 |
With IMF bailout, South Korea braces for belt-tightening
November 22, 1997
Asia watchers such as Richard Samuelson think the economic situation in South Korea will worsen before improving. 
230K/20 sec. AIFF or WAV sound
Web posted at: 12:34 p.m. EST (1734 GMT)SEOUL, South Korea (CNN) -- South Koreans braced themselves for the belt-tightening measures announced by the government, after Seoul asked the International Monetary Fund for a $20 billion bailout to help solve its financial crisis.
President Kim Young-sam addressed the nation Saturday in a televised address, apologizing for the financial troubles and urging everyone to help restore the nation's economic health.
"It is time to tighten our belt again. The coming economic restructuring will involve bone-carving pain," he said. "But we must show the world our determination that we can overcome this crisis."
Late Friday night, South Korea announced it was asking the IMF to organize a bailout package. In exchange, the IMF is likely to order deep spending cuts, lower import tariffs, higher domestic taxes, the elimination of shaky banks, and the forfeiture of some national decision-making power to lenders.
Kim blamed company management and workers for "selfishness," which he said had hurt South Korea's global competitiveness. He said the government would do everything it could to stabilize the currency market and carry out other measures.
'I am so ashamed of our country'
BACKGROUND: South Korea has enjoyed strong economic growth over the past 20 years, fueled by the rapid growth of several family-owned conglomerates, which benefited from government incentives.
The financial success also had a downside, however: rampant land speculation, environmental exploitation and bribery of public officials.
The problems came to a head this year when the economy slowed down, sales dropped, and some of the weaker conglomerates went belly up, saddling banks with $26 billion in bad loans.
IMF managing director Michel Camdessus said a negotiating team would arrive in South Korea next week to help authorities draw up a reform program.
Friday's announcement was a sobering moment for a country that had overcome the poverty of the Korean War to become the world's 11th-largest economy.
The mood among ordinary South Korean's was gloomy.
"I am so ashamed of our country and economic ministers," said Park Shung-hwa, a 25-year-old sportswear clerk at a Seoul department store Saturday.
And as for who is to blame -- the answer seemed to be unanimous: corrupt politicians and businessmen who wheeled and dealed during South Korea's boom years.
"We have built up our nation for the past 40 years with sweat and sacrifice, and those corrupt people have wasted all our efforts," said 56-year-old taxi driver Ahn Jong-nam.
Impressive growth rates
South Korea's stunning economic growth rates -- averaging 8 percent annually over the past two decades -- were largely fueled by the fast expansion of a dozen family-controlled conglomerates.
Past military governments provided cheap loans, tax breaks and other benefits to help the corporate giants expand and mass-produce cars, television sets, microchips, petroleum products and other goods.
The business groups account for half of South Korea's industrial output and lead its export-driven economy. They supply one-quarter of the world's computer memory chips and account for about 30 percent of the commercial shipbuilding orders.
The economic boom also had negative impacts, triggering unbridaled land speculation and environmental exploitation. Bribes to police and public officials became common.
The problems came to a head this year when the economy slowed down, sales dropped, and some of the weaker conglomerates went belly up, saddling banks with $26 billion in bad loans.
Seoul Bureau Chief Sohn Jie-Ae, The Associated Press and Reuters contributed to this report.
Related stories:
- South Korea seeks $20B - November 21, 1997 - CNNFN
- S. Korea props up currency - August 26, 1997 - CNNFN
Related sites:
Note: Pages will open in a new browser window
- International Monetary Fund
- Korean Ministry of Finance and Economy
- Korean Embassy in Washington DC
- The Korea Herald
External sites are not endorsed by CNN Interactive.
|
Sound off on our message boardsYou said it... |
|
© 1997 Cable News Network, Inc.
All Rights Reserved.