1. The Korean Crisis and the End of Late Development
James Gray

2. Origin of the Crisis Major Factors Inflation
Recession in world economy
Appreciation of Korean Won

3. Financial Sector
Foreign Exchange Management Act. (over reliance on foreign capital)
Removed certain restrictions on asset and liability management of financial institutions.
General public
Rapid economic growth
Increase in labor costs
Government
Unhealthy relationship with the private sector
Opening of the short-term financial market

4. Financial Bailouts
Several business conglomerates, whose survival had strong consequences on stability of the economy, were facing bankruptcy.
The Korean Government believed the chaebol groups needed to stand on their own without any support.

5. Bankruptcy of Hanbo, Sammi, Jinro
Government delayed in providing bailout
to KIA Motors
International credit rating agency’s downgrade of Korea

6. Foreign Investors and Creditors, including USA Bank and Japan Bank, lost confidence due to the currency crisis in south Asia
South Korea to use its limited foreign currency
Depleting its foreign reserve and forcing them to approach IMF

7. Major Loans
The United States arranged 10 billion emergency loans to Seoul
Total over 100 billion loans
Loans of all types equaling 51% of Korea’s GNP

9. Korea’s Rebound Massive Trade Surplus
Roll-over of Debts and Return of Foreign Capital
Restructuring of Economy and Liberalization of Markets

10. Financial Reforms designed to strengthen legal infrastructure
restructuring process of financial institutions, leading to dump all the non performing loans
Capital account liberalization
free floating exchange rate was adopted
restrictions on M&A by foreigner was abolished
Strengthen corporate governance of Financial Institution
commercial institution with more risk were closed