Beware the imperialist takeover of Asia

By William Pomeroy

This article was reprinted from the January 24, 1998 issue of the People's Weekly World. For subscription information see below. All rights reserved - may be used with PWW credits.

There have been few cruder, more open and more unprincipled examples of the predatory nature of present-day imperialism than the fate that has befallen South Korea and that looms for other developing countries of East and Southeast Asia. In the wake of the massive crisis of plunging share prices and currency values that has sent so-called "tiger" economies into whimpering collapse, the big US and European transnational companies are moving in to pick up their stricken industries at bargain basement rates.

Giving the crisis its bad odor is the fact that, at its root, it has grown from the lending policies of the western, and Japanese, financial institutions, the International Monetary Fund (IMF) and the major internationally-operating banks, which encouraged and pressed the Asian countries to rely for development on vast loans. One aim was to enable expansion of the Asian market for western exports, but for the bankers the chief concern, of course, has been reaping the profits from annual interest payments.

The current crisis is primarily a debt crisis, the countries hardest hit - Thailand, South Korea, Indonesia, the Philippines - being those with the biggest foreign debt, which has mounted to the point where the repayment of interest and maturing short-term loans cannot be sustained and the knock-on effects have caused a precipitate fall in currencies and stock markets.

For the international bankers the great fear in this situation is that the affected countries might simply default on their foreign debts. The "rescue" programs hurried forward by the IMF and the major lending powers are designed not so much to prop up the ailing economies as to guarantee that the western financial institutions get their capital and interest back, through providing new "bail-out" funds ($57 billion for South Korea alone) which of course pile on further debts for the future.

If all that was involved was a mere shifting about of capital, the crisis would not be so inflamed, but imperialist finance capital does not operate so altruistically. The Asian countries are made to pay a heavy price, to agree to demands formulated by that chief arm- twister, the IMF. The price is literally to hand over their economies to the western banks and transnationals.

In December the former U.S. Commerce Secretary, Mickey Kantor, told a gathering in London of the Confederation of British Industry that when countries seek help from the IMF the U.S. and Europe should use the IMF as a battering ram to gain advantages and that the troubles of the "tiger" economies should be seized upon as a golden opportunity to reassert U.S. and commercial interest.

South Korea is a prime case for the golden opportunity. IMF, U.S., Japanese and other loan capital had been poured into it but the use to which it had been put by reactionary South Korean governments had not always made the creditors happy. Pursuing right-wing nationalist and protectionist policies, they employed the funds particularly to finance the building up of huge conglomerate industrial groups (the Chaebol) that became major transnational companies - Hyundai, Daewoo, Samsung and others - investing and trading internationally in rivalry with western transnationals.Cars and electronics were the most prominent of these but the trade threat had spread to footwear, steel, shipbuilding, petrochemicals and textiles.

The "tigerish" image of South Korea came particularly from the enormous and reckless expansion of these sectors, from which industrialists and their political patrons could cream off profits without concern for huge indebtedness because the chaebols could always turn for funds to governments that could always resort to the ready loans doled out by the IMF and western banks. These agencies have notoriously tolerated and made funds freely available to corrupt and irresponsible regimes, so long as repayment is made with interest. There is a crisis when it is not.

It is estimated that South Korea has a foreign debt, public and private, short term and long term, of more than $100 billion. Of this over half falls due within this year, with $25 billion of short term debt due by the end of January; South Korean reserves were $10 billion. The IMF and western banks, meeting in emergency international sessions, rushed to prevent not just a South Korean collapse but hints that it might default on the debt). A $57 billion "bail out" was agreed.

It was literally forced on kicking and protesting South Koreans, who have resented the onerous terms, which include the scrapping of all the relatively independent, nationalist and protectionist policies that have nurtured the "tiger." When the deal was reluctantly agreed it was called "National Humiliation Day" by its Korean opponents.

South Korea is compelled to open its capital market and financial system in general to foreign banks and investors who are allowed to participate in mergers and acquisitions of financial institutions (meaning a full-scale takeover mainly by U.S. banks). Restrictions on foreign ownership of companies are removed, with foreigners allowed to have 55 percent ownership at first, total control later. Trade barriers are lifted, enabling freer entry of competitive foreign products. The usual IMF terms of drastic cuts in public spending, higher taxes and interest rates, elimination of liberal labor laws, and others must be introduced.

It is the takeover of South Korean businesses that will be most devastating for that country's developing national economy. The European Credit Lyonnais Securities reports that only 87 of listed South Korean companies out of a total of 653 non-financial firms are sufficiently solvent to be safe from foreign predators. These had moved in when the bail-out deal signatures were hardly dry.

The steep devaluation of the South Korean won that is a feature of the crisis has made all such companies vulnerable and fire-sale cheap. As the London Times' leading analyst on international finance, Daniel Bush, put it: "The pact that Asian governments have made with the IMF is positively Faustian. They get billions of dollars in the short term but lose control of their destinies. The 'tigers' will emerge from the current crisis declawed and owned by the west."

Above all the worst effects of the crisis are to be borne by South Korea's workers. The western "rescuers" frankly admit that their "reforms" will result in at least one million unemployed. One of the demands of the IMF and the transnationals is for abolishing worker job security by throwing out the labor law, won by hard struggles in the past, that provides virtual life-time protection from arbitrary firing. The U.S. transnationals moving in for company takeovers want freedom to sack workers for any reason.

The independent 550,000-member Korean Confederation of trade Unions (to be distinguished from the government- backed Federation of Korean Trade Unions) strongly opposes any change in the labor laws, its leader Kwan Young-kie pledging a repeat of the strikes and demonstrations that defeated a similar attempt by the previous right-wing government last year, and calling for public hearings to fix blame for the present economic crisis and to punish those responsible.

If the step is taken toward demolishing job security to serve the transnationals the fight of the militant KCTU is likely to acquire an anti-imperialist character that could have its echo elsewhere in an Asia being taken over by western bankers and big business.