South Korea's Lee Nominates Yoon as Finance Minister

By William Sim and Seyoon Kim

Jan. 19 (Bloomberg) -- South Korean President Lee Myung Bak nominated Yoon Jeung Hyun as finance minister, replacing Kang Man Soo after less than a year as the government tackles the nation's biggest economic crisis in a decade.

Yoon, 62, was head of the nation's financial services regulator from 2004 to 2007, according to a statement by the president's office in Seoul today that outlined three other changes to the economic team. Kang was voted the worst minister in the team in a December poll of 82 economic professionals by Citizens' Coalition for Economic Justice, a civic group.

“The nominees are market-friendly, which sends out positive signals to the markets,” said Chang In Whan, chief executive officer at KTB Asset Management Co. “Yoon, especially, is known for his style of reaching decisions quickly.”

Yoon will have to grapple with an economy facing its first recession since 1998, falling exports and the weakest consumer confidence since the Asian financial crisis a decade ago. President Lee, who this month created an economic war room in an underground bunker, is seeking to restore voter support, which has fallen by more than half in the past year.

Some investors expressed concern that Yoon, who joined the finance ministry in 1971, may not be equipped to handle changes to industry dynamics expected to occur as policy makers fight the worst recession since the 1980s.

Financial Leadership

Yoon is a ``guy from the past,'' said Kim Yong Tae, head of overseas investment at Yurie Asset Management Inc. in Seoul, which oversees the equivalent of $2.2 billion in assets. ``What we urgently need at this point is a strong financial leadership that can swiftly grasp the changing global economic environment and take prompt action.''

South Korea has allocated about 140 trillion won ($103 billion), or 15 percent of gross domestic product, in extra liquidity, tax cuts and stimulus spending to support the economy.

The Bank of Korea cut its benchmark interest rate to a record low of 2.5 percent this month, extending the most aggressive round of easing since it began setting a policy rate in 1999.

Kang, 63, has been criticized since the beginning of last year when he pursued a weaker currency, saying Korea's won had previously risen more than other Asian currencies and that a drop would help exporters. The won lost 26 percent against the dollar last year and 40 percent versus Japan's yen. It fell 0.3 percent to 1,362.5 versus the dollar in Seoul today.

Kang ``seems to lack an understanding of how the world and the Korean financial market and economies changed over the past decade,” said Kim Sang Jo, professor of international trade at Hansung University in Seoul.

Won's Slump

The currency's slump drove inflation to the highest in a decade in July and increased costs of overseas borrowing, prompting speculation of a repeat of 1997 when South Korea was forced to turn to the International Monetary Fund for a $57 billion bailout.

“The weaker won policy was Minister Kang's biggest mistake as that propelled inflation,” said Kim Mi Young, manager of policy research at the Citizens' Coalition.

The government changed its stance on the won in June and in July President Lee dismissed Vice Finance Minister Choi Joong Kyung, who was in charge of the government's foreign-exchange policy.

In other changes today, Lee named Hur Kyung Wook as vice finance minister to replace Kim Dong Soo; Chin Dong Soo, chief executive officer of Export-Import Bank of Korea, to replace the current Financial Services Commission Chairman Jun Kwang Woo; and Yoon Jin Sik, former commerce minister and current chairman of Korea Investment Holdings Co., to replace Bahk Byong Won as chief aide on economic affairs.

Hyun In Taek, a political science professor at Korea University in Seoul, was nominated to replace Kim Ha Joong as unification minister. Most of the posts are subject to parliamentary approval.

To contact the reporters on this story: William Sim in Seoul at wsim2@bloomberg.net; Seyoon Kim in Seoul at Skim7@bloomberg.net