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.