Editorials
Saturday, January 23, 1999

South Korea embraces
economic reforms

SOUTH Korea's economy, which took a steep tumble in late 1997 and floundered much of 1998, has stopped shrinking and may grow slightly this year. This guardedly optimistic forecast was delivered by Korea's ambassador to the United States, Lee Hong-koo, in a talk here before the Pacific and Asian Affairs Council.

The ambassador ascribed Korea's economic plunge in part to too much success. In a generation, the country progressed from impoverishment to one of the most prosperous and vibrant economies in the world. Per capita annual income increased from less than $100 to $10,000.

This rapid growth, Lee explained, engendered overconfidence that resulted in blind expansion of production without regard for changing global realities. When the squeeze came, Korea's conglomerates, with ready access to credit, were caught with huge debts they could not pay. Two million workers lost their jobs and the economy shrank 6 percent.

The economic crisis came just before the election of Kim Dae-jung, the opposition candidate, as president. Lee said Kim's election was fortunate because he could not be blamed for the nation's economic problems, which made it easier for him to introduce reforms.

Korea seems to have accepted the need for economic reform more fully than some of its Asian neighbors and is beginning to reap the benefits. Much credit appears to be due to the remarkable Kim Dae-jung, who survived years of imprisonment and repression by former governments to emerge as the nation's leader at a critical point.

Kim has also softened South Korea's policy toward its bellicose neighbor on the peninsula, North Korea. As the ambassador explained, the new policy combines firmness with patience, with the highest priority being to avoid another war. Although reunification is the ultimate national goal, it is not a short-term one. South Korea wants to convince the Communists that it is not trying to overthrow their regime and simply wants coexistence.

It takes extraordinary patience to put up with North Korea's exasperating tactics, the latest being the demand for $300 million in return for permitting U.S. inspection of an underground site suspected of being used to make nuclear weapons, in violation of a 1994 agreement.

As Lee pointed out, North Korea still has a Cold War mentality while the rest of the world has moved on. Somehow South Korea and the rest of us have to find ways to get along with this strange and still dangerous regime.

Experts’ mistakes

EVEN the proudest practitioners of the medical arts admit that there is still a lot to be learned about treating the various ailments of the human body. However, it is a rare event when the International Monetary Fund admits error in treating ailing economies.

That has just happened with reference to the ongoing Asian financial crisis. The IMF has acknowledged in a critique of its performance that it "badly misgauged the severity of the downturn" that began in July 1997 in Thailand and that it consequently prodded governments to adopt inappropriate spending policies.

The IMF has been accused of prolonging and worsening unemployment and recession by insisting that interest rates be raised and government spending be cut. Demands that the Indonesian government lift subsidies on fuel prices helped to ignite riots that killed hundreds and resulted in the ouster of President Suharto.

Fund officials now admit that they underestimated the magnitude of the need for financial restructuring and that their requirements of fiscal austerity in South Korea, Thailand and Indonesia were too harsh. The policies, aimed at reassuring investors, backfired, triggering flights of capital.

The financial experts blundered, but admitting error is the first step toward correcting it. The IMF has been a valuable instrument for dealing with financial crises, but it is an imperfect instrument. Having been chastened by their miscalculations, the fund's managers can be expected to avoid repeating their mistakes in the next crisis.

Boat Days

ONE of the fondest memories of kamaainas is the Boat Days at Honolulu harbor, when the Matson cruise liners came in from San Francisco and the passengers were greeted with music, leis, hula dancers and boys who dived for coins.

Boat Days began in 1872 and lasted into the 1960s, when the ocean liners were succeeded by the jet airplanes as the preferred method of travel. But the cruise business has been picking up in recent years -- although not the traditional San Francisco-Honolulu route.

Cruise ships are now estimated to put $200 million a year into the economy, with the potential for more. With the hotel occupancy rate at a 16-year low, Hawaii tourism certainly can use some help from the ocean liners.

Tomorrow the Boat Days will stage a comeback. Four cruise ships -- the Queen Elizabeth 2, the Vistafjord, the Maxim Gorky and the Crystal Symphony -- will be serenaded by the Royal Hawaiian Band at various times during the day. It's been a long time since Honolulu has seen anything like it.

City and cruise industry officials say they want to continue the program, and we hope they do. Councilwoman Rene Mansho says one problem is an ordinance requiring that the Royal Hawaiian Band be paid $300 for each cruise ship performance. She is trying to get the City Council to repeal that law.

The city could use the money, but if the fee is a problem it should be waived. Keep up the Boat Days and keep those passengers happy.

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Rupert E. Phillips, CEO

John M. Flanagan, Editor & Publisher

David Shapiro, Managing Editor

Diane Yukihiro Chang, Senior Editor & Editorial Page Editor

Frank Bridgewater & Michael Rovner, Assistant Managing Editors

A.A. Smyser, Contributing Editor