박승 총재 FT 인터뷰 대화록(Interview transcript) 전문

Interview: Bank of Korea governor

Published: May 19 2005 05:03 | Last updated: May 19 2005 05:03

Anna Fifield, the FT's Korea correspondent, interviewed Park Seung, governor of the Bank of Korea, in his Seoul office on Wednesday, May 18. His comments in Korean were translated into English by a Bank of Korea economist. These are the questions and answers concerning foreign exchange:

FT: Can Korean exporters continue to absorb the impact of the won's rise?

Park: The rate of appreciation of the Korean won is actually the highest among OECD countries. During the past three years the Korean won has appreciated 30 per cent against the dollar. This year, compared to the end of last year, the euro has depreciated 7 per cent and the yen has depreciated 5 per cent but the Korean won is has appreciated 3 per cent, as of yesterday.

Needless to say, this is undermining Korea's exporters. Usually Korea's exports are very robust in the six key industries that I mentioned before, and they are actually competing on the aspect of quality and technology rather than price. So in fact, the Korean won's appreciation on the amount of exports is actually lower than in the past but the profitability of these exporters is actually weakening.

Korean exporters, especially SMEs in traditional business areas are having a very hard time so more appreciation might have a significant impact on them.

FT: Korea has very large foreign exchange reserves. What is the best way for Korea to manage those reserves? You've said you'd like to manage them more profitably. I know about the Korean Investment Corporation but what are the other options? And what about diversification?

Park: As we experienced in the 1997 currency crisis, we think that we have a stronger need for enough amount of foreign reserves. So in our management of our foreign reserves we of course consider profitability but we are also focusing on safety and liquidity.

I believe that we now have sufficient reserves to secure our sovereign credibility, so I do not think we will increase the amount of foreign reserves further. Since we have sufficient foreign reserves at $200bn, which is the fourth largest in the world, I think we now need to take more consideration of profitability, and I think we're at a stage where we need to manage our reserves in a more useful way.

So as you know, we will give $17bn to the KIC and yesterday we concluded a foreign currency swap agreement with the Korean Pension Fund at $600m. It will allow the pension fund to purchase US treasuries using these funds. This is a tangible result of our efforts to manage our reserves more effectively.

FT: Can I just clarify something. You said that you have sufficient reserves now and that you will not need to increase them further. Does that mean you will not be intervening in the foreign exchange markets?

Park (in English): No, no, we will not be intervening.

(Later in the interview, Park Seung clarified: "I said we will not increase our foreign reserves but actually we do not anticipate increasing our foreign reserves. We are trying to manage our reserves more usefully and the current account surplus is decreasing so we do not expect foreign reserves to increase.")

Park: In fact the Bank of Korea is not doing any intervenion in the foreign exchange markets to defend the exchange rate, we are just doing smoothing operations.

FT: Are you happy keeping the proportion of your reserves in dollars as it is or would you like to swap some of it out of dollars and into euros or other strong currencies?

Park: We have dollars and other foreign currencies and we do not think we will change this mix.