISION - INDUSTRY CONSULTATION

96. Development Relative to Best Possible LEGEND STRUCTURAL BASE Transaction Infrastructure Transparency Skills Professionalism OPTIMAL KOREALONDON Regulatory Structure Judicial

97. Development Relative to Best Possible LEGEND STRUCTURAL BASE Transaction Infrastructure SHANGHAI Transparency Skills Professionalism OPTIMAL HONG KONGTOKYOSINGAPORE KOREALONDON Regulatory Structure Judicial

98. Development Relative to Best Possible LEGEND RELATIVE POSITIONS DEBT MARKETS EQUITY MARKETS FX MARKETS DERIVATIVES MARKETS OPTIMAL KOREALONDON MARKET PARTICIPANTS STRUCTURAL BASE