1. 1/24 Korea's Policies for Anti-Corruption & Integrity 2007. 8

2. 2/24 Contents Background I Korea's Anti-Corruption Policies Ⅱ

3. 3/24 1 2 Korea's population & economy Evaluation of Korea's Integrity I Background

4. 4/24 1. Korea's population & economy YearTotal population (unit: million) Nominal GDP (billion) Per capita GNP($) Central gov't Expenditures (billion) Economic growth rate(%) 197032.2413.02540.93 197534.70711.26023.325.9 198038.12442.11,64511.62 -1.5 198540.44891.32,30920.076.8 199042.869202.96,14741.82 9.2 199545.093433.511,43297.429.2 200047.008628.910,841165.498.5 200147.357676.210,160175.80 3.8 200247.622743.711,499188.35 7.0 200347.859787.612,720208.58 3.1 200448.039847.114,193199.124.7 200548.138880.916,413209.134.0 200648.297921.618,372219.635.0

5. 5/24 2. Evaluation of Korea's Integrity 1) Domestic Evaluation Korea's Integrity Perceptions Index

6. 6/24 2. Evaluation of Korea's Integrity 1) Domestic Evaluation Perception Changes by Corruption Type since the Inception of the Roh Mu-Hyun Administration

7. 7/24 2. Evaluation of Korea's Integrity 2) International Evaluation Korea’s constant improvement in the fight against corruption is recognized on the global stage classification199819992000200120022003200420052006 Score (on a scale of 1 to 10) 4.23.84.04.24.54.34.55.05.1 Percentage (rank / total of countries) 50.5% (50/99) 53.3%46.1%39.2%37.5%32.1%25.1% 25.7% (42/163) Corruption Perception Index (CPI) Trend (on a 10-point scale) ※ Source: Corruption Perception Index of Transparency International

8. 8/24 2. Evaluation of Korea's Integrity Economist Intelligence Unit democracy index 2006 According to the Bribing and Corruption Practices Index (BCPI), annually published by the International Institute for Management Development (IMD), Korea's score rose from 2.9 in 2004 to 4.4 in 2005.

9. 9/24 1 2 Beginning Phase of Anti-Corruption Policies Initial Phase of Anti-Corruption System Formation Ⅱ Korea's Anti-Corruption Policies 3 Full-fledged Implementation of Anti-Corruption Systems 4 Korea's Anti-Corruption System 5 Tasks to Be Resolved and Policy Direction

10. 10/24 1. Beginning Phase of Anti-Corruption Policies From Government Establishment to Noh Tae-Woo administration (1948~1993) 1) Background Korea was liberated from the Japanese colonial rule in 1945 and went through the Korean War (1950~1953), resulting in a country divided into the North and the South. The chaotic circumstances devastated industries and depleted both resources and a skilled workforce, creating a vicious circle of poverty. The Korean economy mostly depended on overseas aid throughout the 1950s and into the early 1960s. From the mid-1960s to late 1980s, the South Korean government aggressively led economic development while bringing in foreign capital for full support. Strategic funds, tax credits and other forms of preferential treatment were provided to export-related industries and the heavy chemical industries.

11. 11/24 1. Beginning Phase of Anti-Corruption Policies From the Government Establishment to the Noh Tae-Woo administration (1948~1993) 2) Policy achievement During the government-led economic development drive, anti-corruption efforts focused only on prosecution and punishment rather than on reforming the corruption-prone socio-political structure and systems. Anti-corruption policies were mainly end-of-pipe measures with the Board of Inspection and the Social Purification Committee playing an important role. Punishment mainly focused on low-ranking officials rather than the powers- that-be, helping to create a vicious circle of corruption and punishment without fundamental reforms. Under these circumstances, the perpetrators of corruption resorted to clandestine and crafty methods that allowed government officials to simply do nothing. Despite the government's anti-corruption drive, corruption became more rampant while mistrust over the government intensified, largely because most corruption cases concerned power abuse and collusion between politics and business circles, particularly the large conglomerates.

12. 12/24 2. Initial Phase of Anti-Corruption System Formation The Administrations of Kim Yong-sam and Kim Dae-jung (1993~2002) 1) Background From the early 1990s, Korea underwent rapid political democratization with the transition from 30 years of military regimes to a civilian administration. Korean companies failed to respond to the ongoing wave of the globalization in the 1990s, including market opening. The Asian financial crisis spread to Korea by late 1997, significantly impacting the Korean economy. The South Korean government blamed the financial crisis on the resistance to the transition to a full market economy and a social structure prone to corruption, including, collusion between politicians and businessmen and ineffective government regulations. Recognizing this, the government launched an intensified reform campaign administration-wide, including the establishment of an anti-corruption system.

13. 13/24 2. Initial Phase of Anti-Corruption System Formation The Administrations of Kim Yong-sam and Kim Dae-jung (1993~2002) During the Kim Yong-sam Administration (1993~1997), - Introduced of the fundamental anti-corruption programs - Established the Corruption Prevention Committee (an advisory body of the Board of Audit and Inspection) and Administrative Reform Committee During the Kim Dae-jung Administration (1998~2002), - The Anti-Corruption Act and the Money and Laundering Prevention Act were enacted - The Presidential Commission on Anti-Corruption and the Financial Intelligence Unit were establishd - Administrative regulation reforms were undertaken - The System for Administrative Information Disclosure was adopted Accounting standards became more transparent and sophisticated, while corporate governance was improved as part of efforts to meet the international standards of accounting and corporate responsibility. 2) Policy achievement

14. 14/24 2. Initial Phase of Anti-Corruption System Formation The Administrations of Kim Yong-sam and Kim Dae-jung (1993~2002) Previously, the government had acted alone in the anti-corruption efforts. Under the civilian governments, however, civic groups such as the People’s Solidarity for Participatory Democracy(1994), Korean Solidarity for Anti-Corruption(1995), Center for Transparent Society(1996), Citizens’ Coalition for Better Government (1997) and YMCA became broadly and proactively involved in the fight against corruption. As a result, more public pressures was exerted on the elimination of corruption and irregularities related to power abuse. However, these anti-corruption efforts were not sufficient. The legacies of collusion between politicians and businessmen persisted; e xcessive campaign funds were collected for a minority ruling party to gain ground. Nepotism-related corruption occurred, too, involving the relatives of both Presidents. 2) Policy achievement

15. 15/24 3. Full-fledged Implementation of Anti-Corruption Systems The Roh Moo-hyun Administration (2003~present) 1) Background Building on strong support from the civil society, Roh Moo-hyun was elected President, and his administration designated government reform and a fight against corruption as major policy goals. President Roh Moo-hyun declared that he would not seek political gain from the misuse of the Prosecutors' Office, National Intelligence Service and various parties previously regarded as powerful institutions. This declaration highlighted a commitment to eradicating corruption. President Roh has presided over the inter-Ministerial meeting on anti- corruption and vigorously pursued anti-corruption policies. On the administrative front, existing anti-corruption systems are now implemented more systematically, with KICAC playing a leading role.

16. 16/24 3. Full-fledged Implementation of Anti-Corruption Systems The Roh Moo-hyun Administration (2003~present) 2) Anti-corruption Measures Establishment the Inter-Ministerial Meeting on Anti-Corruption Pursuit of reforms and anti-corruption measures in the influential government organizations Reform of the political sector Introduction of online systems for transparent administrative process Disclosure of the results of Integrity Survey of public institutions Establishment of systems for protecting and rewarding whistle-blowers Provision of recommendations Introduction of Corruption Impact Assessment Introduction of the Citizen Audit System and the Citizen's Recall System Signing of the Korean Pact on Anti-Corruption and Transparency (K-Pact) by the public, political, economic sectors and civil society

17. 17/24 4. Korea’s anti-corruption system 1) Anti-corruption bodies Organization Foundation Year Key functions KICAC2002 - formulate and coordinate national anti-corruption policies Board of Audit and Inspection1963 - act as watchdog role over public organizations and public officials Supreme Prosecutors' Office1948- investigate corruption scandals and punish offenders - enhance public order National Police Agency1948- investigate corruption scandals and punish those responsible - enhance public order Public official's ethics committee1990 - carry out duties related to registration, disclose personal assets of public officials and restrict employment of retired public officials Korea Financial Intelligence Unit of Ministry of Finance and Economy 2001 - collect and analyze transaction data concerning money laundering Audit Committee of each ministry1948- act as auditor and inspector Fair Trade Commission1996- ensure fair trade practices Financial Supervisory Commission1998- help create a sound financial order - protect financial customers

18. 18/24 4. Korea’s anti-corruption system 2) Key function of KICAC Formulate and coordinate the national anti-corruption policies Make recommendations on eliminating corruption-causing factors in laws and regulations that govern corruption-prone areas Evaluate the progress of policy steps which public organizations have taken to prevent corruption Receive reports of corruption while protecting and rewarding whistleblowers Promote international cooperation for corruption prevention with private and global organizations Ensure the implementation of the Code of Conduct for Public Organization Employees

19. 19/24 4. Korea’s anti-corruption system 3) Major anti-corruption systems Establishment and coordination of anti-corruption policies at the national level - Policies to enhance integrity and fight corruption are established and coordinated at the national level. - The president presides over the Inter-Ministerial Meeting on Anti-Corruption to help eliminate a structure and systems conducive to corruption and to strengthen cooperation among government organizations on anti-corruption efforts. Corruption prevention - Establishment of the Administrative Reform Committee - Introduction of the System for Administrative Information Disclosure - Improvement in systems related to corruption-prone areas - Adoption of the Corruption Impact Assessment - Operation of online systems for transparent administrative process - Evaluation of the integrity at public organizations

20. 20/24 4. Korea’s anti-corruption system 3) Major anti-corruption systems Investigation & punishment - Establishment of the Corruption Report Center - Introduction of the system for protecting and rewarding whistleblowers - Operation of an internal audit committee within each ministry Public ethics - Implementation of the Code of Conduct for Public Officials - Introduction of Confirmation Hearings on the appointment of high-ranking officials - Registration and disclosure of public officials’ personal assets - Employment ban on public officials associated with a corruption case Cooperation between the private and public sectors - K-Pract, the Citizen Audit System, the Citizen's Recall System and various anti- corruption activities of civic groups

21. 21/24 5. Tasks to be resolved and Policy direction 1) Tasks to be resolved When public ethics are lacking, cronyism and paternalism, regarded as part of Korea's traditional customs, serve as corruption-causing factors. Decision-making process are not transparent enough. For example, many committees still depend on unfair policy-making processes, and retired public officials make lobby on behalf of their organizations. Some local politicians and business people share inappropriate ties that result in corrupt practices.

22. 22/24 5. Tasks to be resolved and Policy direction 2) Policy direction Anti-corruption efforts will continue based on vigorous prosecution and punishment against irregularities and corruption, and on the system for protecting and rewarding whistleblowers. At the same time, the Code of Conduct will be strictly implemented to enhance ethics in the public sector with importance placed on transparency of decision- making processes and responsibility. Institutional improvements will be made to increase the transparency of corporate accounting, while further measures for corporate ethical management will be adopted.

23. 23/24 Annex Inter-Ministerial Meeting on Anti-Corruption 」 (2004) Code of Conduct for Public Officials (2003) Confirmation hearings on appointments of senior officials (2003) Integrity Survey of Public Organizations (2003) Enhanced system for an ethical and transparent management of businesses Elimination of corruption concerning power abuse (2004) Institutional Improvement for Corruption-prone Areas System for protecting and rewarding whistleblowers(2005) Horizontal partnership and the K-PACT (2005) Citizens Recall System (2007) International Cooperation in Combating Corruption

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