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South Korea Braces for Worst

Jason Strother 29/09/08September 29, 2008

Amid ongoing financial crisis in the US, stock markets across Asia saw more losses on Monday. The South Korean stock exchange, the KOSPI, fell by 1.35 percent and the local currency, the won, continued its decline. But not everyone in South Korea thinks that the troubles in the US are bad news. Some economists think Korean investors could capitalize on the situation.

https://p.dw.com/p/LsKo
There is little fear that big South Korean companies would suffer untowardly if there were an economic downturn but that medium size firms would
There is little fear that big South Korean companies would suffer untowardly if there were an economic downturn but that medium size firms wouldImage: AP

South Korea is braced for the worst. As US investors begin pulling their money out of the market here, the government has said it is ready to inject millions of dollars into the national economy to stabilize it.

So far, there hasn’t been any significant damage to the nation’s huge export sector but if things were to get ugly, large conglomerates, such as Samsung and LG, would probably get by largely unscathed, think analysts.

Credit crunch would affect small businesses

However, small to medium size businesses, such as ATICO, which exports clothes, kitchenware and pharmaceuticals to the US, would definitely feel the credit crunch, say economists.

ATICO owner SY Sohn said that all of his 2008 orders were set long before the financial crisis, but he feared next year could be very different: “Because of these problems, we can expect that all the economy will be slowed down and consumption will be down. We can expect that business will be very difficult.”

Sohn explained that although South Korea had firmly merged into the global economy and was not as dependent on the US market as it had been in the past, if other regional powers, such as China, were to go down, the South Korean economy would be dealt a severe blow.

Window of opportunity in US crisis

However, some Korean economists see a window of opportunity in Wall Street’s troubles. Young Soogil, president of the National Strategy Institute, says Korean investors should capitalize on the situation, just as the US did during the Asian financial crisis a decade ago.

“We were in more or less the same situation at that time as American financial institutions are in today. They helped us to rehabilitate our economies and earned money out of the process. It was a win-win game.”

Young added that the crisis was costing American financial institutions their global hegemony and that it opened doors for other nations to step in, especially Asian ones: “That would create more room for the financial institutions of other countries to emerge to the global market as more realistic competitors.”

Business owner Sohn agreed that the current troubles in the US were reminiscent of the difficulties that he experienced during the crisis here in the 1990s but he was optimistic that US Americans would get through the rough times, just as he had done.

“In Chinese characters, we say two different words, one is crisis and the other is opportunity, it’s mixed. We say that when there is a crisis there is always an opportunity.”