Korean With Ties to 2 Lands a Key Figure in Debt Talks

You Jong Keun gave up his U.S. citizenship four years ago to bring democracy and Western-style economics to an impoverished region of South Korea that had languished in the shadow of its more politically connected neighbors.

This week, the onetime Rutgers economics professor returned to the United States as the economic czar of the newly elected Korean government, handed the imposing task of persuading a coalition of skeptical bankers owed $158 billion to give his homeland a desperately needed infusion of cash.

You, 54, spent 20 years abroad, making him an unlikely champion for this embattled country. But after serving three years as governor of North Cholla, his home province, he comes to the negotiating table armed with a politician’s savvy and an economist’s mind.

You was named chief economic advisor to Korean President-elect Kim Dae Jung last week. He is expected to be appointed to the job of senior presidential secretary for economic affairs when the new administration takes office in February.

South Korea’s delegation is to meet today with the International Monetary Fund, which has extended a $60-billion support package to Korea, and Wednesday with international bankers.

While South Korea’s stock market has strengthened in recent days, the government’s immediate headache is negotiating the rollover of at least a portion of the $25 billion in short-term debt coming due before March.

“I don’t think we need to take care of the entire amount in one fell swoop,” You said Monday morning from his hotel in New York. “If we try to force the market to absorb too much too soon, it could be disadvantageous to us in terms of the [interest] rate.”

The lenders have proposed that South Korea swap the bank debt for government bonds. But You said the Korean government is “very reluctant” to issue bonds and would prefer to extend the loans at interest rates “in the single digits” backed by a government guarantee. They would also like the option to renegotiate or pay off their debts when the country’s credit ratings improve.

You’s political experience, which includes an aggressive effort to recruit foreign investors to his home province, will be useful in bolstering South Korea’s support at home and abroad. But they said it is too soon to know how well he will handle the complex financial issues facing his government.

“It’s the financial part of the equation” that’s in question, said Yoo Tae Hou, managing director of the Daewoo Economic Research Institute.

You originally left South Korea in the 1960s to study in the United States and was unable to return home because of his public opposition to the military rulers who wrested control of the country after the end of the Korean War.

During his two decades in America, You taught economics at Rutgers and served as an advisor to three New Jersey governors. He also worked closely with pro-democracy activists on both sides of the Pacific.

In 1986, You began visiting North Cholla for several months a year. In 1994, he returned for good and began a campaign for the governor’s seat against two powerful candidates, one a three-term congressman.

During his campaign, You held American-style town hall gatherings, where he uncovered decades of frustration over discriminatory treatment of the North Cholla people by the national ruling party.

He also encountered hostile young South Koreans who opposed increasing their country’s dependency on foreign investment, particularly from the West. Others questioned the strength of his loyalty, arguing that he would simply return to the United States if he lost.

But some, frustrated by their region’s backwardness, voiced support for You’s economic vision and outspoken ideas. And the Korean American community called relatives and friends back home, spreading good words about their former colleague.

In the summer of 1995, You won his three-year seat by a landslide, becoming one of half a dozen Asian Americans who have become influential in shaping their countries’ transformation from military-led dictatorships to fledgling democracies.

As governor, You wooed foreign investment to his long-isolated province, taking recruiting missions to Japan, the United States and Europe. Dow Chemical Co. has since agreed to invest up to $2 billion over 15 years in the region, and others have shown interest.

But his aggressive outreach rankled officials in the national government in Seoul, who retained tight control on the regional economies through such things as investment controls and licensing. As a dissident, You grew close to President-elect Kim.

By joining the president-elect’s economic team, You has been given the opportunity to address those complaints from the inside. But first he must convince a group of outsiders--skeptical foreign bankers--that his nation will survive.

“I feel great about bringing true democracy to our homeland, but I feel terrible about the economic difficulties,” he said. “I also feel this is a blessing in disguise. For years we’ve been talking about the need to reform the way we run our economy, but because of the resistance from vested interests we weren’t able to implement the reforms. Now we are in a position of having to do it.”