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To: John Curtis who wrote (1481)	12/2/1997 8:40:00 PM
From: Matthew Leo	Respond to of 27311

FWIW- South Korea Again Claims Tentative Deal With IMF On Bailout SEOUL -(Dow Jones)- South Korea Tuesday announced for the second time in two days that an agreement essentially had been reached with the International Monetary Fund on an economic bailout plan. Earlier, the government suspended operations of nine merchant banks until the end of the year, signaling a deal was near. The banks' operations were suspended due to mismanagement and concerns that recent massive withdrawals from investors will hurt overall investment sentiment. South Korea's troubled financial sector has been the main sticking point in the talks with the IMF, with the international lending organization pressing for closures of 12 debt-ridden merchant banks. The Seoul government, fearful of lost jobs and possible unrest, had lobbied for restructurings over actual shut-downs. The nine suspensions would appear to be a compromise. Merchant banks, which specialize in short-term lending, have been at the core of the country's debt crisis and market turmoil. The banks have been severely hurt by a string of big corporate bankruptcies this year. Because the government announced a similar IMF agreement on Monday only to backtrack later in the day, some economists and other observers were skeptical a tentative agreement had been forged. "The talks are virtually completed," Lim said at a hotel in Seoul where talks have been held for several days on a bailout program for South Korea's flagging economy, the world's 11th largest. The finance minister said the two sides will sign the aid agreement at 0030 GMT Wednesday (7:30 p.m. EST Tuesday) after the South Korean cabinet reviews details of the package and IMF Managing Director Michel Camdessus arrives in Seoul. Camdessus, speaking from Kuala Lumpur, would say only that he's in contact with authorities in Seoul, who are "working day and night in order to explore all aspects of Korea's economy that need strengthening, and economic legislations that need to be amended." The IMF director also criticized the South Korean government for tarrying too long in seeking IMF aid, saying the delay has complicated the task of repairing its economy. Lim said agreement on growth targets and financial-industry reforms, such as the bank suspensions, paved the way for the tentative deal. The two sides agreed to target South Korean GDP growth at 3% next year compared with an expected growth rate of 6% this year, according to the finance ministry's Assistant Minister, Chung Duk-koo. The IMF had been calling for GDP of 2.5% in 1998, sparking fears in South Korea that the lower growth target for a country used to average growth of 8% during the last ten years will fuel a sharp rise in unemployment. Lim and Chung refused to disclose further details of the imminent agreement, but Chung said the IMF agreed not to interfere with the Korean government's policies toward the country's powerful industrial business groups, or chaebol. The media had reported earlier that Camdessus was demanding the disintegration of the sprawling chaebols, which are credited for the country's leap to industrialization from postwar poverty. The anticipated IMF package is expected to be much larger than the $20 billion South Korea initially requested from the IMF on Nov. 21. Analysts say between $60 billion and $70 billion will be needed to ease the country's debt crisis. Meanwhile, Camdessus, whose agency has negotiated bailouts for three Asian countries since August, said he was frustrated that warnings issued by the IMF to countries with risky economic policies usually go unheeded. Those warnings often involve calls for tighter credit policies by financial institutions, an end to protectionism for "the happy few" and reduced military spending, he said. Camdessus said he expects the structure of the eventual bailout package for South Korea to be similar to Indonesia's. The Indonesian rescue negotiated in October is seen as the model for the principles of the so-called Manila Framework, which gives the IMF the lead role in organizing a more comprehensive surveillance mechanism for the troubled Asian economies, as well as in organizing new sources of emergency finance for Asia. Indonesia received $18 billion in assistance from the IMF and other multilateral donors. But "second line" commitments from Japan, Singapore, the U.S. and other countries brought the total to nearly $40 billion. The South Korean won ended at a new low of 1,235 won to the dollar compared with 1,187 won per dollar at Monday's close. Dealers said the won sank on concerns of a liquidity squeeze following the temporary closure of the merchant banks and on concerns that the IMF funds will arrive later rather than sooner. Share prices plunged 16.29 points, or 4.1%, to 376.87 on fears that an IMF agreement will result in massive corporate failures. Should the expected conditions on the financial industry be tough, shares will plunge, market watchers say. The won, meanwhile, will be boosted if the package is sealed, on relief much-needed funds will soon enter the economy