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Analysis and Evaluation of 1997 Individual Action Plan
Analysis and Evaluation of IAPs 1997 Individual Action Plan Keuk-Je Sung Individual Action Plans of 1997 was an expansion of the IAPs of 1996, covering as many as 15 areas including tariffs, non-tariffs, investment and services. ..
Keuk-Je Sung Date 1998.10.14
Economic opening, Economic cooperationDownloadContentSummaryAnalysis and Evaluation of IAPs 1997 Individual Action Plan Keuk-Je Sung Individual Action Plans of 1997 was an expansion of the IAPs of 1996, covering as many as 15 areas including tariffs, non-tariffs, investment and services. The actual improvement was, however, rather limited from a general perspective. This lack of improvement was visible in market access area such as tariffs, non-tariffs, services, government procurement and UR implementation. The improvements, if any, were the repetition of already committed WTO commitments in basic telecommunications, financial services and Information Technology Agreement. Rules area including competition policy, standards, and deregulation, showed similar tendency of repetition; this time, basic principles.
This lack of improvement may be unavoidable due to the short history and nature of APEC's voluntary liberalization. Unless controversial MFN problem is resolved, such reluctance to unilateral liberalization cannot be easily overcome, as long as there are non WTO members. Creative ideas, however, may help induce member countries to pursue liberalization in an indirect manner. For example, requirement of reporting only the improvement for the next couple of years would generate significant peer pressure to the members. Same kind of pressure may be exerted if reporting formats were more detailed in the rules area of standards, deregulation and UR implementation. In the areas of non-tariffs and investment, establishment of five-year plans may help pursue further liberalization. -
Korea's Trade and Industrial Policies: 1948-1998
Korea's Trade and Industrial Policies: 1948∼1998Why the Era of Active Policy is Over Chan-Hyun Sohn, Junsok Yang, Hyo-Sung Yim Throughout its history, Korea has based its economic policies on ideas of how to best promote exports..
Chan Hyun Sohn et al. Date 1998.09.30
Trade policy, Industrial policyDownloadContentSummaryKorea's Trade and Industrial Policies: 1948∼1998Why the Era of Active Policy is Over Chan-Hyun Sohn, Junsok Yang, Hyo-Sung Yim
Throughout its history, Korea has based its economic policies on ideas of how to best promote exports and control foreign exchange reserve levels. Even during periods of liberalization, more attention was given to promoting exports than liberalizing imports.
The review of Korean trade and industrial policies showed how the trade policy, which began by effectively utilizing international competition, evolved into an industrial policy which encouraged close cooperation between the government and the private sector. Such close ties led to crony-capitalism which is the underlying root of the current economic crisis. Thus, activist industrial policy must no longer be a part of government's policy options. The theoretical justifications are no longer as clear in the 1990s as in the 1960s, and the potential for misuse and the negative effect on the rest of the economy is too high to be tolerated.
Instead, Korea must now engage in policies which undo the ties between the public and private sectors fostered during the last fifty years. In the short term, this means that the government must acknowledge and reveal publicly the quasi-legal and illegal ties it maintained with the private sector since the 1980s. In the long run, it means that the government must change their emphasis and engage in policies designed to lower the concentration of market power in a few select large conglomerates, increase competitiveness, and thus promote the innovativeness and the flexibility of the Korean economy. -
The Role of Cross-Border Mergers and Acquisitions in Corporate Restructruing
The Role of Cross-Border Mergers and Acquisitions in Corporate Restructuring Yunjong Wang, Jong Keun Kim In Korea, a market for mergers and acquisitions (M&As) has virtually not existed until recently, because there was only ..
Yunjong Wang et al. Date 1998.09.15
Business managementDownloadContentSummaryThe Role of Cross-Border Mergers and Acquisitions in Corporate Restructuring Yunjong Wang, Jong Keun Kim
In Korea, a market for mergers and acquisitions (M&As) has virtually not existed until recently, because there was only a limited number of market participants, and furthermore the activity of mergers and acquisitions was perceived as an immoral and cold-blooded one against the Korean business culture.
After the currency crisis broke out in late 1997, the pace of foreign direct investment through cross-border M&As has picked up markedly, despite ongoing concerns regarding profitablity of Korean firms, labor unrest and difficulties attending the acquisition process. Compared to 700 million dollars or only 10% of total foreign direct investment in 1997, foreign acquisitions of outstanding Korean stocks has increased to 700 million dollars or about 40% of total foreign direct investment by the first half of 1998. If the acquisitions of assets are included in the statistics of cross-border M&As, the amount of cross-border M&As would be even larger.
Cross-border M&As have various merits to our national economy: foreign capital inflow in this critical time of currency crisis; facilitation of corporate restructuring; enhancement of market contestability; advancement of corporate governance; and transfer of advanced technology and managerial know-how. In order to take advantage of these benefits, the Korean government need to improve the environment for foreign direct investment. Furthermore, various policy measures should be undertaken continuously to strengthen the role of mergers and acquisitions as a powerful market mechanism by which inefficient management could be disciplined. -
The Role of Foreign Direct Investment in Korea's Economic Development: Productivity Effects and Implication for the Currency Crisis
This paper seeks to investigate the role of foreign direct investment (FDI) in Korea focusing on productivity spillover effects in manufacturing and implications for the current currency crisis. Estimation results of a random-effe..
June-Dong Kim et al. Date 1998.09.10
Foreign investmentDownloadContentSummaryThis paper seeks to investigate the role of foreign direct investment (FDI) in Korea focusing on productivity spillover effects in manufacturing and implications for the current currency crisis. Estimation results of a random-effects model with instruments using the annual data of six subsectors in manufacturing industries reveal that foreign direct investment had a positive but statistically insignificant effect on the productivity of Korean manufacturing during 1970-1996. The paper also examines whether or not FDI has the role of preventing bail-out loans in a currency crisis. The probit estimation results using cross section data of 90 developing countries show that the incidence of bail-out loans from the IMF during 1994-1997 is negatively associated with FDI stock relative to total GDP. The probit analysis using pooled data of 84 countries in 22 years of 1973-1994 also reveals that FDI inflow relative to total debt is negatively associated with both currency crashes and the IMF rescue loans. -
Change in Japan's Trade Policy Directions since the 1980s and Implications for Korea
Change in Japan's Trade Policy Directions since the 1980s and Implications for Korea Sungsup Ra This study intends to investigate changes in Japan's trade policy directions since the 1980s. Since the 1980s, facing changes both i..
Sungsup Ra Date 1998.08.31
Trade policyDownloadContentSummaryChange in Japan's Trade Policy Directions since the 1980s and Implications for Korea Sungsup Ra This study intends to investigate changes in Japan's trade policy directions since the 1980s. Since the 1980s, facing changes both internationally and domestically, Japan's trade policy, once known as "managed," has been gradually transformed into a liberal policy, yet it is still taken as an example of export-led trade or industrial policy.
Japan's trade policy since the 1980s has, in its principles, shown three distinctive changes: firstly, it has increasingly interacted with competition policy and its scope include an area where trade and competition policies interact together; secondly, Japan has been inclined to take more active or aggressive reaction toward foreign pressure in formulating its trade policy than before; finally, Japan has shown its effort to enhance harmonization between the Japanese and the international economy.
Under these changes in the principles, Japan's economic growth strategy has shifted from export-led to domestic-led since the 1980s. Steps have also been taken towards deregulation and structural reform in Japan's economy. Some measures for promoting import and foreign direct investment into Japan have also implemented. And Japan has actively supported a multilateral trading system under the framework of GATT/WTO as a free and non-discriminatory trade dispute settlement mechanism. However, these Japanese efforts are, in this study, evaluated to be partial in scope and several sectors including agriculture, construction and certain services, especially financial, remain subject to restrictive regulation that affect both foreign market access and better allocation of domestic resources.
This study firstly overviews the background affecting changes in Japan's trade policy since the 1980s and identifies important aspects of changes in Japan's trade policy through careful examination of trade policies and policy instruments taken by Japan and case studies on the U.S.-Japan semiconductor issue, the U.S.-Japan automobile and auto parts issue, and the U.S.-Japan film issue. This study also shows that Japan is expected to continue the trade policy directions into the 21st century. Finally, evaluating Japan's trade policy, implications for Korea are drawn. -
Bilateral Investment Treaties of the United States: Implication and prospects of the BIT between Korea and the U.S.
Bilateral Investment Treaties of the United States: Implications and prospects of the BIT between Korea and the U.S. Kwan-Ho Kim Korea and the U.S. agreed at last June's Summit to conclude a Bilateral Investment Treaty by the end..
Kwanho Kim Date 1998.08.20
DownloadContentSummaryBilateral Investment Treaties of the United States: Implications and prospects of the BIT between Korea and the U.S. Kwan-Ho Kim
Korea and the U.S. agreed at last June's Summit to conclude a Bilateral Investment Treaty by the end of this year. The treaty will prescribe a wide range of investment protection standards: including non-discriminatory treatment; prompt, adequate and effective compensation in the event of expropriation; and free transfer of all kinds of funds. The treaty will also contain topics regarding investment liberalization. Performance requirements such as local content will be prohibited.
It was unusual that the treaty was inititated not by the U.S., but by Korea, which is in the position to import capital. This reflects the changing circumstances in Korea, which is undergoing rapid structural reform and actively seeking to attract foreign direct investment. Rather than waiting for a proposal from the U.S., Korea decided as a matter of policy to conclude a BIT with the U.S.
Korea hopes the BIT with the U.S. will help establish a favorable investment climate, bulid confidence, and send a positive signal to investors. While the BIT may contribute to some growth in foreign investment, we should not have too many expectations. The BIT with the U.S. is only a tool - one factor creating a favorable investment climate. Existing studies show that BITs play a minor and secondary role in influencing foreign investment flows. Unless we can offer a secure profit-making ventures to foreign investors, the existence of the BIT will not itself attract investment.
Some of Korea's policies might be challenged by the BIT with the U.S., e.g., the screen quota system which is contrary to the obligation to not enforce local purchasing requirements. Korea is currently maintaining this policy to foster its film industry. Whether we should expose this cultural industry to open market competition will be a contentious issue. -
Trade and Labor Standards
A number have countries have moved to impose trade sanctions against manufactured goods from countries that are considered to have substandard labor conditions. The issue of labor standards was brought up before and after the Mara..
Yunjong Wang Date 1998.08.19
DownloadContentSummaryA number have countries have moved to impose trade sanctions against manufactured goods from countries that are considered to have substandard labor conditions. The issue of labor standards was brought up before and after the Marakeshi cabinet meeting of 1994 because France and the United States were seen to adopt it as a new agenda item in trade negotiations in the Uruguay Round.
Advanced countries were seen to link trade to labor standards for political motives and from a desire to protect their declining industries, lower unemployment rates and stem the flow of goods from countries with low labor costs, including China, East Asia and South Asia.
In other words, by creating a relationship of cause and effect between low labor costs and low labor standards, advanced countries have argued that their economies should be protected from social dumping of developing country based on sweat-shop labor and unfair working conditions. -
Adjustment Reforms in Korea since the Financial crisis(1997.12-1998.6): A Comprehensive Report
Adjustment Reforms in Korea Since the Financial Crisis(1997.12 - 1998.6) : A Comprehensive Report Hyoungsoo Zang, Yunjong Wang On December 3, 1997, the Korean government sent a Stand-By Arrangement with a Letter of Intent to the..
Hyoungsoo Zang et al. Date 1998.07.20
Economic development, Financial crisisDownloadContentSummaryAdjustment Reforms in Korea Since the Financial Crisis(1997.12 - 1998.6) : A Comprehensive Report Hyoungsoo Zang, Yunjong Wang On December 3, 1997, the Korean government sent a Stand-By Arrangement with a Letter of Intent to the International Monetary Fund asking for 21 billion dollars of emergency assistance to replenish foreign exchange reserves depleted by the financial crisis. The government announced its commitment to carrying out fundamental reforms in the financial and corporate sectors as well as further trade and capital market liberalization under the IMF program. This progress report is the first comprehensive study of adjustment reforms in Korea since the inception of the recent financial crisis.
The Korean government has now implemented all measures recommended by IMF, and in some areas reform has surpassed program targets. However, still much remains to be done. As stability of the foreign exchange market has been restored, the government's primary emphasis has shifted to impementing restructuring in the financial and corporate sectors and the social consequences of reform. These are certainly not easy tasks to tackle. For successful adjustment reforms in Korea, which are long overdue, a comprehensive blueprint envisaging how the Korean economy should look like after overcoming the crisis should be given first priority. Based on the blueprint, reforms should be done swiftly and boldly.
Futhermore, Korea should not overlook the widespread consensus that the current crisis was originated from low productivity borught out by high cost and low efficiency. -
Bankruptcy Procedure in Korea: A Perspective
Considering Korea's current economic environment, foreigners are likely to have greater interest in Korean bankruptcy procedures than before. However, little English-written material covering the subject currently exits. To fill t..
Mikyung Yun Date 1998.07.10
Financial crisis, Business managementDownloadContentSummaryConsidering Korea's current economic environment, foreigners are likely to have greater interest in Korean bankruptcy procedures than before. However, little English-written material covering the subject currently exits. To fill this gap, this paper briefly describes reorganization procedures and introduces some of the related discussions that have taken place recently. Korean reorganization consists of two distinct processes: composition and corporate reorganization. Some of the most important issues raised with respect to these procedures are; 1) treatment of existing managers and shareholders, 2) the appropriate roles of composition and corporate reorganization (and whether they should be unified), and 3) interim financing. -
Korea's Economic Reform Measures under the IMF Program : Government Measures in the Critical First Six Months of the Korean Economic Crisis
By November 1997, the financial crisis that had been tormenting Southeast Asia since the summer of that year spread to Korea. The foreign exchange difficulties were quite unlike anything the world had ever seen. The resultant econ..
ChanHyun Sohn et al. Date 1998.06.30
Economic reform, Financial crisisDownloadContentContents
Foreword
I. Summary of the IMF Stand-By Arrangement
II. Comprehensive Reviews of Implemented Actions and Plans for the IMF Program
III. Government Reform Measures
1. Macroeconomic Policies
2. Financial Sector Restructuring
3. Trade and Capital Account Liberalization
4. Corporate Governance and Structure
5. Labor Market Reform
6. Information Provision
IV. Official Announcements and Speeches
V. News on International Loans
VI. Miscellaneous Entries
Appendix : Index of All Items by Date
SummaryBy November 1997, the financial crisis that had been tormenting Southeast Asia since the summer of that year spread to Korea. The foreign exchange difficulties were quite unlike anything the world had ever seen. The resultant economic chaos is still being sorted out and the effects will likely be felt for years to come.
The crisis in Korea was touched off in November when a loss of confidence by foreign investors resulted in huge withdrawals of funds and a swift, massive depreciation of the Korean won. In early December, the Korean government requested the assistance of the IMF. The government and the IMF agreed on a program of fundamental economic reforms to curb the foreign exchange crisis. In particular, the reforms aimed to eliminate some of the long-standing problems with the Korean economy such as excessive regulations, inefficient financial sector, corporate governance without checks and balances, high levels of restrictions in trade and capital flows, rigid labor markets, and non-transparency.
At the same time, the government requested that we, the Korea Institute for International Economic Policy (KIEP), establish the "Nation's Confidence Enhancement Team" which, with the assistance of the Ministry of Finance and Economy (MOFE), would help restore foreign investor confidence in the Korean economy. Since the biggest problem that foreign investors faced was the lack of information about the Korean economy, the team was to provide information about economic reforms and restructuring. Information covering reforms and the current economic situation was compiled, summarized, translated, and placed at the "Korea's Economic Reform Update" website within the KIEP homepage (http://www.kiep.go.kr/ENGLISH/ekiephome.html).
While at times quality had to be sacrificed for the sake of making material available immediately, we are proud of what the team has accomplished. Therefore, upon the completion of the project on May 8, we decided to publish their efforts. This volume compiles the individual entries of the website. We believe this compilation provides a unique insight into the critical first six months of Korea's financial crisis, and will provide useful background material to anyone interested in early government responses to the country's financial crisis.
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