BY MAURICE WILLIAMS
South Korea's economy continued to wobble on the edge of a financial collapse when the country's long-term debt rating was downgraded to junk bond status December 22. The country's currency, the won, plummeted 15 percent to a record low of nearly 2,000 to the U.S. dollar.

Asia's economic turmoil has deepened since the Thai government released its currency's peg to the U.S. dollar July 2, triggering a wave of currency devaluations throughout southeast Asia. One year ago it took 841 won to buy a dollar.

The move by Moody's Investors Services, one of the world's two largest international credit rating agencies, also included reducing the investment ratings of Thailand and Indonesia to the same status. Malaysia's debt rating was also downgraded, though not to junk bond status. Junk bonds are corporate bonds with low-grade investment ratings -meaning a greater-than- average likelihood that the issuer will fail to repay the debt.

"A lot people were anticipating downgrades, but it's unprecedented to have four in one day, in one region," said Joyce Chang, a debt strategist with the investment firm Merrill Lynch.

Moody's also reduced the ratings for 20 banks in south Korea and some of the country's largest firms, including Pohang Iron & Steel, Hyundai Motor Co., and Samsung Electronics Co. The agency lowered the ratings of 11 Thai banks and financial institutions, and 5 Indonesian banks.

Standard and Poor's Corporation, the other large credit rating agency, lowered south Korea's status on December 23 to the level of countries such as the Dominican Republic and Pakistan. The credit firm said Seoul was "among the worst of rated sovereigns." The foreign debts of the nation's banks are estimated at twice their foreign assets.

The lowered credit rating will force the government to raise interest rates, which makes borrowing more expensive. This could trigger a wave of defaults and bankruptcies.

Fearing a default on the country's international debt, government officials negotiated a $57 billion "bailout" package of loans with the International Monetary Fund (IMF), which has not quelled the financial typhoon ravaging the economy.

`Korea could still hit the wall'
Default is a "real risk given the foreign-exchange position of the government at the moment," warned Koyo Ozeki, director of the bank rating agency Fitch-IBCA Ltd. Japan.

"Foreign banks must decide to roll over short-term debt before going on the Christmas holidays," stated a banker in Seoul. "Korea could still hit the wall."

Lim Chang-yuel, the finance minister, requested early disbursement of Washington's contribution of $5 billion to the IMF loan arrangement at a December 22 meeting with U.S. treasury undersecretary David Lipton.

Foreign investors are reportedly owed some $150 billion. Private bankers demand that $20 billion in short-term loans be repaid by the end of December, London's Financial Times reported. The regime claims $14 - 15 billion is due since some of the debt has been rolled over. An official at the country's central bank said the regime's useable foreign reserves had diminished to $7 billion.

According to the December 29 issue of BusinessWeek, 49 of the largest conglomerates in south Korea reaped only $32 million in profits on combined sales of $274 billion - a return of barely 0.01 percent. At least 10 more of the 50 largest conglomerates are expected to go bankrupt. In 1997, 11 enterprises collapsed.

Meanwhile, Washington is pressing the south Korean government to sell off chunks of the nation's patrimony - $14 billion worth - including banks, steel mills, real estate, and factories.

To ensure Seoul implements these IMF demands and the imperialist institutions' austerity measures, U.S. treasury undersecretary Lipton held a meeting with Kim Dae Jung, who was elected president December 18. The president-elect agreed in his meeting with Lipton to impose the IMF proposals for laying off workers as "part of industrial restructuring to make the economy competitive," according to the Financial Times.

Kim, touted in the big-business press as a "champion of the common worker," said at his acceptance speech, "I reiterate my intention to fully support the agreement made with the IMF."

The imperialists' demands "will sorely test Mr. Kim," declared the Wall Street Journal. "He will probably face street protests, strikes and pressure .. to defy the IMF program. Yet he must win over foreign bankers and investors."

As a further move to curry favor with his imperialist sponsors abroad and the ruling class at home, Kim immediately amnestied two jailed capitalist politicians, former military butcher Chun Doo Hwan and his successor, Gen. Roh Tae Woo, both of whom had been convicted two years ago on corruption charges.  
 
 
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