The Korean financial crisis, reform and positive transformation: Is a second 'Han river miracle' possible?

There is general agreement that the initial onset of the East Asian Financial crisis was made possible by fundamental economic, political and financial market errors and weaknesses, but also that the market reaction to these vulnerabilities (as their extent was revealed) was exaggerated and disproportionate. This is based on a model of “self-fulfilling” crises, under which existing vulnerabilities make a crisis a possibility but not a certainty. Unfortunately, the analyses to date (whether from public or private, domestic or international sources) do not suggest at what point underlying vulnerabilities will move from being the potential for a crisis and the point at which a crisis is a certainty. This article suggests that in the face of potential self-fulfilling crises, countries should act in advance (i.e., to take pre-emptive action) to reduce their potential vulnerabilities, both to an initial crisis and to contagion resulting from the onset of a crisis elsewhere, whether through panic, fundamental problems or the unpredictable potentialities of vulnerabilities. In effect, a main emphasis of this presentation concerns the importance of ongoing and meaningful ("bottom-up") economic, financial and commercial law reform throughout the East Asian region (or other emerging regions) and the related enhancement of legal education in these subject matter areas. In this sense, this article further suggests that, in looking forward, these emerging countries need to consider the critical importance of a law-based, “building block” approach in addressing the long-term implications of the current East Asian financial crisis.