SERI Warns Against Second Crisis

2001-03-21 444 words

By Shim Jae-yun Staff Reporter

A leading economic research institute yesterday warned that Korea may face a second crisis unless it appropriately addresses the structural reform at financial and corporate sectors.
Samsung Economic Research Institute (SERI) said Korea has similar problems with those of Japan in terms of insolvent financial sector, lackluster corporate restructuring, ineffective political leadership and problematic bureaucratic system.
It said Japan has been able to withstand the problematic points mainly bolstered by its businesses' possession of world-class competitiveness, massive amount of financial assets and the world's largest currency reserves.
``Korea which lacks the said factors may face a serious crisis should it fail to find solution to the problems in the near future,'' it said in a report titled ``Lost 10 Years, Lesson From Japan.''
Regarding looming sense of crisis clouding Japan, it said Japan's banking companies have begun to see snowballing problem loans while its drive toward corporate restructuring has failed to see a meaningful progress.
``It has also been suffering from weak political leadership due mainly to the limit of the coalition government. Public officials have failed to present proper policy remedies to pending issues due to ministerial selfishness,'' it said.
The report went on to say that the general social atmosphere in Japan has been refusing to changes since 1990s.
In case of Korea, the non-performing loans extended by the financial companies continued to increase to reach 76.3 trillion won as of the end of September last year and the corporate restructuring has begun to show signs of slowing, it said.
Compared with the early stage of the financial crisis, the political leadership has greatly weakened and the inter-ministerial cooperative system has failed to perform well.
``The most urgent task facing Korea would be to step up efforts to expedite the financial sector restructuring and clear the problem loans and raise the nation's external credit,'' said SERI's senior researcher Yoo Yong-joo.
He foresaw that the possible outbreak of economic debacle in Japan coupled with the economic slowdown in the United States might rapidly spread to the entire world.
``But in that case the economically industrialized countries would attempt to make concerted efforts to head off further crisis, '' he said.
But the Korean companies will be vulnerable to the drastic depreciation of the Japanese yen mainly in terms of export price competitiveness.
``Such crisis in Japan is expected to freeze possible investment from Japan, which current takes 16 percent of the total,'' he said.
SERI analyzed that Korea's exports would decrease by $2.7 billion per year in case Japanese yen depreciates by 10 percent while its import would decline by $800 million.