If world leaders fail to come up with creative ways to deal with the current [economic] difficulties, credit will not flow, President Lee Myung-bak said in a contribution to The Wall Street Journal Friday (Mar. 27).
A true economic recovery requires all countries to do everything they can to stabilize the economy, he emphasized in his article "How Korea Solved Its Banking Crisis."

In the run-up to the G20 meeting that will be held in London on Apr. 2, President Lee said the G20 leaders at the venue should, above anything else, focus on removing toxic assets from the balance sheets of financial institutions.

President Lee also introduced some valuable lessons that Korea had learned while successfully overcoming the 1997-98 foreign exchange crisis. Lee said the lessons would be useful for world leaders to remove such toxic assets.

First, Lee said, bold and decisive measures are required to regain market confidence. As to the reasoning, Lee pointed out that from 1997 to 2002, Korea had tapped various sources to raise a public fund of US$127.6 billion (159 trillion KRW) to resolve the problem of impaired assets and recapitalize financial institutions.

Bank recapitalization and bad bank creation are not mutually exclusive, but will have a positive effect only when both are done simultaneously, Lee said. Korea established the Korea Asset Management Corporation as a bad bank in late 1997, while the Korea Deposit Insurance Corporation was involved in recapitalizing financial institutions, he explained.

A special mechanism for shareholders, managers, workers and asset holders should be set up for them to bear their fair share of responsibility, Lee said.

He also said there should be a plan for government-owned shares to be turned over to the private sector, while bank nationalization should be a temporary measure, not a perpetual goal.

President Lee said although governments would take the lead in the removal of impaired assets, private capital should be encouraged to fully participate in the process. Lee also said that all forms of financial protectionism should be rejected in the process and a coordinated effort is needed to ensure that regular cross-border capital flows are not interrupted.

This is the first time this year that the WSJ has run a head of state''s special contribution, Cheong Wa Dae said. The economic daily seems to expect a leading role from President Lee in the second round of the G20 meeting after his "Stand Still" (no more new trade barriers) suggestion that he made in the first round, the office explained.