Imf In Korea Essay, Research Paper
The subject matter that will be discussed within this paper are the effects of the IMF (International Monetary Fund) in relation(s) to South Korea and other neighboring Asian countries in the same economic distress. It will also tie into the use of media and other aspects of international communications Korea and the United States used to cover the crisis.
The economic crisis of South Korea has hit many of the citizens of Korea very hard. Many companies went bankrupt and with that many people lost their jobs. This economic crash was not only felt by the Koreas living in Korea, but also by the ones who live abroad. Many international students had to return back home because they could no longer afford the expenses with studying abroad. Store owners in Korea who lived in the United States would more than likely lose their businesses. Overall, the economic crash is effecting our United States economy greatly. It began with the devaluation of currency in Thailand in July of 1997. Afterwards, many other Asian countries were to follow such as the Malaysia, Philippines and of course South Korea. Media coverage of the economic situation was and still is now, being highly covered. All the major news stations are covering how this situation is having adverse effects to not only the Korean nation, but the United States also. Many goods that the United States export to Korea and other Asian countries cannot be bought due to the lack of money.
As the crisis has unfolded in Asia, the IMF has become, at least for this brief moment in history, almost a household name. But even if the institution has become more well known, its role in Asia and more broadly in the world economy is not widely understood. Despite the back-to-back corporate failures and resulting financial jitters, Korea has asked the United Nations to help with their crisis. The involvement of the United Nations has increased the media coverage of the Asian crisis. The actions they take are look with scrutiny by people that the crisis directly or indirectly affects. The IMF has supplied South Korea with $57 billion dollars to help rebuild Korea’s economy. The status between Korea and the IMF is change constantly everyday, In February Korea asked the IMF to lower the interest rates to rollover some massive debt they had.
IMF is labeled all over the cities of Korea, department stores advertising $5,000 jackets for $1,0000 because of the “cold wave of the IMF.” This type of sales pitch is given in most every shopping place possible. It is even done commercially on television, to promote sales. Television dramas and sitcoms would have a story line incorporating the economic crisis. Korea will not let this situation go unnoticed to its citizens. Like any other country they are trying their hardest to get themselves out of this terrible situation.
The International Monetary Board reconfirmed its optimistic outlook for the Korean economy. “Helped by the strong economic fundamentals, including brisk foreign shipments, the Korean economy is estimated to grow by 6.5 percent next year, with the current-account deficit narrowing to about $10 billion from $23.7 billion in 1996, the IMF said.” Yoo, Cheung-Meo. An IMF mission, at a news conference after winding up its 10-day assessment of the Korean economy, said the nation’s inflation rate in 1998 will remain below the 4.5-percent level targeted for this year. “Judging from our in-depth reviews, the long-term outlook for the Korean economy is very bright,” Charles Adams, assistant director of the IMF’s Asia and Pacific Department, said in a news conference. After a period of rapid growth, the Korean economy is now in the phase of cyclical restructuring. “Thus, the economy will shortly bottom out and enter an upward curve, said Adams, who headed the six-member IMF mission to Korea.” He also stated that the Korean economy is in a serious crisis, the IMF economist said that a recent string of corporate bankruptcies cannot be defined as a crisis, but as part of a normal market economy. “Korea is already a big, mature economy that can easily handle individual corporate bankruptcies. Some firms make right decisions and others make wrong ones, taking the course of bankruptcy. That’s an element of the market economy,” said Adams. Regardless of financial troubles at some conglomerates, Korea’s domestic and external economic fundamentals are very sound.
Media coverage of the economic crisis in the United State is not as widely covered as it is in Korea. The Korea society has to let the people know what state their economy is in, so they incorporate the media as a “information highway”. Many other nations such as Great Britain, Japan, China, and other bordering Asian countries publicize the crisis going on in Korea. It directly affects the citizens in Korea, but it indirectly affects people in all the other nations. This forms a basis to begin talks with other nations to help eliminate the problems in Korea.
A high-level delegation from the European Union visiting Japan and South Korea began talks in Tokyo aimed at kick-starting an Asia-wide economic revival. European Union officials say the delegation will tell Japan, as Asia’s economic leader, it must take urgent steps to boost domestic demand, clean up the banking sector and open up its markets to more Asian exports. The European Union delegation was also expected to ask South Korea to pursue efforts at economic restructuring and liberalizing trade. Seoul is now being urged to use its influence to gather support for a new round of regional trade talks. On December 3, 1997, Italy informed the International Monetary Fund that they would in fact help with Korea’s economical crisis.
“The Italian authorities have just informed the IMF that, like other G-7 countries and Australia, Italy is prepared to make available supplemental financing in support of Korea’s program with the IMF in the event that unanticipated adverse external circumstances create the need for additional resources to supplement Korea’s reserves and resources made available by the IMF and other international institutions. I welcome this.”
“As in the cases of Mexico, Thailand and Indonesia, the financial assistance from the IMF will be accompanied by financial assistance from other participating countries. Conditions of financial assistance, including the size and terms of lending, will be determined by the IMF and the participating countries.”
A recent overseas report on the annual talks on the world monetary system in Geneva, where the Asian Development Bank (ADB) discussed an early warning system against potential regional financial crisis. It was a very favorable to debate the issue on a global basis, since the Asian crisis was triggered by the currency devaluation of Thailand in July 1997. It has since spread across the national borders of Malaysia, Indonesia, the Philippines and now South Korea. The Asian Development Bank observed the following facts.
“…these affected Asian countries account for some 20 percent of Japan’s exports, 8 percent of the United States’ exports, and 3 percent of Europe’s exports…”
It is hoped that a proper surveillance mechanism based on the countries’ financial crises can be made to limit such crises.
The statistics show how much other nations economies have been influenced by the economical disaster. This again indirectly affects the stock market for the whole world.
People wonder how Korea and the other Asian nations came into such economical distress. There are four theories on the reason why the economy crashed the way it did. According to the Theory of Crony Capitalism, Corporate business practices were based on excessive borrowing of foreign capital and the poor management of that debt. Also the idea that there was inadequate government and bank supervision of the scale or usage of the foreign debt taken in by companies. A different theory on why the economy crashed was the Antelope Theory. Similar scenario as when the mere presence of a lion in hunt for just one member of a herd of antelopes triggers the flight of all the other members of the group. The attack on the Thai Bhat and its severe devaluation triggered major capital flight from all other nations in the Asian region. The third theory is called the Conspiracy theory. Jewish capitalists and/or US government plotted a financial siege upon the Southeast
Asian region in order to keep the rapidly growing Chinese economy in check and prevent overseas Chinese capital. This was the opinion of many Asians. And last but not least was the Theory of Japanese Responsibility.
Japanese bank loaning large amounts of money to western investment institutions at comparatively lower interest rates, which then flowed into Southeast Asia, hence, contributing to a bubble economy. After the collapse of the bubble economy in Thailand, the Japanese withdrew their money in large quantities in a hurry which, in turn, causes capital flight from other parts of the region. As a result, Japan did not fulfill its main role of setting a progressive pace for the Asian region.
Korea, and her other neighboring Asian countries are struggling for economic stability, with the help of the International Monetary Fund and other countries, this may be possible. Korea is doing all it can to involve many different nations to compromise a plan to increase their economic market. If matters are to become worse, the entire world will feel the economy crash fall right in their lap. The economic struggle may have started with Asia, but it will have a domino affect on all its major and minor associates. Again, this is the main reason why international communication is so important to their situation. To make their problem known they may be more likely to receive help and prevent other nations from whirling down the same treacherous path.
Yoo, Cheong-Meo, Korean Herald, 1997.
Fischer, Stanley. Asia’s Economic Crisis. 1998
Fischer, Stanley. International Monetary Fund News Brief. 1997
Lim, Chang-Yeul, Korean Embassy Press Release. 1997
Lee, Kyu-Sung. The Asian Crisis and Korean Community. 1998