In 1997, a financial turmoil swept across Asia, and Thailand, Indonesia, Malaysia, the Philippines and other countries were severely impacted, and the economy fell into a deep recession. South Korea, one of the Asian Tigers, has not been spared, with its currency, the won, depreciating by nearly half, its financial system collapsing, its corporate debt crisis erupting, its international credibility battering, its people's living standards plummeting, and its political turmoil.
How could South Korea, once hailed as Asia's economic miracle, go from a rich developed country to a poor and backward country in just a few months?How could South Korea, once regarded as a model for Asia's financial system, go from a reputable borrower to an unpaid debtor overnight?
How could South Korea, once considered a model of corporate management in Asia, go from a manufacturing powerhouse with many world-class brands to an economic ruin rife with bankruptcies and layoffs?
South Korea's financial system is a dominant system, and there is too much intervention in financial institutions and financial markets, which affects the autonomy of financial institutions and the free operation of financial markets. By controlling the ownership, personnel arrangements, credit policies, interest rate levels, etc., of financial institutions, they can achieve their economic and social goals, without considering the efficiency and profitability of financial institutions, nor the supply and demand relationship and mechanism of financial markets.
* Through various forms of subsidies, guarantees, bailouts, etc., it has also protected and supported some inefficient, loss-making, and bankrupt financial institutions and enterprises, resulting in a waste of financial resources and corruption in the financial system.
South Korea's financial system is a bank-based system, with the banking sector accounting for the vast majority of the financial system, while other financial institutions and financial markets are relatively lagging behind, resulting in structural imbalances and lack of functions in the financial system. The scale and proportion of the banking industry are excessive, so that the risks and problems of the banking industry directly affect the stability and security of the financial system.
However, the lack of development of other financial institutions and financial markets has made the financial system lack diversification and flexibility, and cannot effectively diversify and transfer risks, nor can it effectively meet different types and levels of financial needs.
South Korea's financial system is a closed system, and the openness of financial institutions and financial markets to the outside world is low, resulting in an isolated and fragile financial system.
South Korea's financial institutions and financial markets have been protected and restricted for a long time, and they have not faced the competition and challenges of the international financial market, nor have they accumulated experience and technology in the international financial market, which makes the competitiveness and adaptability of the financial system very weak. When the international financial market changes and fluctuates, South Korea's financial system is difficult to cope with and adjust, and is vulnerable to shocks and crises.
These deficiencies and loopholes have made South Korea's financial system one of the most vulnerable and injured in the Asian financial crisis, and the extent and duration of the financial crisis in South Korea have exceeded that of other affected countries. In the next sub-heading, I will continue to analyze the problems and shortcomings of corporate governance in South Korea and their impact on the financial crisis in South Korea.
Corporate management in South Korea is a family-based management in which ownership and control of a business is concentrated in the hands of a small number of family members, affecting the governance structure and decision-making mechanism of the enterprise. Family management confuses the business objectives of the enterprise with the interests of the family, makes the business strategy of the enterprise and the will of the family obey, solidifies the business style of the enterprise and the tradition of the family, and interferes with the business activities of the enterprise and the private affairs of the family.
Family management also makes the management of the enterprise lack professionalism and fairness, makes the talent selection of the enterprise lack openness and competition, makes the internal supervision of the enterprise lack of effectiveness and independence, and makes the external supervision of the enterprise lack transparency and credibility.
South Korea's enterprise management is a dependent management, the business activities and development direction of the enterprise are too dependent on the support and intervention of the first, and do not pay attention to the needs and changes of the market, which leads to the decline of the market adaptability and competitiveness of the enterprise. Dependent management makes the business decision-making of the enterprise too consistent and obedient to the policy guidance, makes the business behavior of the enterprise too close and implicated in the interests of the enterprise, makes the business risk of the enterprise and the political risk too shared and bears, and makes the business responsibility and social responsibility of the enterprise too passed on and shirked.
Dependent management also makes the company's market positioning and competitive strategy too conservative and imitated, makes the company's market development and competitors too limited and backward, makes the company's market response and competitive advantage too slow and weakened, and makes the company's market share and competitive position too low and lost.
These problems and drawbacks have made South Korean companies the most vulnerable and damaged group in the Asian financial turmoil, and the extent and duration of the crisis have also exceeded that of other affected countries. In the next subheading, I will continue to analyze the political and social factors and consequences in South Korea, as well as their impact on the financial crisis in South Korea.