South Korea's Economy
Korea's Reforms After 1997
How South Korea restructured its banks and big companies after the 1997 crisis, and how these reforms shaped its later economy.
The 1997 Asian financial crisis hit South Korea hard. It took an IMF rescue package of around 58 billion dollars.
Causes in Korea
- Chaebol had borrowed heavily, often in foreign currency.
- Banks lent without careful risk checks.
- Short-term foreign debt fled when confidence fell.
The gold campaign
In 1998, millions of Koreans donated gold jewellery to help the country repay foreign debt, a famous show of solidarity.
Reforms
- Bank restructuring: weak banks closed or merged.
- Chaebol restructuring: Daewoo, one of the largest groups, collapsed in 1999.
- Opening to foreign investment.
- Labour market flexibility, allowing more layoffs.
- Corporate governance reforms.
Results
- Korea recovered quickly and repaid the IMF early, by 2001.
- Firms became more profitable and less indebted.
- But non-regular jobs increased, raising inequality.
Lasting lessons
Korea built large foreign exchange reserves to guard against future crises.
The gold campaign
A grandmother donates her wedding ring to the national gold drive. The collected gold is melted and sold abroad to help Korea repay its debts.
Thinking Korea's crisis ended its growth story
It recovered quickly after deep reforms.
Key takeaways
- The 1997 crisis forced an IMF rescue of about 58 billion dollars.
- Koreans donated gold to help repay debts.
- Banks and chaebol were restructured; Daewoo collapsed.
- Korea recovered fast but non-regular work grew.
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