Authors: Peter Drysdale and Soogil Young, Asia G20 Roundtable

The most important outcome of the G20 will be the reassurance of strong commitment from G20 leaders to macro-economic recovery strategies and to the structural changes needed for balanced growth and sustained development in the long term. As the most dynamic in the global economy, Asian economies have an especially important role in setting out the course ahead for re-balanced and sustainable growth.

The recovery of some industrial economies is still fragile and will require continuing expansionary measures, within the bounds of debt sustainability (which are a greater constraint for Europe). Read more…

Author: Soogil Young, Chair, KOPEC, Seoul

Koreans have been shocked, and even frightened, by the severity with which the current global financial crisis has affected their economy since September last year.

The Korean stock market index (KOSPI) fell 33 per cent from mid-September to the end of November, and continued to be volatile around what turns out to have been a weak upward trend since then. The won value of the U.S. dollar hovered around 1,000 until last August and rose precipitously in the months that followed, reaching a peak level of 1,518 on November 24, and another peak level of 1,594 on March 3 this year.

The main cause of Korea’s financial turbulence has been rapid and large outflows of foreign financial capital. The foreign holdings of domestic stocks fell by 29 per cent, from 228 trillion won at the end of August, when it accounted for 31 per cent of the total value of the stock market, to 163 trillion won at the end of November last year.

Concurrent with the flight from the stock market were the difficulties the Korean banking and corporate sectors had renewing foreign loans. This was indicated by a steep rise in Korea’s CDS premium, from 116 on August 31 to 405, the highest in Asia, on December 6 last year.

Read more…

Special Author: Soogil Young, National Strategy Institute, Seoul

Lee Myung-bak, the candidate from the conservative Grand National Party, won the Presidency of the Republic of Korea on 17 December 2007, with an unprecedented margin over his main opponent. The landslide victory provided a strong mandate for him to undo most of what had been done by his populist predecessor, President Roh Muh-hyun.

Roh had sought to undo what he thought were the injustices that the engineers as well as the beneficiaries of Korea’s industrialization between the 1960s and 1990s had built into the economic and political system.

Roh’s favourite keyword to describe the economy was ‘polarization’, a phrase meant to highlight what he believed to be deepening divisions in the Korean economy and society: between big Chaebol businesses and small and medium enterprises; between the rich (whom he considered morally corrupt) and the middle class and the poor; and between the populous and dynamic greater capital region around Seoul and the vast but ‘hollowing-out’ countryside.

Read more…