Donald Kirk: Korean Crisis: Unraveling of the Miracle in the IMF Era
Publisher: Palgrave Macmillan (1999)
The strength of this book is that is brings together in one place the reportage of one of the key foreign journalists based in Seoul during the 1990s. With access to politicians, press releases and Korean and foreign businessmen, Donald Kirk assembles an account which highlights what a tangled mess things were. We see the viewpoint of the people in authority, tempered with interviews with “real” people – a striking Hyundai shipbuilder or a shop assistant at the sharp end of the retail downturn.
We see the negotiations with the IMF, the attempts to stabilise or revitalise the financial sector and the chaebol, often by throwing good money after bad. We witness the tension between the need to bring in foreign capital and expertise, and the familiar strand of nationalism wanting to keep the foreigners out. Particularly delicate were the circumstances surrounding the attempts to keep Daewoo alive. Daewoo (along with many Korea chaebol) owed gazillions to both foreign and domestic banks, and government efforts to keep the chaebol alive generally involved strongarming the local banks into rolling over debts in exchange for concessions. Such negotiations inevitably left out the less pliable army of foreign lenders. But at the same time, HSBC and Newbridge Capital were negotiating to buy Seoulbank and Korea First Bank respectively, both major creditors in the Daewoo mess. The government was faced with the possibility of a foreign bank owning a domestic bank, which could either have meant the local bank would be less amendable to the governmental strongarm tactics, or would start giving the foreign bankers more of a toehold in the negotiations. Consequently or coincidentally, the HSBC takeoever failed to materialise (leaving the UK bank still without a large Korean operation, which it still lacks after its failure to purchase Korea Exchange Bank in 2008). By contrast, the more passive private equity firm, Newbridge, was able to buy Korea First Bank (now owned by HSBC rival Standard Chartered). Kirk’s accounts of events 10 years ago still has repercussions and relevance today.
For some, Kirk’s account may be too immersed in the tangled undergrowth rather than showing the shape of the forest as a whole. Thus we get the occasional daily snapshot of a surge or slide in the KOSPI index, but no picture of the overall direction and the forces which were driving it. Originally published in 1999, maybe the book appeared too early to enable a longer perspective on how Korea descended into the abyss and how it managed to struggle its way out again.
What we lack in “big picture” is made up for in the wealth of vignettes. We meet the “compdozer” – like the current “bulldozer” president a senior manager in the Hyundai empire. But Lee Ik Chi, chairman of Hyundai Securities and mastermind of the Buy Korea Fund, combined the brute force of a bulldozer with the calculating capacity of a computer.
And among the various statistics we are provided with in the narrative, there’s the interesting one which is used to illustrate the petty corruption which pervaded the upper echelons of Korean society: in the posh area of Kangnam, 60% of the young male population were apparently physical misfits, making them unfit for compulsory military service.
Later chapters in the book chronicle the battles for Kia (in which Ford loses out to Hyundai) and Jinro (in which Coors loses out to OB). The final chapters follow a strange digression – that of North-South relations – irrelevant to the theme of the book as a whole, leading one to suspect that the material was thrown in because it was too good to waste but would otherwise have failed to have found a good home. But even here the nuggets of detail make the chapter worth reading – such as the fact that the Unification Church (the Moonies to you and me) was an organisation equivalent in size to a middle-ranking chaebol and included the manufacture of rifles and tank cannons in its range of activities; or the weekly drinking bouts between the US and DPRK soldiers at Panmunjom involving snake wine and American beer.
Although we may still be waiting for the definitive book describing how Korea recovered from the IMF crisis, this book provides a wealth of fascination from one of the leading journalists still in Seoul.