- The Washington Times - Thursday, December 14, 2000

SEOUL Tens of thousands of layoffs. Violent labor protests. Conglomerates facing bankruptcy as scores of smaller firms go under.

Surely this isn't the same South Korea that was rebounding strongly from the Asian economic crisis, which swept across the region three years ago and triggered fears of a global financial emergency.

Think again. "Nobody knows how desperate we are," said Koh Hyong-choon, 387, the father of two who expects to lose his job at a money-losing chemical factory here set to soon close.

South Korea, long a symbol of Asian business prowess, faces a surprising return to some familiar problems in an eerie echo of the 1997 crisis. Today, South Korean corporate titans such as Hyundai and Daewoo are deep in red ink, some 100,000 workers are expected to lose their jobs by year's end and labor unions are growing restive.

South Korea isn't as bad off this time around, and its plight seems unlikely to spread to other countries, economists say. But the woes are raising concerns about the durability of Asia's fragile rebound, with Indonesia, the Philippines and Thailand still struggling to recover from rising debt, political instability and financial mismanagement.

The 1997 recession was triggered when Thailand devalued its currency and set off a chain reaction across the region. Thousands of financially weak companies in South Korea collapsed. Unemployment soared in a nation where workers were accustomed to lifetime jobs. South Korea required big bailout loans overseen by the International Monetary Fund.

South Korea, a major global exporter of autos and electronics, has since lured back foreign investors, greatly shored up its foreign currency reserves and pressed ahead with wrenching financial reforms. Now, those reforms themselves are causing hardship, demonstrating the fragility of the recovery and arousing the enmity of unions and thousands of uneasy workers.

Underscoring the predicament, some economists fear the South Korean economy will shrink again if the government fails to speed up reforms by shutting down heavily indebted companies.

Typical is Mr. Koh's employer, Korea Synthetic Chemical, a bank-owned concern that loses an average of $17 million a year and probably will close by year's end, stranding hundreds without jobs.

South Korea's jobless rate is expected to rise by half a percentage point to 4 percent, or 910,000 people this year well below the 9 percent peak in February 1999.

That's no consolation to Mr. Koh, who supports his family on his $1,000 monthly salary, which includes housing and other subsidies.

Major labor unions have vowed to resist layoffs, raising the prospect of a round of labor protests similar to those during the IMF crisis, when hundreds of thousands of workers were driven out of jobs and held rallies against what they blasted as inept corporate management.

This month, two large street protests in Seoul drew up to 20,000 workers each. One turned violent, resulting in 100 people injured in clashes with riot police.

Despite problems, South Korea's economy is expected to grow around 9 percent this year, after expanding 10.7 percent last year in a dramatic turnaround. But experts warn the economic situation could deteriorate unless the government moves decisively to restructure bloated businesses that subsist on large bank loans.

Early this month, the government named 52 companies deemed in such poor financial shape they should be liquidated. The government said it would name more ailing firms.

Then Daewoo Motor Co., South Korea's third-largest car maker, went bankrupt with $10 billion in debt. Heavily indebted Hyundai Engineering and Construction Co., the nation's largest builder, is in danger of the same fate.

Dang Sung-keun, 32, who has worked at Daewoo for eight years, says he hasn't been paid since late August.

"I am really concerned about my future. If they throw me out on the streets, how am I supposed to make a living?" he asked. "All I have learned is how to assemble a car, and no car companies are hiring new workers."

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