(EDITORIAL from the Korea Herald on Oct. 27)

Not bold enough
The government has repeatedly vowed to take bold and preemptive steps to prevent the financial markets from collapsing. But the reactions of the market prove that the government has been one step behind every time it has taken action. Moreover, its action is not bold enough to put the edgy markets into a lull.

On Sunday last week, the government committed itself to guaranteeing domestic
commercial banks' external debt in the tune of $100 billion. It also promised to
inject another $30 billion directly into the banking sector out of its foreign
currency reserves.
The government took another step on Tuesday, this time to prop up the ailing
homebuilding industry. It promised to spend as much as 9 trillion won, including
5 trillion won to be used to buy idle land and unsold apartments from
hard-pressed construction firms. By doing so, the government wanted to prevent
the sagging property market from distressing the financial industry any further.
Rescue efforts did not end there. The Bank of Korea said Thursday that it would
make an additional 2.5 trillion won available to small and medium-sized
corporations, many of them struggling under losses from knock-in-and-knock-out
derivatives.
All these measures had been intended to restore calm in the jittery financial
markets. But the markets moved in the opposite direction -- a development lending
credence to the claim that the measures were too little and too late.
Panic gripped the financial markets throughout the week. At the end of last week,
the stock market broke another psychological barrier, tumbling below the 1,000
point level. The Korean currency plummeted 1424 won to the U.S. dollar, the
lowest since June 16, 1998. Market conditions were so bad that some economists
called for a Korean version of the New Deal the United States, launched in the
1930s.
As shown by the market response, actions so far taken either by the
administration or the central bank have been far from daring, coordinated and
comprehensive enough to help the nation overcome the impact of the global
financial crisis on the domestic financial markets. Instead, they were tentative,
haphazard and piecemeal.
There is no disputing that the nation is in a crisis that threatens to rival the
1997-98 financial meltdown. There will be no easy way out of this crisis. What is
needed at the moment is a master plan that should include all options conceivable
-- ranging from an emergency rate cut to an increase in government spending and
an additional tax cut. In addition, a larger fiscal deficit is worthy of serious
consideration.
The Finance Ministry, the Bank of Korea and the Financial Services Commission
will have to huddle together and hasten to hammer out a comprehensive contingency
plan. They will have to maintain unity in their policy proposals. A turf war
would prove to be an anathema to rebuilding investor confidence in the financial
markets.
It goes without saying that the political community should actively assist the
financial authorities by speeding up the process of making their proposals law.
Time does not seem to be on its side.
With the 20-day parliamentary investigation of government agencies over last
week, the first job the National Assembly must do is endorse the government's
proposal to guarantee $100 billion in foreign debt held by domestic commercial
banks. Nothing is more urgent now because a delay would pose an obstacle to
rolling over their foreign-currency loans.
The opposition Democratic Party will have to make good on its promise not to
attach any strings to approving the $100 billion debt guarantee. Better still, it
will do well to declare a truce with the ruling Grand National Party until the
financial markets regain any measure of stability. If bipartisanship has ever
been needed desperately, now is the time.
(END)