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South Korea seeks $20B
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November 21, 1997: 8:57 p.m. ET
President Kim Young-sam asks for his country's support for the radical plan
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NEW YORK (CNNfn) - South Korean President Kim Young-sam on Saturday apologized for the economic troubles that prompted the country to seek a $20 billion bailout package from the International Monetary Fund.
"This is not the time to blame others, but rather we should all, once again, tighten our belts and share the pain to overcome the crisis," Kim said.
Kim spoke in a televised address as the nation struggles to accept the idea that the IMF will dictate some of its economic policies. Many South Koreans are galled and consider the move an infringement of "economic sovereignty," according to local media reports.
South Korea's announcement came a day after senior officials denied the nation would seek IMF help. Kim has vigorously opposed such a plan in the past for the world's 11th largest economy.
South Korea decided to pursue IMF help, often seen as a drastic measure which comes with strings attached, after pleas to the United States and Japan for assistance were unsuccessful.
"We will use the IMF system to raise urgent foreign currency. We will do our best to undertake the burdens following economic reforms," Kim said.
Finance Minister Lim Chang-yuel said senior officials will meet this weekend to negotiate terms of the bailout. He expects the country to receive the loans within four weeks.
"We accepted the advice from the IMF and our friendly nations and we decided to ask for the IMF loans," said Lim, who was once executive director of the IMF.
Financial markets cheered the decision, with the South Korean composite stock index ending 17.66, or 3.6 percent, higher at 506.07 Friday.
The South Korean currency, the won, was also braced by the IMF news, closing at 1,065 to the U.S. dollar, after beginning Friday at a record low 1,139 to the dollar.
South Korea's economy has been buffeted by the same Southeast Asia forces, primarily unmanageable overseas debt loads, which have dragged down the value of most currencies in the region and forced many companies into bankruptcy.
Before the IMF loans money to a country, it often requires provisions which involve a housecleaning of poorly run businesses and financial institutions.
One of those reforms will be the need to create a sense of business "transparency," said Nicholas Horsley, portfolio manager at Oppenheimer Funds, Inc.
"You don't know what most of the [companies] are up to," he said. "You look at them. You know profits are hidden. Profits are manipulated. There has not been a fair pricing of capital."
Its estimated that South Korea has about $55 billion of debt which will need to be repaid in the short term. That debt has strained the nation's banks and they may bear the brunt of the restructuring, said Horsley. (146K WAV) or (146K AIFF)
The problems are extreme. South Korea has the world's 11th largest economy, but its top 49 companies, which produce 90 percent of the country's gross domestic product, are believed to have only made a combined profit of $65 million.
South Korea's aid package could be the largest IMF plan ever. Indonesia and Thailand have received plans for assistance totaling about $60 billion combined, and Mexico in 1995 negotiated a package of $50 billion in aid, which has thus far been the biggest.
-- From staff and wire reports
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