Recession Is a Fear in Seoul

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Recession Is a Fear in Seoul

Don Kirk New York Times Service Saturday, September 1, 2001

South Korea, verging on an economic crisis, got a fresh shot of bad news Friday as the government reported a sharp drop in industrial output and concerns mounted over the future of two major companies that have emerged as emblems of the economy's current difficulties.

With the gloom deepening, the Bank of Korea was expected to consider another cut next week in the benchmark interest rate, which was lowered to a record 4.5 percent Aug. 9.

For the second month in a row, industrial production sank amid a sharp drop in orders for semiconductors and other electronic products - a pillar of manufacturing. Motor vehicle production also fell.

The drop in July output was 5.9 percent from a year ago - more than double the year-on-year decrease posted in June, according to the National Statistical Office. The figures were a dark reminder of conditions leading into the country's economic crisis of 1997-1998. The last time output declined two months in a row, officials noted, was in October 1998, when it fell 8.8 percent.

Fears of a prolonged decline in the exports that power the South Korea economy added urgency to the task of resolving two of the longest-running industrial sagas: the fates of Hynix Semiconductor Inc. and Daewoo Motor Co.

Finance Minister Jin Nyum said for the first time Friday that Hynix might have to go into receivership if creditors reject the latest plan for restructuring.

The creditors, led by the government-controlled Korea Exchange Bank, have been showing increasing reluctance to approve a plan that they fear would only cause them to hemorrhage more money. The plan calls for exchanging approximately $3 billion in debt for equity, while rolling over at least another $1 billion in loans for a company whose total debts are now estimated at around $10 billion.

http://www.iht.com/cgi-bin/generic.cgi?template=articleprint.tmplh&ArticleId=31181

-- Martin Thompson (mthom1927@aol.com), August 31, 2001


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