Managing the Asian Meltdown - Case Study Example

As a result of the country developing as a major industrial nation, the country begun to receive pressure from other economic powers in relation to liberalizing its economy (Corning 3). The labor, on the other hand benefited from Korea’s developmental state by mainly improving the Chaebol businesses and privileges for the labor unions. The Chaebol amassed more assets, which they used as collaterals to secure loans. In addition, the expansion in terms of development during the 1980s, created a favorable environment for labor and guaranteed a lifetime employment (Corning 3).

The collapse of the Hanbo Steel was significant in the sense that it contributed to the collapse of other four group companies, and almost brought down the Korea First. Further, the collapse of the Hanbo Steel was significant in terms of revealing the problems that existed with the Korea’s financial system (Corning 3). On another note, the term “connected lending” in this context, means the focus by the Korean banks on lending loans for expansion to the Chaebol without considering the financial risk of accumulating bad loans.

The country’s current account deficit increased inn 1996 as a result of a slowdown in exports. The government and investor’s view of the country’s economic development revolved around a lack of questioning the economic model (Corning 4). Further, the term “Asian contagion” means the spread of tensions related to the economic crises that caused investors to explore other financial markets. Korea’s initial position in regard to the assistance from IMF involved a focus on improving the depreciating won that was sending investors away to other financial markets(Corning 5).

The person who contributed to the IMF-brokered bailout was Michel Camdessus, and the funds were to be used to replenish the country’s foreign-currency reserves so as to improve the