S. Koreans should remain wary despite debt progress
S. Koreans should remain wary despite debt progress
SEOUL (Reuters): South Koreans should not let down their guard
despite signs that the country's massive debt crisis may be
easing, analysts said yesterday.
"South Korea is still a sick patient in need of intensive
care," said Kim Se-jin, research fellow at the Korea Economic
Research Institute.
A dramatic plunge in the Indonesian rupiah triggered by
international criticism of the country's new budget led to
whispers about a debt moratorium last week.
By Friday, U.S. President Bill Clinton had stepped into the
Asian financial crisis, telling Indonesian President Soeharto
that Jakarta had to comply with the International Monetary Fund
(IMF) reforms.
South Korea is also under an IMF program of nearly $60
billion, but its reform efforts have been seen as positive by
global investors.
The Sunday edition of the Hankook Ilbo said in its editorial:
"The thin ice we are walking on can give out any time even at the
slightest shock."
The paper said currency crises in Indonesia and Thailand was a
"stark reminder of the cruel realities" faced by Korea.
South Koreans have grown more optimistic in recent days amid
signs of a let-up in the country's financial crisis. The local
stock market has rebounded more than 17 percent so far this year,
while the battered won has stabilized against the dollar.
The country's tough austerity campaign also appears to be
taking hold, swinging its current account balance to a surplus in
December.
Seoul's efforts have also received positive feedback from
overseas. International Monetary Fund deputy managing director
Stanley Fischer said last week the South Korean economy was
likely to recover soon.
"In the past, the Korean economy has shown remarkable powers
of recuperation when faced with a big crisis, and we have seen a
little bit of that already," he told CNN.
South Korea's financial diplomacy is in high gear as global
creditors study rolling over loans to Korean banks.
The transition government led by president-elect Kim Dae-jung
will send a high-powered debt negotiation team to New York later
this month in an effort to get a seal of approval from the
foreign investment community for Korea's reform.
"It's too early to tell where we are going. If you look to the
right, it may look like spring time but to the left it's still
deep winter," said Oh Yeon-seok, head of equity sales at Hannuri
Investment & Securities.
On Saturday, Kim Dae-jung's party issued a public warning that
South Korea's crisis was far from over.
"The crisis is continuing despite some atmosphere of
optimism," said Chung Dong-young, spokesman for the National
Congress for New Politics.
"Foreign investors are still looking at the Korean situation
with suspicion," he said.
Moody's Investors Service on Friday cut Korea's foreign
currency bank deposit ceiling because of the forced rollover in
late December of interbank credits.
"These rollovers are a default in the way we define it," the
agency explained.
South Korea's economic reform also faces one crucial hurdle.
Powerful trade unions oppose layoffs, which Kim Dae-jung and his
new government insist are essential to bring back foreign
investors.
On Saturday, the militant Korea Confederation of Trade Unions
(KCTU) said it would not participate in proposed talks to discuss
layoffs. It renewed its threat of an all-out struggle against
legislative moves to make layoffs easier.
South Korea's National Assembly plans to hold a special
parliamentary session this week to pass bills aimed at speeding
up layoffs at troubled financial institutions before the
introduction of industry-wide layoffs.