Turning global crisis into an opportunity

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: In the wake of global economic recession, most of the countries seek to minimise the impact of the crisis on them. Republic of Korea (South Korea)’s export-oriented economy is considered to be more prone to be get affected by the crisis. In the backdrop, South Korea has taken various proactive and bold steps to prepare itself for any unforeseen situation. The state is seamlessly trying to intervene, assist, direct and coordinate with the market in the process. Even though there are signs of recession, with sluggish domestic demand and slowing exports, the government’s multi-pronged stimulus plan seems to be helpful in minimising the effect of the crisis.

The South Korean approach to the crisis is distinct as it has been trying to utilise the crisis as an opportunity to further enhance its standing in the world economy.

For this, the government has been careful about both micro and macro-economic variables. South Korean National Economic Advisory Council (NEAC), which consists of 27 private experts of economy, seven government officials, and the South Korean president as the chairman, works as the nodal body to devise strategy and broad direction to the country’s economic preparedness.

To minimise the repercussions of the crisis, South Korea has announced more stringent monitoring of the banking sector and to provide them more incentives to comply with regulations. The comprehensive package to deal with the situation has provision to provide three-year government guarantees for new foreign exchange borrowings by banks until June 2009.

In addition, the government has also decided to provide an additional $30 billion to banks to ease pressures in the foreign exchange market.

The government is keen to maintain liquidity in the financial market and not hesitant to take ‘decisive’ and ‘sufficient’ steps. South Korean pre-emptive measures has been quite bold, as even China and Japan, which have $1905.6 billion and $977.7 billion of foreign reserves, did not use their foreign reserves to the extent South Korea did to ensure domestic liquidity. In October, India was the only country in Asia which spent more money from its forex to provide liquidity to its financial market than South Korea. South Korea used $27.35 billion and $11.74 billion of its forex in October and November to expand supply of foreign currency liquidity to ease pressure in the local currency market.