SEOUL, Feb 25, 2008 (AFP) - South Korea's incoming President Lee Myung-Bak on Monday promised a new era for South Korea based on economic revival, and expressed willingness to meet North Korea's leader to improve relations.

"I hereby declare the year 2008 as the starting year for the advancement of the Republic of Korea," Lee told 45,000 guests at his inauguration ceremony.

"We must move from the age of ideology into the age of pragmatism," the conservative former CEO announced as he began his single five-year term following a decade of left-leaning rule.

He expressed willingness to meet its leader Kim Jong-Il.

The two sides should "contemplate what they can do to make the lives of all 70 million Koreans happy and how each side can respect each other and open the door to unification," he said in his inauguration speech.

"If it is to discuss these issues, then I believe the two leaders should meet whenever necessary and talk openly, with an open mind."

Lee said inter-Korean relations must become more productive. "Our attitude will be pragmatic, not ideological."

He reiterated promises of massive economic aid if the impoverished hardline communist state fully scraps its nuclear weapons "and chooses the path to openness."

Along with the international community, he promised assistance to raise North Korea's per capita income to 3,000 dollars within 10 years.

Lee also promised a stronger strategic alliance with the South's decades-old ally the United States, and relations of peace and mutual prosperity with close neighbours such as China, Japan and Russia.

But he stressed: "Economic revival is our most urgent task."

Despite dramatic economic growth in the decades after the 1950-53 Korean War, developing countries are fast catching up, he said.

"Our nation's competitiveness has fallen and instability in the resource and financial markets threatens our economy."

South Korea's middle class had "crumbled," he said, and the lives of ordinary people were becoming harder. The country was also rapidly becoming an ageing society due to a record low birthrate.

"We are at the crossroads where the destiny of the nation over the next 60 years will be determined," he said.

"New engines of growth must emerge assuredly, the economy grow vigorously and more jobs be created," he said, pledging to start by slimming down the government.

He promised privatisation, tax cuts and major deregulation among other business-friendly policies.

"All who wish must be allowed to start a business and build a factory without difficulty," Lee said. "Innovative small and medium-sized enterprises must be encouraged and invigorated."

"Opening of the market to the foreign sector is an unavoidable mega-trend," he said, vowing to pursue free trade pacts.

Lee called for improvements to "increase the opportunities for quality education," adding that: "One must be able to study even if one is poor.

Internationally, he said South Korea must actively take part in reducing carbon emissions and in United Nations peacekeeping operations. It would also enlarge its foreign aid budget.

Lee cited his own rise from childhood poverty as illustrating the nation's opportunities.

"A boy from the countryside who could not even eat regular meals went from being a street vendor, a self-supporting student and a salaryman to becoming the chairman of a prominent conglomerate, a member of the national assembly and the mayor of Seoul.

"And finally, this person became the president of the Republic of Korea," he said.

"As such, the Republic of Korea is a country where we can dream our dreams and bring those dreams to reality."