A Lesson from Japan's 'Lost Decade'

The year 2009 has dawned, but the Korean people appear depressed about the gloomy outlook of the national economy and bad news such as rising unemployment as are their counterparts across the globe. Otherwise, the season would be a time for exchanging New Year's greetings and a renewed hope as well as new, optimistic resolutions.
Instead of hope or optimism, however, the buzzword among business tycoons and leaders of business organizations in the early days of the new year is "Survival." The current crisis is unprecedented. One tycoon even cited the book about Ernest Shackleton's South Pole adventure "Endurance" and the hit movie "The Day After Tomorrow," comparing them to the current situation and infusing a sense of crisis with his employees, appealing to them to explore strategies to survive these difficult times.
Recognizing the magnitude of the economic tsunami, the Samsung Business Group became the first Korean conglomerate to break the mold in personnel management and organizational structure as the group's flagship company, Samsung Electronics, has combined four divisions into two, dismissed 18 "old guard" CEOs and reassigned many more employees to the field, leaving a skeleton crew at the headquarters. In reality, Samsung Electronics is no exception, as world-class corporations like Toyota are expected to post their first losses in decades. The Korean electronics giant is likely to log its first loss in eight years for the fourth quarter of 2008 and to face a gloomy outlook for 2009. Other conglomerates and corporations will follow suit.
Ever since the final meltdown that began in the United States last year wrought havoc on the global financial markets, pushing a sagging global economy over the brink, policymakers across the world have assured each other they will not repeat the mistakes Tokyo made during Japan's "Lost Decade" of the 1990s: The unsoundness of the Japanese financial system trapped Japan in the quicksand of an economic slump for more years than expected. Central banks across the globe have been scrambling to ensure liquidity.
Korea is among those nations taking such measures as increasing spending and stabilizing liquidity.
The Lee Myung-bak government has come up with the "Green New Deal," the Korean version of green growth initiatives, named after U.S. President Franklin D. Roosevelt's post-Great Depression economic recovery plan. It is also pushing ahead with the Gyeongin waterway project, a miniature version of the Grand Canal Plan, one of the pledges Lee made during the last presidential election campaign.
The public limelight is now focused on how the government will translate these grandiose plans into action to explore growth engines that will stimulate the slumping economy and serve as the breadwinners of the future.
Based on the priceless lesson it learned while tiding over the Asian final crisis in 1998, the Korean government has taken such preemptive steps to restructure industries in advance. The reality is that banks hoard cash rather than lend money while they hesitate to select viable companies from marginal ones in fear of a rise in nonperforming loans.
We expect the second economic team of policymakers, recently appointed by President Lee Myung-bak, to earn the confidence of the markets and engineer an economic recovery. nw

Publisher-President
Elizabeth M. Oh