[Viewpoint] The confidence to see with our own eyesAfter months of campaigning, it has been announced that Korea has won the right to host a G-20 summit meeting next year, while the country’s stock exchange was also upgraded to developed market status by the FTSE Group.
Korea has seized an important opportunity to increase its status in the international community and become an advanced country. Perhaps because we have already hosted both the Olympics and the World Cup, or because we experienced merely a “period of turbulence” while the rest of the world changed overnight, many are underestimating the achievement of bringing the G-20 here.
However, it is a historic event that Korea, which was once a follower in the global economic order, has become the one that will help decide the direction of the world economy, and this is an accomplishment we can take pride in.
So moved was the team that succeeded in winning the G-20 summit meeting for Korea that they gave three cheers for the Republic of Korea on the plane ride back home, together with President Lee Myung-bak. The G-20 meeting will prove an important story for the Korean press to report to the whole world. As the world economy is reshaped, all eyes will be on us. Imagine - the Korean press will provide authoritative commentary and analysis on the summit meeting to the world press, and renowned international business papers, such as the Wall Street Journal and the Financial Times, will carry reports quoting them.
On the occasion of the invitation of the G-20 summit meeting to Korea, it is necessary for us to reflect on the practice here of giving credit to reports by foreign investment banks or newswires. The old practice of reporting the reaction of other countries and using foreign press reports when major events take place here in Korea should be changed. In an international society where the interests of many countries are closely interwoven, it is, of course, necessary to see the reaction of the foreign press, but Korean media often rely on them to excess.
These stories cited to show the reaction of the foreign press to major domestic events often originate in Korea. It is doubtful, therefore, whether they introduce the overseas reaction to such events properly. After all, so-called foreign news reports are influenced in general by local press reports. The compulsion to read overseas news reports on Korea to see the foreign reaction is yet more evidence of Korea’s mixture of legitimate pride with a national inferiority complex. When we do host the G-20 summit meeting, we must free ourselves from such psychological restraints.
What about the investment bank reports preferred by stock watchers? Even if foreign and local banks come to the same conclusions, the Korean press gives prominence to the reports from abroad. Recently, as foreign investment banks present one report after another on the rosy prospects of the Korean economy and stock prices, they confuse investors.
First of all, the predictions they make on the growth rate of the Korean economy are tilted too far toward pessimism or optimism. They competed to lower Korea’s predicted growth rate toward the end of last year, but then raced to raise it again recently. Credit Suisse Group AG raised its predicted Korean growth rate to 0.2 percent from the minus 2.2 percent it estimated at the beginning of September and predicted that Korea could achieve 6 percent growth next year. Morgan Stanley also said it would be unsurprising for Korea to record positive growth this year. These predictions are all quite different from the original forecast - that Korea would be the hardest hit by the global economic recession because its economy was export-oriented.
Banks’ predictions on the Korean stock exchange were even more inaccurate. Goldman Sachs, the quintessential American investment bank, predicted in March that the Kospi could drop to 735 points or rise to a maximum of 945 by the end of the year. But in reality the index has already exceeded the 1,600-point mark. In general, foreign securities companies had conservative views on Korea’s domestic stock market and played a role in pulling down the Kospi index. But now the situation has changed completely.
In many cases, the banks led to explosive rises or catastrophic falls in stock prices or profit estimates for certain companies. Merrill Lynch has made major increases in its target price for Samsung Electronics twice, from 480,000 won ($407) to 800,000 won, and then to 900,000 won, after the company gave advance notice that it would announce high profits.
Of course, predictions can go wrong, but people should know that there are limits to the capacity of foreign investment companies to see the future. Although they have skill in forecasting the movement of the global market, their capacity to collect information in Korea lags behind that of local securities companies, and they often fail to release detailed and up-to-date information on each industry or individual stock.
The reality is that, for some issues, many foreign securities companies rely on analysis provided by their overseas offices, in Hong Kong and elsewhere, without investigating the companies through close contact or in-person visits. Therefore, it is difficult to guarantee the credibility of their analysis, which is their lifeline. Many of the reports are produced by local desk clerks who write them after listening to Korean market players. Of course, there are merits to the foreign securities companies, too. Sometimes they can see a more objective picture from outside of the woods than the one we see from inside.
Today the Korean economy has grown bigger, and has produced many of its own investment experts in the meantime. Although we still have a long way to go, it is not right to follow reports by the foreign press or foreign investment banks blindly, simply because they give us an overseas perspective. Having groundless self-confidence is a problem, but having an excessive inferiority complex should also be avoided.
Why should we report on ethnic tension in the Xinjiang region through the eyes of CNN? Why should we see neighboring China through the eyes of Joseph Nye? I don’t think it too much to ask that Korea be a country that has the vision to overcome problems like these. This is why I look forward to seeing the beginning of the G-20 summit meeting, to be held in November next year in Korea.
President Lee Myung-bak speaks at a press conference at the Blue House about Korea’s hosting of the G-20 summit next year. [NEWSIS]
The writer is the senior economic news editor of the JoongAng Ilbo.
Translation by the JoongAng Daily staff.
by Park Eui-joon