Economy Should Be Restructured to Prevent the Second Crisis

Overseas and domestic economists warned, “The recovery of Korean economy is due to temporary recovery of world economy and expansionary fiscal policy after IMF, so financial crisis can happen at anytime.”

At 4th, in a international academic seminar opened by International Financial Center of Seoul University (director: Chung Duck-goo) at Convention Center of KOEX in Samsung-dong of Seoul, the participants indicated like this, and advised to restructure economic system that hasn’t yet completed and prepare a early warning system for unpredictable international market movement.

The seminar was opened for the 5th anniversary of IMF with the topic of ‘Korean Economy, Overcomes the Crisis’. Chung Wun-chan, the president of Seoul University, commented in opening speaking, “IMF happened because of micro structural defect rather than macro unbalance.” and stressed, “However, the government has managed by focusing on expansionary fiscal policy rather than restructuring economic system for last 5 years. So the economy has the possibility to suffer difficulties from financial crisis at anytime if external conditions become worse.”

Lee Jung-wha (Korea University), Lee Chang-young (Seoul University) and Hong Kee-suk (Ewha University) said, “48% of the countries had experienced IMF suffered the crisis again.” and added, “So the government should focus on attracting foreigners’ direct investment rather than reducing short-term foreign debts to strengthen economic tolerance against external shocks.

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Kim In-jun (Seoul University), Song Chi-young (Kukmin Universiry) and Cha In-baek (KDI) said, “Considering the potential instability implied in international financial market, the restructure of economic fundamental is not a sufficient condition.” and recommended the government to consider seriously about extension of free capital policy.

Park Won-am (Hongik Universiry) and Choi Gong-ik commented, “An independent restructure of financial and industrial restructure policy by a country can’t prevent financial crisis again.” and added “So cooperation with other Asian countries and the improvement of international financial system are required.”

Lee Chung-woo (Kyungbuk University) said, “During 1998-99 financial year, poverty class increased twice and the income distribution system becomes worse.” and stressed, “An improved social welfare system should be prepared before another financial crisis happens.”

Cheol-Yong Lee lcy@donga.com