"We don't know whether we would go bankrupt tomorrow or the day after tomorrow. I can't sleep since I was briefed. I am totally flabbergasted....This is the bottom. It's a matter of one month, no, even one day. I just can't understand how the situation came to this."
-- Korean President-elect Kim Dae-Jung, in the December 23 Chosun Ilbo newspaper
In response to Kim's confidence-inspiring public remarks, stocks plunged a record 7.5 percent, and 772 Korean stocks plunged to their daily lower limit. The won (which had been stable for a few precious weeks) fell to 1,962, less than half of what it was only 18 months ago. Making remarks that crush the confidence of a nation that desperately needs some is no way to run a country. There is no irrational exuberance in Korea this week.
Kim Dae-Jung (known as DJ to his friends) was elected last week in Korea's third open elections ever. He was a leader of the democracy movement for decades, landing himself in prison on several occasions for his troubles. In a way, he is like South Africa's Nelson Mandela. Also extremely popular, Mandela was skilled at leading the opposition to a repressive government, but many South Africans have commented that he had little idea how to run a government. Luckily for Mandela, he is surrounded by savvy bureaucrats and economists. Kim Dae-Jung may or may not enjoy the same.
Kim Min-seok, senior vice-spokesman for the NCNP, told Reuters that "the president-elect did not mean there was a real possibility of a national bankruptcy but wanted to express his willingness to undertake restructuring." But the spin put out by his advisers failed to stem the hemorrhaging of the markets. Standard & Poor's and Moody's Investor Service downgraded Korea's short-term foreign currency ratings to junk bond status, further stemming the already thins trickle of foreign investment that is necessary to pay the massive short-term debts Korea faces. The World Bank authorized an emergency three-billion-dollar loan to Seoul to help cover the short-term debt.
Even more ominous for the future, Kim, who hails from the minority National Congress for New Politics Party, faces a possibly hostile parliament, as the majority Grand National Party still has three years left of its simple majority in the National Assembly. Given the growing Korean backlash against the harsh conditions set by the IMF, Kim may lack the political power (or will) to enforce the strict and possibly painful rules. In his first news conference after winning, he proclaimed that he would "faithfully abide by agreements between the IMF and the current government." He asked the people of Korea to "prepare yourselves to endure, if needed, hardships together with me." These hardships include slashing government spending, lowering economic growth, raising interest rates, and allowing businesses to fail naturally -- measures which have been forecast to put up to one million Koreans out of work.
