South Korean leader to put economy first

SEOUL - South Korea's president-elect promised on Thursday to put the economy first once he takes office and not to be shy about telling prickly North Korea to mend its ways over nuclear weapons and human rights.

Wednesday's landslide win by Lee Myung-bak, the country's first businessman president, gave short-lived a fillip to local share prices, especially construction and finance firms that are seen as early beneficiaries of his conservative presidency.

"I'll create an environment where businesses will feel confident in making investments," Lee told a his first news conference since winning a single five-year term by one of the largest margins in the country's history.

In a campaign built almost entirely on pledges to reinvigorate the world's 13th largest economy, the former CEO of one of South Korea's top companies has said policies stifling business must be swept away, state banks privatised and foreign investors encouraged.

"His policy is widely considered positive to the economy and markets, but that's just a perception and we need to see what his inauguration will mean to the economy," said Lim Ji-won, an economist at JPMorgan Chase.

The won currency also took heart from Lee's victory, but economists have warned that with the global economy in flux because of credit worries, Lee may struggle to meet his promise to reach 7 percent annual GDP growth for an economy so reliant on exports. It is now growing at around 4.5 percent.

Those concerns were clear as local financial markets gave up early gains once traders turned their attention back to global economic problems.

Seoul's benchmark KOSPI index ended the day down 0.9 percent, after rising as much as 1.1 percent earlier in the day.

Pre-election polls made clear that voters had scant interest beyond which candidate would make them better off after what has been seen as tepid economic management under outgoing President Roh Moo-hyun.

NUCLEAR WEAPONS

Lee has also promised to review the North Korea policy of Roh, criticised for being too soft on the communist state whose government has continued to develop nuclear weapons and maintained a dismal human rights record.

"The way for North Korea to advance is to give up its nuclear programmes," said Lee, who wants future aid far more closely linked to his hermit neighbour ending its atomic arms ambitions.

"If we try to point out North Korea's shortcomings with affection, I think that will go a long way toward improving North Korea's society."

Some of Lee's first meetings were with ambassadors of the United States and Japan, key allies but with whom relations were at times tense under Roh's rule.

A former CEO of the giant construction arm of the Hyundai Group, Lee's penchant for big public works projects and his can-do style earned him the nickname "the bulldozer".

And he will be under strong pressure to show early successes with the economy, which is facing mounting competition from neighbouring Japan and China and has struggled to encourage its own major companies to invest at home.

Analysts say it was Lee's promise to boost the economy and his contrast to Roh that attracted voters to the father of four who rose from abject poverty to head, at the age of 36, what became one of the country's biggest construction firms.

Despite his popularity, Lee has been dogged by allegations of involvement in a securities fraud, a problem that flared up again just before the election when a liberal-dominated parliament agreed a special investigator should look into the accusations.

The investigation is unlikely to be completed before Lee's inauguration on February 25, when he will become immune from prosecution, but it could undermine his authority if any link to the fraud is established.

President Roh is already under pressure from the conservative camp to veto the bill to set up a prosecutor and so allow Lee an easy ride into the presidency.

But it is unlikely the liberals will give up their attack over the issue before parliamentary elections in April, when they stand to lose their majority in the National Assembly.