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S Korea considers re-denomination of won
Not directly about WOT, but the trade and currency issues are tied closely to other state-state relations.South Korea is considering a radical overhaul of its currency, the won, including re-denomination and the issuing of higher-value banknotes. The measures, proposed by the head of the countryâs central bank this week, are designed to make one of the worldâs most unwieldy currencies more user-friendly. But critics say the scheme would encourage corruption and fuel inflation. Park Seung, governor of the Bank of Korea, said the countryâs economy had outgrown its currency, leaving peopleâs wallets stuffed with banknotes that had too many digits but not enough value. South Koreaâs highest-denominated banknote is worth Won10,000, equivalent to just $8.40, meaning people must carry thick wads of cash to fund large transactions. Mr Park proposed the introduction of a note worth Won100,000 and called for the currencyâs denomination to be cut by a factor of up to 1,000, meaning that a Won10,000 note would become a more manageable Won10. South Koreaâs economy has grown by 100 times and prices have increased 11-fold since the Won10,000 note was first printed three decades ago, making re-denomination inevitable, according to Mr Park. He said a firm plan for the reforms would be finalised before the end of 2003 with the process likely to take several years to implement. However, Roh Moo-hyun, South Koreaâs president, said talks about the plan had not started and no decision had been made, suggesting a rift with the central bank. Mr Rohâs caution could reflect uncertainty about the popularity of plans to meddle with peopleâs money ahead of Aprilâs crucial parliamentary elections. Critics say the introduction of higher-value banknotes would increase corruption because bigger bribes could be paid using fewer notes. Concern about graft is one of the reasons South Korea has always limited the value of its banknotes, reasoning that it is difficult to pay large bribes in Won10,000 notes. Supporters of re-denomination argue there are better ways to tackle corruption than limiting the value of banknotes, pointing out that graft remains rampant in South Korea despite the restriction. It emerged last year that LG Group, South Koreaâs second-largest conglomerate, delivered Won15,000bn to its favoured political party in the run-up to the 2002 presidential election, using a truck stuffed with 1.5bn of the countryâs largest banknote. Another concern is the psychological impact of re-denomination on a country where almost everyone can currently call themselves millionaires. Some critics believe the chopping off of a few zeroes from the price of goods would encourage excessive spending, while others fear people would be alarmed by having digits stripped off their savings. Other risks include inflation caused by vendors using re-denomination to hide price increases â although fear of this phenomenon proved unfounded when the European single currency was introduced two years ago Posted by: rkb 2004-01-16 |
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