[Congressional Record Volume 144, Number 1 (Tuesday, January 27, 1998)]
[Extensions of Remarks]
[Pages E25-E26]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             SHREWD ADVICE

                                 ______
                                 

                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                       Tuesday, January 27, 1998

  Mr. HAMILTON. Mr. Speaker, one of our former colleagues, Mike Barnes 
of Maryland, has recently published an essay in the Baltimore Sun in 
which he describes two recent trips to South Korea--the first in 
October, before the worst of the financial crisis took hold in Korea, 
the second two months later, after it had become apparent how severely 
hit South Korea would be by the economic turmoil that has rocked Asia 
in recent months.
  Mr. Barnes argues that it is very much in America's interest to help 
South Korea through the current financial crisis. Moreover, he insists, 
all the fundamentals are present in Korea for a full recovery.
  Mr. Speaker, because of our own stake in the Asian crisis, and 
because we have an immense interest in seeing South Korea weather its 
current problems, I ask that Mr. Barnes' essay be reprinted in the 
Record.

              South Korean `Tiger' Is in Our Best Interest

       Recently, the Center for National Policy has sponsored 
     trips to two very different countries in Asia. Each time, the 
     destination was South Korea.
       In October, we visited a dynamic Asian ``tiger'' with a 
     booming stock market, huge multinational corporations and a 
     population of 70 million looking forward to 1998 with 
     expectations of improved economic performance.
       Late last month, we visited a country in deep emotional 
     depression brought on by the sudden collapse of banks, 
     securities firms, major construction and manufacturing 
     conglomerates and the stock market. Almost overnight, South 
     Korea's currency--the won--lost more than 60 percent of its 
     value. The government was forced to seek emergency assistance 
     from the International Monetary Fund to stave off national 
     bankruptcy. Now, massive job layoffs are inevitable in a 
     society that once regarded them as unthinkable.
       Signs of the new economic reality were everywhere. Seoul's 
     infamous traffic jams have virtually disappeared. Stores, 
     buses, airplanes were all half-empty at the height of the 
     holiday season. Prices have skyrocketed for anything that 
     must be imported, such as heating fuel, which has doubled in 
     cost at the beginning of a tough Korean winter. The news 
     media gave wide coverage to tragic stories such as that of 
     the woman who leaped to her death from an apartment window to 
     avoid another argument with her husband over the family's 
     financial difficulties.
       Equally dramatic is the change in Korea's politics. The 
     Dec. 18 election of longtime opposition leader and democratic 
     activist Kim Dae Jung as president can only be compared with 
     that of Vaclav Havel in the Czech Republic, Jean-Bertrand 
     Aristide in Haiti or Nelson Mandela in South Africa. In 
     October, we were told it was impossible for Kim to win 
     because he could never appeal to voters outside his rural 
     home province of North Cholla. But he won a narrow victory 
     over two candidates from the ruling party by carrying urban 
     districts, including the capital city of Seoul.
       The election of Kim to South Korea's ``Blue House'' is 
     extraordinary by any measure. When I last met him in 1985, I 
     was a congressman from Maryland serving on the Foreign 
     Affairs Committee, and he was in exile in the United States 
     from a repressive military regime that repeatedly attempted 
     to assassinate him. When they kidnapped him in Japan, only an 
     intense international outcry prevented his murder at the 
     hands of his captors. His ultimate return to Korea was 
     highlighted by an attack of government thugs at the airport 
     and his immediate arrest.
       Since his election, Kim has been making the right moves to 
     give Koreans and the world confidence that the economic and 
     political future will be better. He has recognized the need 
     for restructuring Korea's economy in accordance with IMF 
     mandates, called for direct dialogue with North Korea and 
     reached out to domestic political opponents by allowing lame 
     duck President Kim Young Sam to pardon two former military 
     dictators (those responsible for his own persecution). The 
     president-elect has successfully urged the Korean National 
     Assembly to

[[Page E26]]

     pass key financial reform bills that give the Central Bank 
     more independence in monetary policy, unifies financial 
     sector regulatory bodies and improves the openness of 
     corporate finances by forcing companies to issue consolidated 
     financial accounts. He also has called for reform of labor 
     laws that will permit layoffs for the first time in Korea, 
     despite the strong support he received from labor unions in 
     his campaign.
       Kim's chief of staff, Congressman Yoo Jae Gun, told us that 
     the president-elect's team was surprised at the extent of the 
     economic disaster they were inheriting from the outgoing 
     administration. Nonetheless, they are ready, he said, to take 
     the steps necessary to turn around the economy as quickly as 
     possible.
       The Korean economic crisis might have hit with surprising 
     suddenness, but it was many years in formation. In essence, 
     Korean corporate giants financed their global expansion by 
     borrowing from international investors eager to ride the 
     success of the ``Korean Miracle.'' Virtually all of the 
     Korean corporate families, or ``chaebols,'' had accumulated 
     large debts as they circled the world finding new markets for 
     Korean products and manufacturing facilities.
       When the ``Asian economic flu'' began to spread from 
     Thailand through Indonesia to South Korea, foreign lenders, 
     principally New York banks, became nervous and began to 
     demand repayment of loans. When the value of the won dropped 
     precipitously, timely repayment became impossible for many 
     Korean companies. Initially, the Korean government sought to 
     bolster the economy through infusions of new capital, but 
     national reserves of foreign currency were much lower than 
     anyone had expected. As this became apparent to domestic and 
     international observers, a panic ensued that caused the 
     collapse of the Korean stock market and further devaluation 
     of the won. Even the announcement by the IMF of a $57 billion 
     bailout of South Korea was not enough to stem the panic for 
     more than a couple of days.
       The international community recently responded with new 
     commitments to roll over and extend loans to Korean 
     borrowers. International banks have committed new funds that 
     soon will be available to Korean companies. It is hoped that 
     these steps will be sufficient to renew confidence in the 
     Korean economy as the country prepares for Kim's inauguration 
     Feb. 25.
       South Korea's success is important to the United States, as 
     Treasury Secretary Robert Rubin has demonstrated by helping 
     marshal international support for Seoul's markets. Not only 
     is Korea a key trading partner, but we have 37,000 troops 
     guarding the demilitarized zone between North and South 
     Korea. Weakness in the south might be misinterpreted in the 
     north as an opportunity to threaten the security of the 
     peninsula.
       As one who has closely observed Mexico's recovery from its 
     own recent ``peso crisis,'' I would expect that Korea can 
     rebound even more rapidly. Korea has a strong industrial 
     base, an educated and committed work force, one of the 
     highest rates of saving in the world and a remarkable sense 
     of national unity. Certainly the courage and determination of 
     the new leadership has been proven during the decades of 
     struggle to bring democracy to the country. It is very 
     clearly in the United States' best interest to help them 
     succeed.

     

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