The Korean financial crisis: Diagnosis, remedies and prospects

The Korean financial crisis: implications for international business in Korea

“…Korea's international business environment, as outlined above, had an important bearing on the 1997 financial crisis. The causes of this crisis, which have been extensively investigated in the literature (Cha 1999;Jaw and Yi 1999;Kwon 1998;Pyo 1999), include: (1) low productivity and loss of international competitiveness;…”

“…Taking advantage of institutionalised privileges and government protection from international competitors and minority shareholders, chaebols expanded and diversified with debt capital on a large scale. This was a major cause of the financial crisis (Cha 1999;Jaw and Yi 1999;Kwon 1998), as well as a source of unfairness to potential foreign competitors. Chaebols enjoyed enormous advantages over foreign businesses in raising debt capital, and controlled the Korean distribution system through their vertical diversification, from which foreigners were excluded.…”

“…This led the financial sector to be under-capitalised. Under-capitalisation, inefficiency and a lack of transparency and accountability in the operation of the financial sector were among the major causes of the financial crisis (Kwon 1998). 8 Restriction of inward FDI contributed to the crisis not only by making domestic industries (chaebols and banks) inefficient, as discussed above, but also through its effect on the balance of payments.…”

“…2 South Korea (hereafter Korea) now faces the burning question: why did the financial crisis occur? This question has been extensively discussed in the literature (Cha 1999;Jwa and Yi 1999;Kwon 1998;Norton 1998;Warne 1998). Another important issue is the implications of the crisis for international business in Korea.…”

Recent Changes in Korea's Business Environment: Views of Foreign Business People in Korea

“…This eventually rendered domestic industries inept at adapting themselves to the changing business environment and created inefficiency, resulting in a significant loss of losing international competitiveness by the mid-1990s. Korean industrialization policy also provided chaebols with incentives and protection and encouraged them to expand and diversify excessively with debt capital, generating a collusive government-chaebol relationship (Kwon 1998;Cha, 2001;Jwa & Yi, 2001).…”