History of Korea, part III

The Legend of Tan-Gun | Pre-20th Century | 20th Century | Korean War | Korea's Future

Korea's Future
1996 - present:
In what was termed "the trial of the century," former Presidents Chun and Noh and several of their closest cronies were convicted in December 1996 for crimes committed after 1979. Chun received life imprisonment, while Noh was sentenced to 17 years in jail. President Kim, Young-sam issued a special pardon for them a year later, in the name of national reconciliation.

Trying to create a more favorable environment for economic growth and foreign investment, the government has been liberalizing many of the existing economic policies. Korea joined the Organization for Economic Cooperation and Development (OECD) in 1996 as a full member. However, in order to sustain its development of the past decades, the country must proceed with structural adjustments, especially in its finance sector.

The establishment of the World Trade Organization (WTO) and membership in the OECD have increased outside pressure on Korea to open its domestic markets to competitors. Imports have risen, and a trade deficit of $20.6 billion occurred in 1996. Domestic manufacturers have gradually lost some of the market share they enjoyed under the protection provided by the government, and new opportunities for foreign companies have been created.

In November 1997, Korea became the third Asian nation after Thailand and Indonesia to become a ward of the International Monetary Fund (IMF) since August. It was a humiliating pill to swallow for a nation that had only joined the OECD the previous year. The IMF package ended up totaling close to $60 billion, by far the largest bailout ever by the organization. In exchange for the bailout, Korea must make several economic changes which, while painful in the short term, should make Korea more competitive in the future. Despite numerous protests by private citizens for the government to renegotiate the terms of the bailout, the government appears to be sincere in its efforts to implement the reforms outlined by the IMF.

For the past several years, the won/dollar exchange rate was relatively stable, limited by an extremely narrow daily fluctuation band. In November the government lifted the daily fluctuation limits on foreign exchange trading and F/X rate watching has become a national pastime. At one point, the dollar buying rate exceed 2,000 won. Since the IMF intervened in December and agreed to loan Korea over $57 billion, the won has traded between 1,400 and 1,800.

Expatriates here who receive their wages in won found their salaries worth almost half what they were only a year ago. Many who still had dollar-based debt for credit cards or student loans suddenly found they could not afford to continue working here. As Korea heavily relies of imports to satisfy many basic needs, consumer prices for electricity, gas, and wheat have risen sharply.

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