December 15, 1999	atimes.com

The Koreas S Korea's economy in a nutshell By Kim Min-jung SEOUL - The Korean economy posted some significant changes in 1999, the second year of the IMF-prescribed restructuring program. As a result of nationwide efforts, there has been substantial progress in the restructuring of financial institutions and major corporations, while the economy has recorded faster-than-expected growth. The following are this year's major changes and issues in the Korean economy. Changes in economic indices over two years The changes in various economic indices over the past two years show a recovery in the Korean economy, which almost collapsed at the end of 1997. Economic growth, which fell to minus 5.8 percent last year, rebounded to a growth of 4.6 percent in the first quarter this year, 9.8 percent in the second and 12.4 percent in the third. The factory operation rate, which fell to the 60-percent level last year, climbed to 79.5 percent in the third quarter this year to recover close to the pre-IMF crisis level, as did the rates for shipments and consumption. The rate of consumer price increase, which rose 7.5 percent last year, was only 0.8 percent this year. Unemployment went from 6.8 percent last year to 4.6 percent in October this year. The Korean bourse, whose benchmark Kospi fell to as low as 406.1 points last year, saw brisk recovery this year. The index is now moving around 1,000 points. Per capita Gross National Product, which had fallen to $6,823 last year from $10,307 in 1997, recovered to almost $9,000. Foreign currency reserves now amount to over $70 billion and Korea, which was a net foreign debtor of 5.41 billion won at the end of 1997, became a net creditor of $400 million at the end of October this year. Many Korean financial institutions introduced various foreign systems such as credit judging, risk management committees and personal credit ratings to enhance efficiency and transparency. Strategic alliances with foreign banks also boomed in 1999. Hana Bank secured investment from the International Finance Corp, Korea Exchange Bank from Commerzbank, Kookmin Bank from Goldman Sachs, and Housing and Commercial Bank from ING Barings. Conglomerates' efforts to reduce debts The most important task facing Korean conglomerates this year was to lower their debt-equity ratios to below 200 percent. Many conglomerates relied heavily on loans for management expansion, advanced sales or merger of affiliates to meet the government's strong demand to reduce their debt ratio to under 200 percent. The Daewoo Group, which continued to borrow excessively despite the government's push for downsizing, suffered from a serious financial crisis this year that has resulted in heavy damage to the Korean economy. Samsung Motor, to which many financial institutions lent money without a thorough examination of its actual business prospects, went under court receivership. The four remaining big groups - Hyundai, Samsung, LG and SK - are expected to see total debts fall by 30 trillion won to 135.3 trillion won ($120 billion) by the end of the year from the year before, and succeed in lowering debt ratios to below 200 percent. Companies under workout Corporate restructuring was still moving at a slow pace while financial restructuring reached its final stages, producing fears of a chain of bankruptcies. A total of 79 companies were under debt workout, including 12 Daewoo affiliates. In the first nine months of this year, they posted profit at only 53.1 percent of their original target. Some creditors of those companies have already poured an enormous amount of funds into revitalizing the firms, and will provide more money to stop the firms from falling in the course of the workouts. Other creditors are selecting firms to liquidate before suffering more damage. Tax evasion by conglomerates The National Tax Service strengthened audits on conglomerates in an attempt to flush out cases of tax evasion this year. The Hanjin Group was found to have evaded a record-high 1 trillion won in taxes and was duly fined a record 541.6 billion won ($480 million). Also making news was the tax audit of the Bokwang Group, whose major shareholder was the president of the major daily Joongang Ilbo. The daily, which has been critical of the incumbent administration, accused the government of using the tax probe as a means to ''tame the press.'' Stock boom A large number of people such as office workers, housewives, university students, retirees and even prisoners jumped into investing in the Korean bourse in 1999, bringing a stock investment boom. The indirect investment market also saw brisk growth as personal investors poured money into various mutual funds that were introduced at the end of last year. Stock-type beneficiary certificates, which were worth 8.3 trillion won at the end of last year, skyrocketed to 56.25 trillion won ($49.87 billion) in value as of December 4. The over-the-counter Kosdaq market was dubbed the ''dream market'' in the latter part of this year thanks to a boom in Internet and information and communications stocks. (Asia Pulse/Yonhap)

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