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Thursday, December 4, 1997 Published at 14:07 GMT


IMF deal gets thumbs-up from Asian markets
image: [ South Korean car industry could be hit especially hard ]
South Korean car industry could be hit especially hard

Financial markets in South Korea have responded positively to the agreement reached with the International Monetary Fund on a $57 billion rescue package.

The full details have not been released but the head of the IMF, Michel Camdessus, said the strong programme would open up financial markets to foreign competition and bring about a change in the structure of large industrial groups.

On Thursday there was a record increase in share prices on the South Korean stock market, with the main index rising by 7%. The national currency, the won, made small gains against the dollar, but remains fragile.

[ image: Union bosses have said they'll fight mass job cuts]
Union bosses have said they'll fight mass job cuts
However, some of the country's newspapers bemoaned the loss of the country's economic independence. Others even accused the US of using its influence over the IMF to break down South Korean trade barriers.

South Korea's car industry could be one of the hardest hit sectors as manufacturers have relied on a virtually closed domestic market to fund rapid expansion overseas.

They will now be confronted by much reduced domestic demand and real foreign competition at home. The reforms are likely to lead to levels of unemployment not seen in South Korea for more than three decades.

Many analysts fear that may lead to social conflict and trade unions have warned they will fight any mass layoffs.

[ image: Rescue package raised to $57 billion after Italy offered to help]
Rescue package raised to $57 billion after Italy offered to help
The package was signed in Seoul after prolonged negotiations with the South Korean Government over the strict terms for its implementation. The amount announced on Wednesday was raised to $57 billion after Italy contributed 2 billion to the sum offered by European Union members.

The majority of the funds, some $35 billion, will be provided by the IMF, World Bank and the Asian Development Bank. Another $22 billion will come from the US, Japan, Germany and other European donors.

The agreement was signed by Michel Camdessus, managing director of the IMF, and South Korea's Finance Minister, Lim Chang-yuel.

Reports say the IMF also demanded written assurances from the country's three presidential candidates that they would support the conditions for the agreement.

[ image: Agreement signed by Finance Minister Lim Chang-yuel and IMF boss Michel Camdessus]
Agreement signed by Finance Minister Lim Chang-yuel and IMF boss Michel Camdessus
Mr Camdessus has previously said South Korea's rescue package would resemble those already approved for Indonesia and Thailand.

Thailand has received $17.2 billion and Indonesia $37 billion under IMF rescue plans that involved contributions from other countries and international lenders.

Merchant banks, the country's short-term lenders, are widely blamed for setting off South Korea's current financial crisis by their haphazard lending practices.

South Korea's foreign debt is believed to have grown to about $120 billion as of the end of September, with about $66 billion of that in short-term obligations. About $20 billion is due by the year ending, analysts said.

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