South Korea has fully recovered from the devastating 1997 economic crisis, the government said yesterday on the eve of its anniversary, but commentators said crucial reforms were still not in place.
On Nov. 21, 1997, Seoul asked the IMF for a bailout of US$57 billion -- the largest in the fund's history -- to avoid a state bankruptcy.
In return it effectively gave up sovereignty over the economy, accepting tough austerity measures -- including high interest rates -- prescribed by the IMF.
The turmoil swallowed up 16 of the 30 largest business conglomerates, including the second-largest Daewoo Group, and forced some 900 financial institutions out of business.
Millions lost their jobs due to corporate restructuring and insolvencies, even though the government injected some US$180 billion to bail out failing businesses and financial institutions.
But the finance ministry said the restructuring and austerity measures paid off.
Foreign exchange reserves have recovered from US$204 million at the end of 1997 to US$260 billion, making the country the world's fifth-largest foreign exchange holder.
Sovereign ratings, once at junk bond levels, recovered and the won rebounded from 1,962 won per US dollar in December 1997 to less than 920.
"Sovereign ratings have been rising, reflecting South Korea's economic recovery, increase in foreign exchange reserves and restructuring of insolvent businesses," the ministry said in a report marking the 10th anniversary.
The average ratio of business debts against assets fell from 400 percent to 80 percent over the 10-year period, while profitability in terms of earnings against sales improved from 2.1 percent to 5.9 percent last year.
However, the crisis left many businesses wary of new investment, resulting in slower facility investment and lower economic growth.
"Conservative management and low investment took their tolls on economic growth as increased use of hourly workers [instead of full-time staff] led to growing income gaps," said Hwang In-sung of Samsung Economic Research Institute.
Dong-A Ilbo newspaper said in an editorial that initiatives in the public, finance, business and labor markets had not been completed.
"Hostile labor-management relations have not been resolved. Inefficiencies and regulations may have been exacerbated, not mitigated, over the past 10 years. Job insecurity and youth unemployment have become commonplace," it said.
The newspaper also cited rising income gaps, an increasing national debt and growing household debts.
"All these indicate that an economic crisis may be approaching us once again," it said.
The paper added it was crucial for the economy to become vibrant "to get out of the low-growth trap" and open a new decade of further growth.
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