International experts speak on Korean economic crisis

In response to the instability of the South Korean economy, Ann Arbor residents and members of the University community gathered last night for a meeting with two experts who have first-hand experience with the crisis.

The economic downturn that is plaguing many Asian countries and worrying U.S. investors hit particularly hard in South Korea.

"This is the biggest recession the economy in Korea has ever witnessed," said Business Prof. E. Han Kim, who served as the finance adviser to the South Korean government during the recent negotiations to resolve Korea's economic crisis.

During September of last year, while political leaders were busy with a close presidential election, the Korean economy took a turn for the worse when inflation, unemployment rates and interest rates skyrocketed.

In an act of arbitrage - the buying and selling of a country's currency for profit - the Korean government overestimated the value of the won, the Korean unit of currency, in comparison to other currencies.

EMILY NATHAN/Daily Business Prof. E. Han Kim discusses Korea's economic problems at a forum last night at the International Institute. Also present was Sang-Mok Suh, a member of the National Assembly of the Republic of Korea.

The artificially high value, when deflated, caused national panic, Kim said.

The lower standard of living, the heightened rates of unemployment and the loss of national pride have caused many Korean citizens to classify the situation as a crisis.

The financial panic and loss of foreign investments forced the Korean government to borrow from the international market, Kim said. Due to the situation's unexpected nature, Korea was forced to borrow money from the International Monetary Fund at annual interest rates of up to 30 percent.

When the country was forced to borrow money, it was "a day of national disgrace for Korea," said Sang-Mok Suh, a member of the National Assembly of Korea.

Excessive media coverage of the situation caused investors to panic and stock prices to plummet.

The events had a ripple effect. Increased corporate bankruptcy and high unemployment rates were among the consequences.

For the past seven months, the Korean economy has been struggling to keep its head above water. Unemployment has risen from 469,000 at the beginning of the downturn to 1,235,000 in February, and corporate bankruptcy has tripled over that time period.

"If the current interest rates stay for long, Korean corporations will be wiped out," Suh said.

Suh said the key to turning the situation around lies in the hands of Korean corporations. He said that if Korean corporations can resolve "how to deal with unemployment while trying to maintain efficiency" the situation will improve.

Although the numbers have begun to stabilize in recent months, investors remain apprehensive about Korea's economic future.

When asked if Kim, as a foreign investor, would invest in Korea, he

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