(2nd LD) Developing countries, not currency, drive S. Korean export boost: M. Stanley

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SEOUL, April 29 (Yonhap) -- Resilient exports, the key factor behind South
Korea's fast economic recovery, were driven by rising shipments to developing
countries rather than the local currency's depreciation, a senior executive of
U.S. banking group Morgan Stanley said Thursday.
"The role of the currency is overplayed in assessing your ups and downs in
exports," Stephen Roach, chairman of Morgan Stanley's Asian operations, said in a
meeting with reporters.
The key driver behind South Korea's export rebounds came from the nation's shift
to developing economies which suffered less from the global economic meltdown,
away from developed countries, Roach said.
The shifts in export destinations are "far more important in shaping positive
exports than the won depreciation," which many people believe is the decisive
factor in export recovery, the chairman said.
The South Korean economy avoided an economic recession by growing 0.2 percent in
2009, powered by a solid rebound in outbound shipments with a weakening local
currency against the U.S. dollar, making locally manufactured goods cheaper
overseas.
The remarks of the Morgan Stanley executive, who holds an upbeat outlook on
China's development as a global growth engine, are part of his wider view that
the roaring Asian economy should expand domestic consumption as opposed to
exports in order to fill the void left by the U.S. and help power the
international economy.
Roach also said U.S. efforts to narrow its massive current account deficits
through raising the value of the Chinese yuan, or renminbi, will not achieve the
intended goal. Instead, he said expansion in domestic consumption by typical
export-dependent economies including China and India should dissolve deficit
issues.
"The experience of the Japanese currency revaluation in the 1980s did not lead to
a narrowing in current account surpluses, nor did the dollar weakness in the
eight years beginning in 2002 lead to an appreciable narrowing of America's
current account deficits," he said.
The currency realignment is a very circuitous way to deal with current account
surpluses or deficits, Roach said, adding that "structural remedies such as some
of the policies China will embrace to boost internal private demand will likely
play a much important role in the years ahead in narrowing current account
imbalances".
The executive urged the Bank of Korea to move up its policy interest rate, which
was set at a record low of 2 percent in the height of the economic emergency. The
rate has remained unchanged for the past 14 months.
"The emergency is now over, and it is inappropriate to leave policy interest
rates at emergency levels," Roach said. "In the minimum, the rates should be
moved up somewhat from the current emergency settings (to be) consistent with the
forecast of the weak or fragile recovery."
pbr@yna.co.kr
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