Below is the text of Mr Major’s speech to the Executive Board of the Federation of Korean Industry in Seoul on Tuesday 5th March 1996.
Let me first thank Chairman Chey for his very warm welcome and I am delighted to be here with you on this occasion. I would also like, at the outset, to pay my tribute to the Federation of Korean Industry for their work in promoting closer business ties with the United Kingdom.
We have only a short time together today, so I want to concentrate on some of the things that I think are important to both of us and leave plenty of time for a more relaxed exchange around the table.
We have seen a truly enormous increase in economic ties since the President’s visit to the United Kingdom last year. Exports to Korea are up by very nearly 50 percent; Korean exports to the United Kingdom are up by over 60 percent; and two-way trade has exceeded 5 billion US dollars for the first time.
We have seen similarly exciting events on the investment front. In October last year Her Majesty The Queen opened the new Samsung electronics complex in North-East England; LG have opened a major new electronics plant; Daewoo have doubled the capacity of their video recorder plant in Northern Ireland; Halla will perform ground-breaking ceremony for a new factory in Wales just next week.
Britain is one of the great overseas investors of history, and so we understand the logic of overseas investors, our investments abroad, and investments from abroad into the United Kingdom. Our industry is very ready to globalise its efforts and establish bases abroad. We are the world’s largest overseas investor after the United States, and of course the largest European investor in Asia, Just within the last few minutes I have witnessed the signature of a GKN/Hanwha agreement for a 30 million dollars joint venture here in Korea.
Let me say also how much we welcome the Korean investment we have had in the UK. We are always a welcome home for inward investment. We have received by far the largest share of world investment into the European Union and I very warmly welcome this. We had three further announcements today: Fine Electromechanics, Sung Kwang Electromechanics and Poong Geon – all setting up to supply existing Korean investment in the UK. In this particular occasion the existing Korean investment is that made by Samsung.
These investments are going to take the number of Korean companies who have chosen the UK as a manufacturing base to 19.
But that is what has happened already. What I would like to dwell upon for a few moments is what awaits Korean companies in the United Kingdom. Well firstly a very warm welcome from the government. We treat Korean companies which have set up in the United Kingdom as though they were British companies formed with indigenous British capital. The United Kingdom economy is now entering its fifth year of sound and stable economic growth. The economic fundamentals are in place to ensure an environment in which companies can flourish.
Let me try and illustrate that for you. Manufacturing labour costs – critical to any investor – are much lower in the United Kingdom than in the United States, in Japan or in any of the other major European countries. And so are our non-labour costs far lower than those of our European competitors. Inflation is under firmer lock and key than we have known in the United Kingdom for getting on for half a century. It has been below 4 percent for over 3 years, it is now below 3 percent and continues to fall. Productivity in manufacturing industry since 1980 has increased more rapidly than in any other member of the OECD, and to take a European example, twice as rapidly as in Germany. And unemployment, too high at just under 8 percent, is still at its lowest rate since 1991 and very far below the average of other European nations. Our economic growth in the current year will be higher, for example, than Germany’s for the fourth successive year.
I emphasise these points to try and indicate to you some of the fundamental changes that have taken place in the British economy. It has not happened suddenly, it has not happened overnight. Economic success takes time and commitment. And the core of what we believe in is our belief in free markets in the United Kingdom.
Competition both at home and abroad sharpens incentives, it focuses business on what business does best, and that is creating wealth.
We believe that deregulation, removing unnecessary government controls is central to competitiveness. We have sought out some of the unnecessary regulations which raise prices, destroy jobs, stifle innovation and end choice. We have identified over 1,000 of those regulations and half of them have already either been repealed or amended, and we are on our way to dealing with the other half.
The key target of deregulation has been the labour market. The reforms we have undertaken in the last 16 years have created a flexible, an efficient and competitive labour force, as those of you in the United Kingdom will already know. Industrial disputes are very much a thing of the past. The number of days lost last year in the United Kingdom in industrial disputes fell to the lowest level we have known for over 100 years.
One policy perhaps, above all, encapsulates our belief in free markets, and that is the policy of privatisation, pioneered in the United Kingdom and a policy upon which we now have more experience I think than any nation in the world. We have privatised, put back into private ownership, 48 major industries, transferring nearly a million people from the public to the private sector, increasing efficiency and improving services to the customer. And where we have led on privatisation, many people have followed right around the world.
Loss-making monopolies have been transformed these days into world-class companies. Let me give you an illustration or two. British Airways is now the most profitable international airline in the world and I am delighted that from next month it will fly three times a week directly from Seoul to London. Following privatisation British Telecom has also been transformed. The number of lines has increased by 30 percent. Competition in the UK has led to the development of a domestic mobile telephone market that is now twice that of any other European country. And the UK is the only European Union country with a competitive telecoms network and with costs the lowest in Europe.
They are two examples. I could certainly have given you more. But the competitive cost base and open and deregulated business environment has meant that companies manufacturing in the UK – whether Korean owned or British owned – have been remarkably successful in winning export orders in Europe. And since one of the main objectives of most Korean companies investing in the UK is to be closer to their European customers as well as their British customers, it seems to me the case for coming to the UK is compelling.
Let me touch on some of the other things that we have sought to provide because we believe that they are important for the future: an educated and highly motivated workforce; the City of London, perhaps, not perhaps, certainly, the world’s most flexible and sophisticated financial services market; competitive utilities with substantial cost benefits for industry; an increasingly highly developed science and technology base; a transport infrastructure that has global links; and of course English which, to our great good fortune, is becoming the language of international business.
We British are irrevocably part of Europe. We have a very strong self-interest in seeing the European Union develop as a prosperous entity. The single market, crucial to companies dealing with Europe, was a UK priority, was a UK invention, was pushed through with UK political muscle.
The benefits I think to business of that are increasingly clear – harmonised standards, quicker movement of goods with less frontier bureaucracy, the opening up of the financial services market and freeing public procurement from national restrictions so that governments could and should pick the most efficient company offering them services rather than simply pick a national leader in that particular area.
These gains, which are in my judgement an essential element of enhanced competitiveness, are equally open to Korean companies investing in the UK.
There is one area of very sharp difference between the United Kingdom and its other European partners. We have not accepted what is known as the European Union Social Chapter. And we have not accepted it because it would introduce new regulations and new restrictions into labour relations. It would make companies less efficient and that is not the right way to proceed. In the UK we are determined to maintain labour force flexibility, and our refusal to join the Social Chapter – a refusal which we shall maintain in the years ahead – provides significant competitive advantage over those countries that are burdening themselves with unnecessary costs that make them anti-competitive.
The end result, what we are aiming for in the United Kingdom, is a full-scale, properly functioning, enterprise economy. I have made it clear that I want Britain to be the enterprise centre of Europe. Combined with the evident strengths of Korea’s economy and industry, I think that together we are able to increase the prosperity of both our peoples. I think there is much fertile ground for further trade and investment expansion and I look forward to continuing to work, whenever it is practicable and whenever it is possible, with Korean companies with European interests, and in particular with British interests. You would be very welcome, you would be very welcome in Europe, and I am delighted to have had this opportunity of speaking to you this afternoon.
What I would like to do for the rest of the time is try and respond to any questions and thoughts that you may have, so that we might understand one another even better about the opportunities and challenges that lie ahead. Thank you for being here this afternoon.