Living the sham of a free market
Korea has been negotiating to join the OECD. But the country's financial structure is still partly shackled, despite reforms in recent years. And president Kim's call for Korea to accept globalization has not been welcomed by many of his compatriots involved in finance and business. They believe opening the country's fragile financial markets to foreigners too quickly will create instability. Andrew Horvat reports
This summer, while oecd officials considered Korea's application for entry into the Paris-based organization of advanced free-market economies, huge gaps began to emerge between Korean promises of open financial markets and actual policy. Perhaps nothing highlighted this discrepancy more clearly than the rude welcome home that awaited the record number of Korean tourists travelling overseas this year. Even as mandarins at Korea's ministry of finance and economy (mofe) were busy drafting assurances to the oecd that Korea was committed to unrestricted capital flows, prosecutors in Seoul were engaging in a highly publicized crackdown on Korean tourists who had dared to put more than $5,000 on their credit cards in purchases overseas.
The prosecutors made no secret of having requisitioned confidential credit card records of hundreds of thousands of Korean travellers in order to bring to justice some 15,000 culprits. These may face up to five years in jail for having helped push the country's balance of payments into the red this year, adding perhaps a few million dollars to the deficit.
Korea's balance of payments deficit had surpassed $9 billion by July 29, greater than the total for all of 1995, and the campaign against spendthrift tourists was clearly intended to intimidate travellers from taking any more money out of the country.