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IMF aid for Seoul rises, humiliation sinks in
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Copyright ) 1997 Nando.net
Copyright ) 1997 Reuters
SEOUL, South Korea (December 4, 1997 10:06 a.m. EST
http://www.nando.net) - An IMF-led rescue package for South Korea was
expanded to a record $57 billion on Thursday, and many South Koreans
reacted with humiliation and anger to the deal, even though it has
breathed new life into the country's ailing economy.
The militant Korea Confederation of Trade Unions promised to wage
"all-out strikes" if companies pushed for layoffs as a result of
concessions to the IMF.
South Korea was rocked by a month of worker unrest earlier this year
after the government rammed a controversial labor law through
parliament. The government was forced to postpone until 1999 a provision
that would have made layoffs easier.
Political parties were especially eager to exploit voters' feelings of
shame ahead of presidential elections scheduled for Dec. 18.
"We cannot help but question the IMF's attitude. The IMF is acting as if
it is an economic conqueror," the governing Grand National Party said in
a statement.
Lee Hoi-chang, the party's presidential candidate, on Wednesday promised
to abide by the bail-out terms.
Lee is in a virtual dead heat with veteran opposition leader Kim
Dae-jung of the National Congress for New Politics Party.
Kim's party said in a statement that Dec. 3 would be remembered as
"national economic humiliation day." The party said it would
"immediately begin additional negotiations with the IMF" if it wins the
election.
Kim had promised to carry out the IMF agreement in principle but said he
would want to pursue talks on details if he wins.
In Tokyo, IMF Managing Director Michel Camdessus said Thursday he had
received support from "all key political forces" in South Korea for a
reform program linked to the rescue package.
"I have received yesterday support from all key political forces for
this program and a letter from each of the three candidates" in the
presidential election to the effect that they would support the program
if elected, Camdessus told a news conference.
"I have received the same pledge from the president and the speaker of
parliament," he said.
Newspaper headlines lamented the country's humiliation over the IMF
rescue package.
"South Korea has virtually lost its economic sovereignty for the next
three years," said the Joongang Ilbo.
The Kyung Hyang Shinmun said: "Don't forget the economic trusteeship of
Dec. 3."
The term has strong associations for South Koreans, who recall the
trusteeship of Korea given to the United States, the Soviet Union,
Britain and China at the end of World War II that halted 35 years of
Japanese colonial rule.
The Finance Ministry said the package of IMF-arranged loans had grown by
$2 billion to $57 billion after Italy said it would join in and three
other countries increased their offerings.
About $5.5 billion of the package was to arrive in Seoul on Friday
evening and more than $10 billion would be provided by year-end, the
ministry said.
The increases brought the total value of the country portion of Seoul's
aid package to $22 billion. The money is only supposed to be used if the
$35 billion committed by the IMF, World Bank and Asian Development Bank
is inadequate.
Details were expected to be disclosed after the pact was formally
approved by the IMF board of governors on Thursday in Washington.
It is expected to call for Seoul to put the brakes on economic growth,
liquidate or restructure troubled banks at the heart of the country's
debt crisis, further open up the financial markets and end restrictive
trade practices.
It was also expected to call for more transparency in government data
and in the bookkeeping practices of major conglomerates.
Newspapers complained that the United States and Japan had used South
Korea's financial crisis as leverage to force Seoul to open its markets
further.
As part of the IMF deal, Seoul agreed to raise its foreign stock
ownership ceiling on a combined or individual basis to 50 percent,
effective Dec. 15.
At present, the shareholding limit for foreign individuals is 7 percent
in a specific stock, while the combined foreign shareholding limit is 26
percent.
South Korea also agreed to allow Japanese products greater access to the
Korean market, finance ministry officials said. Previously, imports of
Japanese goods had been restricted because of Japan's large trade
surplus with South Korea.
South Korean markets responded to the package enthusiastically, with the
main stock index up 6.99 percent on the increase in the foreign
shareholding limit.
South Korea's won surged on anticipated dollar inflows, closing at
1,170.0, against Wednesday's close of 1,196.0.
Seoul is desperate for assistance because of a ticking time-bomb in the
form of its short-term debt, the reason it called in the IMF.
South Korean media reported this week that the central Bank of Korea had
been forced to pay $10 billion in short-term foreign debt on behalf of
Korean banks over the last few days.
About $66 billion of Korea's estimated $120 billion in foreign debt is
short-term, and about $20 billion was due at the end of this year,
analysts said.
The IMF package for South Korea is its biggest ever rescue effort,
exceeding the $50 billion rescue program for Mexico in early 1995.
Similar IMF packages were provided recently for Thailand and Indonesia.
Thailand received $17.2 billion and Indonesia $40 billion under IMF-led
rescues that also involved offerings from other countries.
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