Lee MB Recovers From Setback

Determined to Push Ahead With Reform Policies

People meeting with President Lee Myung-bak recently concur on the notion that the head of state is in a bright mood, seemingly having recovered from the gloomy spell that started since he took office in February.
It is fortunate to see a "rejuvenated"president, given his hardships in the wake of mass protests and candlelight vigils that mobilized hundreds of thousands of people across the country.
Such demonstrations came in protest to a series of the new government's polices such as the agreement to import U.S. beef.
With the public anger lessening, Lee has begun to regain his confidence and pick up steam in his administration of Korea, with unswerving commitment to pushing for his reform programs including the privatization of public enterprises.
The government came up with a package of policies designed to revive the sagging national economy through development of new engines for economic growth, while injecting fresh air into the sagging real estate market and construction industry.
But at the same time, the administration is tasked to take measures to prevent the possible rocketing of real estate prices in the process of pushing for the new policies. It needs to learn a lesson from the U.S. subprime mortgage crisis.
To lay the groundwork for the new policies, Lee met with leaders of the governing Grand National Party and the opposition Democratic Party, wary of the possible conflict in the upcoming National Assembly in October during the House's inspection of state affairs.
Lee has been staying himself away from the National Assembly so far because of his negative assessment of the political sector. But as head of state he has begun to realize the significance of the cooperation of the opposition camp as well as from the governing one.
Pundits say such efforts come as a press for his own economic concept, known as "MBnomics."Lee needs the help of the National Assembly as the government is set to soon submit its budget plan for next year, which will determine the success or failure of his economic policies.
But it remains to be seen whether the opposition parties will extend helping hands to Lee, given the different measures put forth to cope with the current economic difficulties caused by the financial crisis in the United States.
The opposition camp has been linking the pending issues to a political agenda, calling for the sacking of the national police agency head and chief of the broadcasting and communication commission.
Despite the opposition's defiance, Lee has been pushing for his reform-oriented policies. Lee lamented that the government failed to move quickly in making a decision on whether to endorse a deal between HSBC Holdings and Lone Star Funds on the acquisition of Korea Exchange Bank (KEB).
"Korea lost an opportunity (to finish the KEB deal) as it failed to move quickly,"Lee said. "All public servants should place national interests as their top priority and have a sense of responsibility when they deal with such a crucial contract."Lee made the comments during a breakfast meeting with top economic
policymakers at Cheong Wa Dae to discuss the U.S. financial turmoil and its impact on the domestic market.
The remarks indicate the government is partly to blame for HSBC's cancellation of its $6.3 billion contract with Lone Star to buy KEB, the country's fifth largest lender.
The British banking giant agreed one year ago to purchase the Korean lender, but the deal had been deadlocked as South Korea's financial regulator withheld its approval, citing legal disputes over Lone Star's 2003 purchase of KEB.
The Lee administration, launched in February, took a softer stance toward foreign investors than the previous liberal government, but HSBC decided to walk away from the deal amid global financial instability.
Another challenge in the way of the Lee administration is the fact that there is little possibility that the financial crisis in the United States, triggered by the subprime mortgage failures, will be resolved any time soon despite the U.S. government's recent decision to provide some $700 billion of public funds
to bail out financial institutions crushed under the weight of bad debt.
The global stock markets initially welcomed the U.S. decision with bullish rallies around the globe. But the impact of the "unprecedented"steps will be unlikely to last long with growing anxieties over the possible collapses of an increasing number of U.S. banks.
Actually, the U.S. government has decided to transform Goldman Sachs and Morgan Stanley, the largest and second largest investment banks, into holding companies which can have small-sized commercials banks under their wings.
Congressional leaders have been proactive regarding the U.S. administration's move to offer the $700 billion fund to save the financial organizations, brightening the prospect that the gobal stock markets will be stable.
The New York Times also supported the idea by saying that there has been a consensus that the comprehensive bailout program had been inevitable, as without such measures the financial crisis cannot be settled.
Alan Blinder, former chair of the Federal Reserve Board, called the U.S. measures the proper steps, which can essentially improve the problems of the mortgage market.
He said the possibility that the U.S. will suffer the 10-year-long stagnation similar to what was experienced by Japan has decreased with the recent measures.
But critics point out that the current steps lack details for recovering the funds for the bailout and will continue to cause considerable controversy in the future.
What matters most is that the financial crisis is linked to numerous complicated derivatives instruments of which even regulators are unaware.
Some others cast doubt on whether the U.S. government will be able to find a solution to the financial problems with the $700 billion. In order for the crisis to be resolved, there must be a recovery in the housing market, which has remained sluggish until recently.
Domestic experts share the notion that the recent measures will help the nation cope with the lingering economic slowdown.
But they caution about premature high expectations by saying that it will take considerable time until the current financial strains will be eased.
They cite the need for the government to press for deregulation to help enterprises do business while keeping a proper pace in dealing with real estate issues.
The trade sector worries about the possibility that the recent U.S. move will undermine the nation's exports in the long run as it will lead to sluggish consumption in the U.S. domestic market.
KOTRA released a gloomy forecast, saying the U.S. financial crisis will result in a decrease in consumption and investment. So the impact will be materialized from next year, it said.
Revealing research outcomes in 25 nations, the organization said major export markets will suffer from a decline in domestic demand and investment in the wake of the U.S. financial crisis from next year.
"The companies active in the North American region, in particular, will see a decrease in sales and will even have difficulties in retrieving money amid financial stringency,"it said. nw

(left photo) Korean President Lee Myung-bak and U.S. President George W. Bush hold a news conference following their summit talks in Seoul in August. Lee extends a warm-hearted welcome to Chinese President Hu Jintao prior to their summit talks on Aug. 25.

(clockwise) President Lee presides over a recent cabinet meeting; Lee take a look into a robot developed on Korea's own technology; and Lee attends a meeting designed to expand new growth engines and raise Korea's competitive edge.