SEJONG -- It has been 17 years since former Bank of Korea Gov. Park Seung proposed slashing the face value of the nation’s currency upon taking office in April 2002.
Under Park, the central bank pushed for redenomination in a low-key manner, seeking to do away with 10,000 won, 5,000 won and 1,000 won notes and replace them with notes worth 10 hwan, 5 hwan and 1 hwan.
(Graphic by Heo Tae-seong/The Korea Herald)
The BOK project, initiated in the fifth year of the government of former President Kim Dae-jung, came to the fore during the tenure of former President Roh Moo-hyun. But it was eventually scrapped, apparently due to the disapproval of senior government officials.
During the Roh and subsequent Lee Myung-bak administrations, opponents of the plan warned of inflationary worries potentially leading to chaos. Some financial services industry insiders said a redenomination would incur a huge cost burden, as it would be necessary to replace automated teller machines and establish new financial information technology systems.
A group of lawmakers revived the discussion during the term of former President Park Geun-hye. The matter came into the spotlight in connection with the Park administration’s pledge to prevent large sums of cash from circulating in the underground economy by forcing it aboveground. But again, the plan fizzled out and came to nothing.
Analysts share the view that, since 2006, former BOK Gov. Park’s three successors, including the incumbent Gov. Lee Ju-yeol, have not spearheaded actions to publicize the need for a redenomination of the currency.
Despite proposals that lawmakers have put forth from time to time for more than a decade, it is irrefutable that the BOK holds to the somewhat lukewarm position that a social consensus should precede the publication of its detailed internal research on the matter.
Korea is the only country among the 36 members of the Organization for Economic Cooperation and Development where the value of the local currency against the US greenback tops four digits.
In the early 2000s, Korean tourists in Turkey, also an OECD member, were astonished to encounter a foreign exchange rate of 10,000 won to about 13 million lira. That country conducted a drastic devaluation of its currency’s face value in 2005, and 10,000 won is now worth about 50 Turkish lira.
The UK-based news weekly The Economist has essentially criticized Korea for maintaining the outdated par value, warning that it might be seen as an international “oddity.”
Since gaining its independence from Japan in 1945, Korea has conducted currency reforms on three occasions -- in 1950, 1953 and 1962 -- redenominating the currency each time. It was the third reform, conducted in June 1962 under then-acting President Park Chung-hee, that saw 10 hwan converted to 1 won.
In the 1970s -- in accordance with the 1962 reform -- the most commonly used banknotes made their debuts: 5,000 won on July 1, 1972; 10,000 won on June 12, 1973; and 1,000 won on Aug. 14, 1975. In contrast, it was not until June 23, 2009, that the first 50,000 won bills were issued.
Over the past 57 years, Korean banknotes have undergone design changes and anti-forgery treatments but no devaluations or name changes.
A commercial bank employee showcases a batch of fresh 10,000-won notes issued by the Bank of Korea. (Yonhap)
Under the Moon Jae-in government, only at odd times such as parliamentary audits have lawmakers asked incumbent BOK Gov. Lee Ju-yeol about the central bank’s intentions and policy direction in this matter.
Rep. Choi Woon-yeol of the Democratic Party of Korea is one of the few to have stressed the urgent need to abbreviate the currency’s par value. He was a member of the Bank of Korea’s monetary policy committee during Park Seung’s tenure.
Rep. Lee Won-wook, also from the ruling Democratic Party, echoed Choi, calling on BOK Gov. Lee to clarify his stance earlier this week during the central bank’s policy briefing before the National Assembly’s strategy and finance committee.
But Lee from the BOK took a cautious position, saying such a move would have both positive and negative aspects. Though the governor conceded that there was a need to raise awareness on the issue, he reiterated his position that politicians should take the initiative.
A Sogang University professor was quoted by a news outlet as saying that “the exchange rate of 1,100 won per dollar is excessive, given Korea’s trade volume as the world’s eighth” major trading power.
He pointed out that the nominal gross domestic product as of 2016 -- 1.614 quadrillion won -- had increased more than 4,000-fold since 1962, when the nation abbreviated the face value for the last time and GDP stood at just 365.8 billion won.
An official at Government Complex Sejong predicted that it would not be easy for the 20th National Assembly -- whose term expires May 29, 2020 -- to undertake such an epoch-making endeavor.
President Moon is a politician as well as an administrator. While Moon has yet to comment on the redenomination issue since the days when he was a presidential candidate, the Finance Ministry also remains silent.
By Kim Yon-se (firstname.lastname@example.org)