Date: 01-26-2001

Ungsuh Kenneth Park, president and chief executive officer of KOHAP Corp., a South Korean petrochemical company. Park spoke at the East-West Center's Asia Pacific Executive Forum on "Doing Business in a Changing Asia: A Strategic Vision" held Jan. 16-19. Topic: "Economic Recovery and Future Challenges of Korea"


A characteristic of many Asian economies is that they "grew up too quick." But South Korea may have moved too quickly to recover from the Asian economic crisis as well, deciding to make economic adjustments and recovery in "the shortest possible time." That may have "sewed the seed for the present problem that troubles the Korean economy now."

The first round of adjustments after the crisis brought significant changes: 52 of the 100 largest companies failed. At least 10 major banks did as well, dropping the total number to 23. The government paid back the final installment of its emergency loan from the International Monetary Fund last September ahead of schedule.

But such quick and dramatic change clashed with the country's cultural values and caused massive unemployment. While Koreans traditionally put "individual needs behind the social needs" of the country, they also "demand 'fair' distribution of both prosperity and pains" in return. The fast movement toward recovery left the fair-share tradition "rudely crushed" as the upper middle class and the start-up company owners prospered.

Another problem was having a "very wise leader with a very cold and willful head, and a very warm and compassionate heart." Numerous times the government modified reforms at the pressure of labor unions. "Such last minute retreats by the government destroyed the public confidence." Meanwhile, the call for restructuring and the excessively rapid growth proved unsustainable.

Roughly 80 percent of private corporations have undergone restructuring but only half of the major banks because of bad loans, and virtually nothing has changed in the public and labor sectors.

Vacillating government policies, "reform fatigue" among Koreans, and a new goal of "completing the restructuring" by the end of 2000 could lead to another economic crisis. Banks became reluctant to lend money and the "entire economy started to feel a cash shortage." The stock market had plunged 50 percent last November from a year earlier, and the won has depreciated 11 percent.

Foreign investors, however, still believe the Korean market is heavily undervalued and continue to invest money. At the same time the government is standing firmer against unions and has approved another 40 trillion won for public spending. Such moves are likely to "calm down public anxiety" while the future direction of the country and its ability to handle such great changes remain uncertain.

Ungsuh Kenneth Park can be reached in Seoul at 822-3702-7010 or at uskpark@kohap.co.kr
This is an East-West Wire, copyright East-West Center