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Economic jitters as South Korea's presidential race begins


Seoul announces plans to aid financial institutions

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November 26, 1997
Web posted at: 12:09 p.m. EST (1709 GMT)

SEOUL, South Korea (CNN) -- South Korea's 22-day presidential race officially began Wednesday with the county's financial crisis -- an issue the candidates have so far largely ignored -- likely to dominate the short campaign.

At the same time, the South Korean government spelled out intervention plans designed to prop up the ailing stock market and prevent business collapses. These included measures to encourage financial institutions to buy more stocks and bonds.

Some market analysts said the steps may be "too little too late" for investors confused over the uncertain future of the economy, now dependent on a massive International Monetary Fund (IMF) bailout.

"Even if the government supplies more liquidity (creating an extra) 8.5 trillion won ($7.6 billion ) to purchase stocks and bonds, who do you think will buy?" asked one securities dealer.

The dealer reflected widespread worries over the possibility of business failures, saying: "People said they cannot be sure even of a top conglomerate, such as Hyundai group, and whether or not it will survive this crisis."

Finance Minister Lim Chang-yuel, however, was upbeat. "You will see active intervention by the government if the banking system does not work properly with business," he told a news conference. "Don't worry about business failures."

Two leaders in crowded presidential race

Lee Hoi
Lee Hoi-chang   

Within minutes of the opening of the two-day election registration period, five presidential aspirants made their candidacies official. As many as 10 candidates are expected to register.

The current president, Kim Young-sam, is constitutionally barred from seeking re-election.

The race actually began months ago and the latest polls show it has come down to a two-man contest between Lee Hoi-chang of the majority Grand National Party and Kim Dae-jung of the largest opposition group, National Congress for New Politics.

They are in a statistical dead-heat, each enjoying popularity ratings of about 33 percent. Kim's ratings have been slipping, however, while Lee's have been climbing.

Trailing well behind in third place is Rhee In-je, a provincial governor who broke with the majority party after failing to win its nomination and formed his own opposition group.

No further public polling is allowed by law before the December 18 election.

Politics and economics, a difficult mix

All three main candidates have pledged to revive South Korea's ailing economy, but none has offered a specific plan, sidestepping the hard choices any such plan would likely entail.

All have given lukewarm endorsement to the government's request for an IMF loan that many observers say could leave the country in debt by anywhere from $20 billion to $60 billion.

The IMF is expected to impose harsh conditions on its help, including reduced government spending and the merger or closure of weak banks and other companies. That will result in higher unemployment.  Hubert Neiss, head of the Asia-Pacific Division of the IMF, arrived in Seoul on Wednesday to continue talks with South Korean officials on the terms and conditions of the loan.

"With or without the IMF, (South) Korea will pass through a period of slow growth," he said. "Growth is not dictated by anybody. It happens."

Seoul Bureau Chief Sohn Jie-Ae contributed to this report.

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