Thomas C. Dawson
Thomas C. Dawson

Views & Commentaries

Republic of Korea and the IMF

The IMF and Good Governance -- A Factsheet

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Good Corporate Governance is Mere Common Sense
A Letter to the Editor
By Thomas C. Dawson
Director, External Relations Department
International Monetary Fund
Business Times
February 12, 2002

Chalmers Johnson's name-calling ("Economic Fanaticism Bad for Seoul", Feb. 5) does not mask his failure to grasp the significance of the reforms embraced and sustained by South Korea after the 1997 financial crisis.

His reasoning seems to suggest that Korea is doing fine these days, but it could return to hard times because it abandoned a way of doing business that helped bring about the original crisis. In fact, this old way has been rejected by the Koreans themselves. Korea's economic rebound over the past four years is a tribute to all segments of society who saw that a new approach was needed. The IMF program in Korea ended in 2000, and the loans were fully repaid by last year, yet Seoul remains commited to the reforms—because they are its own.

The corporate governance that Mr. Johnson decries is very important—be it in the U.S., Korea, or any other country. There is clear evidence that countries with poor corporate governance are more vulnerable to financial crises, because the checks and balances needed to prevent insider abuses are not sufficiently strong. If well-functioning laws, regulations, and business practices govern the relationship between companies and their investors, then productivity and growth are likely to increase.

To suggest that the Enron bankruptcy invalidates the pursuit of good governance is to turn logic on its head. A key IMF concern in promoting governance is to prevent crises, and the Koreans themselves have drawn that very lesson from their experience. This is not a foreign ideology; nor is it designed to protect the interests of foreign investors, as Mr. Johnson claims. It is just common sense.