South Korea vs 1997 Asia Monetary Crisis

I was asking my best friend from high school what happen during Krismon (1997 Asia Monetary Crisis in Indonesia), and this is his answer. Not even mad bro, you are in my blog now.

Surprisingly, not only Indonesia whose suffering by crisis in 1997, South Korea also got harshly. However, they return everything back in just 2 years. How come?  I am not economic major, but I will try to make it simple and explain it.


Krismon was the name of Asia Monetary Crisis in 1997. Indonesia was one of he Asian tiger until we got hit by crisis. Not like Thailand, Indonesia was far away from crisis in June 1997. Low inflation, $ 900 million for surplus, and 2 billion foreign exchange reserves. Suddenly in July, the Rupiah grow weaker until end of 1997 from 2,600 Rupiah to 11,000 Rupiah per 1 Dollar. In addition, many Indonesian find a lot of advantage from borrowing Dollar. Thus when the rupiah went down, the company bankrupted since they can't return what they borrow. A lot of political change also happening due to crisis such as Soeharto stoop down from presidency and east Timor independent.

Let's talk more internationally. Asia Monetary Crisis in 1997 affect all the country in east asia, but Indonesia, Thailand, and South Korea were the one who suffer the most from this incident.The economical meltdown starting from Thailand because of huge foreign debt. Like a virus, is contagious to every country in East Asia since the current trend was external borrowing led to huge exposure of foreign exchange. Anyway, IMF trying to solve problem by lending money and advising those country affected by this.

South Korea recorded as one of the worst country during this crisis. Before the time, "The miracle of Han" is successfully improving Korean economy by manufacturing industry. On 1990s, Korea conglomerate was challenged to make worldwide business. Thus, capital investment is the best idea so far. However, excessive absorption of capital investment of conglomerates somehow increase debt and making this country collapsed. The effect on this crisis is the ratio increase from 13 % , 21 % and then 40%. Based on the book, the GDP decrease up to 7%, Bankrupt company sold their stock to other company to repay the debt. At the end, the won decrease from 800 to 1700 won per dollars. IMF came to help south Korea by giving them 50 billion Dollar and advice. However, South Korea didn't follow all whole instruction of IMF and actually they growth faster due to labor adjustment and alternative funding. Thanks to that, South Korea comeback only on two years and suddenly the economic booming high, Compare to other country, South Korea is not only the one who survived, but successfully improve from $80 to 21,000 dollar and become one of the fastest growing country. In conclusion, the government move to didn't follow whole advice and adjusting new rule, is the best move that Korea can do for a comeback. Many of economical of South Korea, but this is the real turning point of South Korea and make them difference from South East country