Tips for this week's economic issues

The main issues for this week are the Hyundai crisis and the establishment of a new economic policy team. By fully understanding the ramifications of the outcomes, one will be able to predict the direction of economic policy in the latter half of Kim Dae Jung`s government. Resolving the Hyundai crisis will be the first and most important task for the new economic policy team.

The primary concern will be the contents of the rehabilitation plan to be provided by Hyundai, which has pushed for the announcement of the program on the pretense that the government`s intention is unclear. It is still uncertain whether the new team will devise a different solution or maintain the government`s present position. The approach towards the chaebols will be demonstrated here.

In the tug of war between the government and Hyundai, the ball in is now Hyundai`s court. Regardless, it would be unreasonable to expect the rehabilitation plan to provide a fool-proof remedy to all of Hyundai`s problems. Hence, in the case that Hyundai does provide a rehabilitation plan this week, it will be difficult to expect all of the government`s demands to be satisfied.

One thing is for certain -- the problem at hand cannot be put off any longer by the government or Hyundai. Not only will foreign investors` outlook on the Korean government and Hyundai deteriorate, but the already troubled financial markets will come under even more stress. If the new team is unable to devise a feasible solution to the Hyundai problem, they will meet with considerable adversity from the outset. When the new team is introduced, a huge change in economic policy direction is expected. The general economic and interest rate policy outlook will become more clear to the market. In addition, the evaluation of workout companies will be completed. The outcome of inspections into the ownership and practices of management in workout companies will be finished by mid-August. A blueprint on who in management will be discharged and the disciplinary action to be taken is to be prepared. There is also growing interest regarding the impact that corporate performance reports submitted to the banking sector last week may have on the market. The Financial Supervisory Committee will make an evaluation of banks to ascertain each bank`s BIS

capital adequacy ratio (as of June) by the 11th.

Based on the results of the evaluation, plans for the second round of restructuring will be designed. Particular attention will also be paid, especially by investors, to the 1H business performances for listed companies, which will continue to be disclosed until next week.