South Korea to Replace Five Ministers in Crisis Fight

South Korea's president will replace five ministers on Monday, which media reported would include the finance minister, to counter criticism over the administration's handling of an economy slipping closer to recession.

CNBC.com

Local media reported Yoon Jeung-hyun, 62, who headed the country's top financial regulatory agency until last year following time at the Asian Development Bank, would replace Kang Man-soo as the Minister of Strategy and Finance.

Seoul financial markets showed little reaction to the news of a potential cabinet reshuffle.

Korea's policy makers have scrambled to fend of the global financial storm that blew up in September last year with the collapse of Lehman Brothers.

Market liquidity has tightened and economic growth in Asia's fourth-largest economy has slumped along with that of its neighbors.

President Lee Myung-bak enters his second year in office next month and has been widely criticized for failing to do more to lift the economy after winning majority support in the 2007 election partly on a platform of economic reform.

Some economists, such as Oh Suk-tae at Citigroup, doubted a few new people could do much to fight a crisis that began overseas, while others, including Lim Ji-won at JPMorgan Chase, welcomed Yoon's potential appointment.

"I think this is positive in a general sense," Lim said. "Mr Yoon has a good reputation for his sense of financial sectors and international relations as well as his strong leadership.

The presidential Blue House said it planned to announce the replacement of five minister-level officials at 0500 GMT. It declined to name the ministries involved.

However, local media reported the heads of the Financial Services Commission, the top financial regulatory agency, and the Ministry of Knowledge Economy in charge of industrial and trade policy would be replaced in addition to the finance minister.

The central bank has forecast 2009 economic growth at 2 percent, but an increasing number of global investment banks are predicting the economy would contract for the first time in 11 years, by as much as 3 percent.

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Underlying the gloomy economy, central bank data on Monday showed that the ratio of business start-ups to failures hovered near a four-year low in December while debt defaults hit a seven-month low in the same month.

On a broader front, the Seoul Economic Daily reported China, Japan and South Korea had agreed with the 10-member Association of Southeast Asian Nations (ASEAN) to boost the size of a proposed emergency fund to fight financial crises to $120 billion from an originally planned $80 billion.

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