Contingency Plan 비상상황 대응체계

Contingency Plan 비상상황대응체계 To: Jeung-Hyun Yoon,Minister of Strategy and Finance From: Kimchi Park, Department of Crisis Management, MOSF Policy Responses To North Korean Provocation Bottom Line: Recommend approving plan for monetary policy in case of unusually large NK attack.

Currently… • Status-quo of “low level” provocations • e.g. ROKS Cheonan, Yeonpyeong Island • Low casualties (< 50-100 dead), relatively infrequent (≥ six months) • Crying wolf …Market Confidence

Currency Reaction to Yeonpyeong

Contingency plan activated… For: • Non status-quo provocation • i.e. larger and/or sooner than usual • Market reaction would be stronger

Contingency Plan Activated… ₩ By… • Observation • Hotline partners • Financial and foreign exchange authorities • Commercial banks

Prevent market panic and herd behavior Objectives Stabilize exchange rate Prevent massive losses in stock market Preserve trade in resources and commodities

Contingency Plan • Prevent capital outflow: • Close KOSPI stock exchange • Exempt foreigners from withholding tax • Tax funds remitted abroad • Maintain exchange rate: • Purchase won with large foreign reserves • Public relations: • Press conferences • Credit rating agencies

Bottom Line President Lee Myung-bak • Korean economy relatively resistant to exogenous shocks • Increasing trade • Current account surplus • High savings rate • Large foreign reserves • US support • Market shows history of confidence in Korea • Lack of confidence in North Korean credibility

…always be prepared! “Let’s smash them with a single blow!” But…

Thank you! Questions?

Currency Reaction to Cheonan

Contingency Plan 비상상황 대응체계