Imf Aid For Seoul Rises, Humiliation Sinks

An IMF-led rescue package for South Korea was expanded to a record $57 billion on Thursday, and many South Koreans reacted with humiliation and anger to the deal even though it has breathed new life into the countrys ailing economy.

The militant Korea Confederation of Trade Unions promised to wage all-out strikes if companies pushed for layoffs as a result of concessions to the IMF.

South Korea was rocked by a month of worker unrest earlier this year after the government rammed a controversial labour law through parliament. The government was forced to postpone until 1999 a provision that would have made layoffs easier.

 

Political parties were especially eager to exploit voters feelings of shame ahead of presidential elections scheduled for December 18.

We cannot help but question the IMFs attitude. The IMF is acting as if it is an economic conqueror, the governing Grand National Party said in a statement.

Lee Hoi-chang, the partys presidential candidate, on Wednesday promised to abide by the bail-out terms.

Lee is in a virtual dead heat with veteran opposition leader Kim Dae-jung of the National Congress for New Politics Party.

Kims party said in a statement that December 3 would be remembered as national economic humiliation day. The party said it would immediately begin additional negotiations with the IMF if it wins the election.

Kim had promised to carry out the IMF agreement in principle but said he would want to pursue talks on details if he wins.

In Tokyo, IMF Managing Director Michel Camdessus said on Thursday he had received support from all key political forces in South Korea for a reform programme linked to the rescue package.

I have received yesterday support from all key political forces for this programme and a letter from each of the three candidates in the presidential election to the effect that they would support the programme if elected, Camdessus told a news conference.

I have received the same pledge from the president and the speaker of parliament, he said.

Newspaper headlines lamented the countrys humiliation over the IMF rescue package.

South Korea has virtually lost its economic sovereignty for the next three years, said the Joongang Ilbo.

The Kyung Hyang Shinmun said: Dont forget the economic trusteeship of December 3.

The term has strong associations for South Koreans, who recall the trusteeship of Korea given to the United States, the Soviet Union, Britain and China at the end of World War II that halted 35 years of Japanese colonial rule.

The Finance Ministry said the package of IMF-arranged loans had grown by $2 billion to $57 billion after Italy said it would join in and three other countries increased their offerings.

About $5.5 billion of the package would arrive in Seoul on Friday evening local time and more than $10 billion would be provided by year-end, the ministry said.

The increases brought the total value of the country portion of Seouls aid package to $22 billion. The money is only supposed to be used if the $35 billion committed by the IMF, World Bank and Asian Development Bank is inadequate.

Details were expected to be disclosed after the pact was formally approved by the IMF board of governors on Thursday in Washington.

It is expected to call for Seoul to put the brakes on economic growth, liquidate or restructure troubled banks at the heart of the countrys debt crisis, further open up the financial markets and end restrictive trade practices.

It was also expected to call for more transparency in government data and in the bookkeeping practices of major conglomerates.

Newspapers complained that the United States and Japan had used South Koreas financial crisis as leverage to force Seoul to open its markets further.

As part of the IMF deal, Seoul agreed to raise its foreign stock ownership ceiling on a combined or individual basis to 50 percent effective December 15.

At present, the shareholding limit for foreign individuals is seven percent in a specific stock, while the combined foreign shareholding limit is 26 percent.

South Korea also agreed to allow Japanese products greater access to the Korean market, finance ministry officials said. Previously, imports of Japanese goods had been restricted because of Japans large trade surplus with South Korea.

South Korean markets responded to the package enthusiastically.

Stocks closed up 6.99 percent to 405.81 points on the increase in the foreign shareholding limit.

South Koreas won surged on anticipated dollar inflows, closing at 1,170.0, against Wednesdays close of 1,196.0.

Seoul is desperate for assistance because of a ticking time-bomb in the form of its short-term debt, the reason it called in the IMF.

South Korean media reported this week the central Bank of Korea had been forced to pay $10 billion in short-term foreign debt on behalf of Korean banks over the last few days.

About $66 billion of Koreas estimated $120 billion in foreign debt is short-term, and about $20 billion was due at the end of this year, analysts said.

The IMF package for South Korea is its biggest ever rescue effort, exceeding the $50 billion rescue programme for Mexico in early 1995.

Similar IMF packages were provided recently for Thailand and Indonesia. Thailand received $17.2 billion and Indonesia $40 billion under IMF-led rescues that also involved offerings from other countries.