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Korea Securities Dealers Association Daily News NATIONAL ACCOUNTS: 2002 (PRELIMINARY) Economic Growth in 2002 (Bank of Korea)(2003-03-22) For the year of 2002, as a whole, Korean real GDP increased by 6.3 percent. This was mainly attributable to the sustained pace of the increase in private consumption and the sharp rebound in exports as well as the upturn of equipment investment growth. Real GNI, though, grew 4.9 percent owing to the deterioration of the terms of trade. Looking at GDP growth by industry, that of agriculture, forestry and fishing production marked a 4.1 percent decrease owing to the contracted rice harvest and vegetables, and the decrease in fishing catches, which were only slightly offset by an increase in animal husbandry. Manufacturing sector production rose by 6.3 percent, spurred by the acceleration of heavy & chemical industry production such as household appliances, semiconductors and telecommunication equipments. Construction industry production rose by 3.2 percent owing to the expansion of residential and commercial construction that counteracted the decrease of expressway, harbor and airport structures construction. Services increased by 8.8percent, led by banking & insurance services and social & personal services. Viewing GDP growth by component of expenditure, private consumption showed a 6.8percent rise owing to the increase in household spending on durables and services. Fixed capital formation increased by 4.8 percent, owing to the upturn in equipment investment, which was partially moderated by a smaller increase in construction investment. Merchandise exports grew at a rate of 17.1percent on a volume basis under the effect of a large increase in semi-conductors and telecommunications equipment, computer and vehicle exports, which was partially offset by a decrease in petroleum products, iron & steel and textile products. Plans to Enhance the Accounting Transparency of Firms Pursuing an Initial Public Offering (Financial Supervisory Service)(2003-03-21) Improvement in the KICPA audit review for firms pursuing and IPO In an effort to enhance the accounting transparency of firms pursuing an IPO, the Korean Institute of Certified Public Accountants (KICPA) will revise its audit review business regulations to gradually in crease the number of IPO pursuing firms that receive an audit review by KICPA from the current 30 percent and to give priority to IPO pursuing firms over other firms for audit review. Moreover, to ensure that KICPA completes it audit review before KSE or KOSDAQ completes its listing eligibility review (preliminary approval) for firms pursuing an IPO, KICPA will form a cooperative business management arrangement with KSE and KOSDAQ. Strengthening of Sanctions on IPO pursuing firms involved in fraudulent financial accounting and their lead underwriters that fail to discover such practices If a firm pursuing an IPO is determined to be involved in fraudulent financial accounting, FSS/FSC will impose stricter sanctions such as monetary fines, referral to prosecutors, and restrictions on the issuance of securities and will impose strict punitive actions on their lead under writers who fail to detect fraudulent financial accounting of IPO pursuing firms such as the suspension of underwriting business licenses. Strengthening the listing eligibility review by KSE and KOSDAQ KSE and KOSDAQ will strengthen their listing eligibility review by elevating review expertise and focusing on material review items such as the internal accounting transparency control system (e.g. the fund management system, the independence of the board of directors and internal auditors, and the accounting system). Listing restrictions for firms involved in fraudulent financial accounting If an IPO pursuing firm is found to be involved in fraudulent accounting of the degree that disqualifies it from meeting listing requirement, the firm will not be granted approval for listing and cannot apply for listing for a certain period (e.g., 3 years). Furthermore, if a listed firm is found to be involved in fraudulent accounting of the degree that disqualifies it from meeting listing requirements, the firm will be de-listed and restricted from re-listing for a certain period (e.g., 3 years). Listing regulations of KSE and KOSDAQ will be revised to include these changes. Activation of a whistleblower system to report disclosure violations To encourage the reporting of disclosure violations such as fraudulent financial accounting, FSS/FSC will state in its supervisory regulations that substantial rewards will be given for whistle blowing of disclosure-related violations (currently there are no stipulations on rewards). In addition, FSC/FSS will establish a separate icon on its Web site to facilitate reporting while maintaining strict confidentiality for the protection of whistleblowers. Improvements in the due diligence of lead underwriters On March 2003 FSC/FSS will provide plans to improve the due diligence of lead underwriters of IPO pursuing firms based upon its examinations of the due diligence operations of lead underwriters and the opinions of the IPO business staff of brokerage firms. Moreover, FSS/FSC will review a measure that will require lead underwriters to conduct due diligence on financial changes during the period from the last day covered by the most recent financial statement to the date the registration statement is submitted to FSC/FSS, in addition to their other responsibilities. Korea to Apply for IDB Membership (Korea Herald)(2003-03-24) Korea will apply for membership with the Inter-American Development Bank (IDB) at the bank's 2003 annual meeting held in Milan, Italy, March 24-26, the Ministry of Finance and Economy said yesterday. Asia's fourth-largest economy has tried to join the bank since 1979, but no IDB member countries were willing to reduce their quotas in the bank to allow for Korea's membership, the finance ministry said. IDB, the oldest and largest regional multilateral development institution, was established in December of 1959 to help accelerate economic and social development in Latin America and the Caribbean. The bank has mobilized financing for projects that represent a total investment of $273 billion. Annual lending has grown dramatically from the $294 million in loans approved in 1961 to $7.9 billion in 2001, after peaking at almost $10.1 billion in 1998 The IDB's original membership included 19 Latin American and Caribbean countries and the United States. Subsequently, eight other Western Hemisphere nations, including Canada, joined the bank. From the beginning, IDB developed links with many industrialized countries on other continents and in 1974, the Declaration of Madrid was signed to formalize their entry into the bank. Eighteen non-regional countries joined IDB between 1976 and 1993. Today bank membership totals 46 nations.