Low Interest Rates, Low Oil Prices, Low Won's Value

By Kim Tae-gyu
Staff Reporter

After decades of fast growth, Korea chalked up a much-hyped current account surplus in 1986 for the first time thanks in large part to a favorable situation called ``the three lows'' ― low interest rates, low oil prices and a depreciated won against the dollar.

Things are almost identical at the moment since all of the three blessings are back ― crude oil prices have plunged of late; the won is weak against the greenback; and the benchmark interest rate is at a record low.

On the surface, a three-lows era seems to be revisiting Korea, so the question is whether the period will benefit the nation as it did 20 years ago. The answer appears to be negative.

``In the late 1980s, both the local and international markets were good. Under a fully functioning economy, Korea was able to make the utmost of the three lows to leap forward,'' said Kim Young-il, an economist at the Korea Development Institute.

``Today, it is different. Of course, the three lows are good for our economy. However, they will not catapult the country sky high. They will just attenuate the difficulties to some extent,'' Lee said.

Lee Geun-tae, a senior researcher at the LG Economic Research Institute, concurs.

``Plunging oil prices and interest rates are systematic responses to an economic downturn, which takes place automatically over the economic slump to prevent a further downward spiral,'' Lee said.

``Look at the United States where the benchmark rate is zero. Oil prices are low and the dollar starts to depreciate. Then, should the U.S. be a beneficiary of the three lows?'' he asked.

Growth Potential

On the other hand, some observers see the bright spots of the three lows.

``The three lows will not work in the same way as they did in the late 1980s. The influence of the favorable factors will be limited under the lingering financial distress,'' said Lee Sun-yup, an analyst at Goodmorning Shinhan Securities.

``However, they will speed up the pace of recovery down the road when things get back on track. In that sense, they are elements that will do good to our economy later on rather than right away,'' he said.

His logic is that the three lows will not weed out financial difficulties on their own but they will combine forces to power the Korean economy into recovering at higher pace than is generally expected.

The Bank of Korea has slashed the benchmark interest rate by 2.25 percentage points over the past two months to a record low of 3 percent.

The central bank said it slashed the interest rates so drastically because inflationary pressure has subsided with the consumer price index stabilizing.

The value of the local currency has also headed down throughout this year. Although the won has appreciated a little bit this month, its value is still substantially low in comparison to last year.

The won closed at 936.1 won per dollar last year and suffered a free fall to a yearly low of 1,525 won last month. It rose of late to move between 1,300 won and 1,400 won.

This is good news for the export-oriented Korean economy where trade accounts for about two-thirds of the gross domestic product (GDP). The high won-dollar rate cuts prices of dollar-denominated products of Korean firms, thus attracting more purchases.

Crude oil prices soared to approach $140 a barrel this summer but plummeted to below $50 this month, once again good news for Korea which does not produce a drop of oil.

voc200@koreatimes.co.kr

South Korean actress avoids jail for adultery

December 17, 2008

A South Korean court today handed out a suspended prison sentence for adultery to a popular actress who had been trying to overturn a law that criminalises extramarital affairs.

South Korea enacted its adultery law more than 50 years ago to protect women who then had few rights in a male-dominated society, but critics say now it is a draconian measure no longer fit for a country with an advanced civil and family court system.

Prosecutors had been seeking 18 months in jail for Ok So-ri who admitted to having an affair with a singer. The suburban Seoul court sentenced her to eight months in prison but she avoided jail because the sentence was suspended for two years.

A sombre Ok told reporters outside the courthouse she was not sure if she was going to appeal.

"I would like to say I'm sorry for stirring up such a controversy," she said.

In October, Ok lost a case she had brought to the country's Constitutional Court, which ruled against the actress and said society would be harmed if it overturned the law that can send a person to jail for up to two years for adultery.

Ok's lawyers said in a petition to that court: "The adultery law ... has degenerated into a means of revenge by the spouse, rather than a means of saving a marriage."

Ok said on her website she had no intention of seeking a criminal indictment for adultery against Park Chul, her former husband. Park, a radio talk show personality, has denied having an affair.

It is rare for courts to jail adulterers but that does not stop several thousand angry spouses from filing criminal complaints each year.

"The law is problematic in that it focuses only on the technical aspects of sexual intercourse and allows the government to intrude on the most private part of adult sexual life," said Lee Hye-kyung of the Minwoo women's rights group.

Critics have said a better compromise might be to allow spouses just to sue for compensation in civil court.

When South Korea enacted its adultery law in 1953, women had almost no recourse against a husband who had an affair. Back then, if a wife walked out on a marriage, she would often wind up alone and broke.