[FORUM]Stand straight; we're rated 'A'A global credit rating agency has a lot of power. Moody's Investors Service's announcement that it has upgraded South Korea's sovereign credit rating by two notches to A3 raised the morale of Koreans sharply. Some people grumbled that Koreans got overly excited at the news, but I cannot forget the shock I felt when I watched Korea's debt rating being downgraded dramatically during the 1997-98 foreign exchange crisis.
During the crisis, the boarding gates for airplanes bound for Seoul at Narita International Airport in Japan were steeped in gloom. There were officials at the branches of Korean trading companies and banks in Japan; they were withdrawing from Tokyo due to their firms' bankruptcy or streamlining. There were students who had given up their studies and were returning home because of financial problems. The boarding areas looked like they were peopled with the remnants of a defeated army on a battlefield. If a country's power is sapped, the people feel wretched, and if a national economy totters, the nation's citizens get the cold shoulder everywhere, I thought with sorrow. The situation was the same at the aircraft boarding gates in New York, Paris, Frankfurt and Moscow; sorrowful faces and slumped bodies going home in failure.
If the economic conditions of a nation deteriorate, delegations from global credit rating agencies come to see senior officials of the country. The lower the nation's sovereign credit rating falls, the more senior the officials the delegates seek to meet. They want to see whether the national leadership has ideas and political will to overcome the crisis. The delegations from international credit rating agencies now are seeing working-level officials in the government and in Korean firms. That indicates that Korea's debt rating has risen nicely.
Korea underwent a very special experience. During the last two months of 1997, Korea's debt rating plunged to speculative grade in Standard & Poor's assessment, dropping 10 ranks, and Moody's dropped Korea's rating six notches, the sharpest fall ever in a two-month period. Now the rating by Moody's has risen two notches in one fell swoop. Those actions occurred in a country that has been on the road to becoming a developed country for only three decades. People who had considered emigration, believing that the country might collapse, are now rushing to Seoul stock markets because they see that the economy is recovering. This country's politics, economy and society are all dramatically changeable, as is the national prevailing sentiment. Such unrest and turmoil are obstacles to a good long-term credit rating. Korea's unrest is also graded A in its seriousness.
Since the foreign exchange crisis, Korea has been busy with corporate restructuring. American and European analysts have good opinions about the restructuring efforts, saying that the fundamentals of the Korean economy have changed. Though praising Korea, they tend to criticize Japanese politicians for a failure to adopt reform policies. Korea's economic performances, open-market policy and construction of the system for transparent society are viewed favorably.
Japanese critics say that their country should carry out restructuring and make efforts to meet the international standards in line with the Korean model. Taiwan analysts say their country needs drastic reforms in the financial sector to shed bad debt like the reform that Korea conducted. Malaysia is facing demands for reform in the labor sector, since labor productivity is far behind wage levels.
Though foreigners have high opinions about the Korean government's economic reforms, those reforms are not receiving good reviews inside Korea. But an administration whose term will soon expire always gets that kind of treatment, so the Blue House should not take such criticism too seriously. The administration should just accept the criticism quietly and reform itself and take a strong stand against illegal strikes. Those are appropriate actions for a country with an A-level international credit rating. If the government makes bad decisions in an effort to be popular, our credit rating might tumble again. I am afraid that Korean social unrest will become serious after the World Cup games and the presidential election.
The writer is an editorial writer of the JoongAng Ilbo.
by Choi Chul-joo