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SCMP Reporter

Korean Crisis: Unraveling of the Miracle in the IMF Era

By Donald Kirk

Published by St Martin's

South Korea has been in the news lately, mainly for sporting reasons as the World Cup soccer finals kick off this week.

But just five years ago at the outbreak of the Asian financial crisis, the country went through a humiliating experience as it had to go to the International Monetary Fund to shore up its economy.

The IMF bail-out came with stringent conditions. The lending body urged the Government to discontinue providing subsidies to loss-making companies as it would only keep weak companies from being closed.

It also asked the Government to allow banks and other private-sector institutions to drive the restructuring process, and that it was not worth delaying privatising financial institutions in order to get higher prices.

Yet another solution suggested was implementation of corporate and financial restructuring to regain long-term potential growth.

Donald Kirk explores the reasons for South Korea's economic crisis, its aftermath and impact on the system that brought it about.

Kirk traces a variety of events that constituted the crisis, including a series of scandals at the height of the Korean miracle; the efforts of one-time dissident Kim Dae-jung as President to curb the problem of the chaebol  or conglomerates; and the intervention by the IMF and the country's desperate efforts to obtain foreign investment.

The book also explores another overwhelming problem - that of coming to terms with North Korea, which was (and still is) suffering from famine and was considered a threat.

This pushed Mr Kim to launch the hectic diplomatic efforts, which resulted in his popular visit to Pyongyang.

The book is based almost exclusively on the author's original reporting - Kirk was reporting for International Herald Tribune  from Seoul - from the onset of the crisis and throughout the intervention of the IMF.

Kirk writes that how the South Korean miracle fell apart, then partially came together again forms one of the great dramas of modern Asian history.

'My purpose in writing this book has been to trace the evolution of the crisis, including the struggle of the Government, business and labour to overcome it,' he writes.

The labour trouble has persisted as several chaebol  have been sold to foreign companies and workers have been laid off as part of the restructuring.

South Korea's motor car industry was hardest hit by the Asian economic crisis.

Well-established international manufacturers such as Samsung Motors, Kia, Hyundai and Daewoo have all suffered as a result of takeovers and mergers.

However, despite all the trouble, South Korea's economy is on the mend and last year its stock market was one of the best performers in Asia.



Journalist traces crisis days of Korea's miracle