“Korean Government’s overall performance on international public relations about economic policy pretty much resembles the long-dated drawback of Korean Soccer team, to chase the ball here and there.”
A quote from Chang-Yong Rhee, Vice Chairman of the Financial Services Commission
In a time of crisis
New opportunities rise from reevaluation
Now is the time for a change
It will be a change for our cheerful days ahead.
So here we are, Korea Financial IR Team!
Korea Financial IR Team is established by Financial Services Commission in collaboration with Ministry of Strategy and Finance, Ministry of Foreign Affairs and Trade, Bank of Korea, Financial Supervisory Service. Since December 2008 it has been in operation to deepen understanding of Korean economy and financial system for international media and other related financial institutions.
Recently, Korea Financial IR Team went on a road show via Tokyo, Singapore, London and to Zurich to update local press and financial communities on Korea’s current economic and financial conditions by providing detailed data.
2009 January 21 ~ 22: Japan / January 23: Singapore
Visited Moody’s, Japan Bank for International Cooperation, Mitsubishi UFJ Securities
2009 February 3 ~ 4: Great Britain / February 5: Switzerland
Visited UBS, Credit Suisse and other Swiss’ major financial institution
In March 2009, Asia Investment Forum was held in Hong Kong and “Korea” was selected as forum topic for the first time throughout 12 years history of ‘Credit Suisse Asia Investment Forum’ which reflects the high level of interest in the Korean economy among international investors. In fact, there were many questions by international investors asking about the Korean economy throughout the forum.
So here we are the Big 3 issues of Korean economy in 2009.
Q) What would be the government’s stance regarding the high foreign currency debt?
A: The total amount of foreign currency debt was 380 billion dollars as of the end of 2008. However, Korean foreign currency debt was exposed to lesser risk compared to other countries’ debt. Because this number includes 39 billion dollars of currency hedging amount and 5 billion dollars of unearned revenue from shipbuilding companies which excludes responsibility of redemption in the future. For this reason, the only foreign currency liability which exposed to actual risk is only 277.8 billion dollars. Furthermore, much of these debts are long-term debt and a large portion of the short-term debts are held by branches of foreign banks. So the overall risk is very minimal.
Q) Isn’t household liability too high in Korea?
(International investors expressed deeper concerns on household debt than foreign currency debt)
A: Residential mortgage loan default ratio in Korea is less than 1%, lower than any other countries’ ratio. Moreover, the value of Korean real estate has increased 3% in the year 2008 amidst of global financial crisis. As you can see from these facts and data, it is very doubtful that Korea is facing a dramatic downfall in real estate price, and nothing similar to the sub-prime mortgage crisis in the U.S.
Q) What would be the explanation for the present state of the high loan-deposit ratio of Korean banks?
A : It is true that Korean banks’ loan-to-deposit ratio (LDR) is relatively high, however, currently the ratio is gradually falling down and government is also taking relevant measures to enhance the banks’ financial soundness.
According to Financial Services Commission, Korean banks’ deposit-loan ratio went down to 118.8% from 126.5% in June 2008. And considering CD (Certificate of deposit), the deposit-loan ratio also fell down to 101%.
Banks’ deposit-loan ratio was increased during late 2008, when the Korean government started to increase loans to SMEs (small and medium enterprises), concerns arose regarding the potential rise in LDR.
Still, banks will find a way to minimize the rise in LDR, since the government has set up a special fund to help banks to supplement their insufficient capital.
The key points discussed from January to March can be summarized as below
– Majority of investors in the US, Research Institution, and economists have positive prospects on the Korean economy
– Because of the devaluation of Korean Won, many investors see Korean stock market as attractive
– Although many financial experts find it difficult for both US and Europe officials to cooperate for extra budget expansion, they expect long-term reforms on financial supervisory system in both systems in order to prevent another financial crisis.
A view was shared among the participants that the Korean economy had managed rather well through some of the major external shocks since September 2008 and that it would be beneficial for Korea to continue to make efforts to raise awareness of its robust economic capacity in the international financial communities.
Recently, one of Korea’s broadcasting firms; MBC ran a documentary program on Ji-Sung Park a famous Korean mid-fielder playing in Manchester United FC in Premier League. Ji-Sung Park always has English tutorials at least twice in a week even when he is away from his home in order to communicate with his teammates and his fans in England. With his sincerity and endless effort, he is creating positive and sound image of Korea.
It is emphasized that Korea have IR (Investor Relations) system which go around the world to provide clear communication on Korean economy. Just as Ji-Sung Park struggles to learn English to become close with his fans and teammates and making positive image on his beloved country simultaneously, we should also struggle in our own field to show our international communities about our sound economy and our new ideas to prepare for the future. In this way, international communities can truly understand that we are capable to stand firm in the future, while at the same time having sound and attractive brand image of Korea.