President Park Geun-hye's crisis-management skills are being tested as she faces a military standoff with North Korea that risks exacerbating turmoil in the country's financial markets.
Park is trying to prevent tensions with Kim Jong Un's government from erupting into open conflict while shoring up the economy from a market selloff that sent the Korean won to a four-year low and drained more than $900 million from Korean equities in a week. So far, Park has chosen to present an image of strength, pledging not to cease cross-border propaganda broadcasts until North Korea apologizes for placing land mines that maimed two South Korean soldiers on Aug. 4.
"She's doing pretty good on North Korea," said Robert Kelly, an international relations professor at Pusan National University in South Korea. "She didn't get rattled. She stood up to that deadline. You gotta be tough with the North. You can't roll over."
Park's vow came as negotiators spent a third day discussing one of the most serious crises on the Korean peninsula since Kim became supreme leader in late 2011. Kim's government, which denies placing the mines, has threatened to unleash a "shower of fire" on South Korea, if the broadcasts across the demilitarized zone don't cease. The two sides exchanged fire across the border on Thursday, South Korea said.
"We should never back off," Park said Monday in a meeting with aides, according to her office's website. "To avoid a repeat of these provocations and instability we need a clear apology and a guarantee this doesn't happen again. If not, the government will continue the loudspeaker broadcasts and take suitable measures."
An uneasy 62-year truce on the peninsula has been periodically disrupted by exchanges of fire that peter out without escalating, though Kim's relative inexperience and the unpredictable nature of his regime have kept tensions high. Even with talks ongoing, the North mobilized its submarine fleet and beefed up its artillery positions, while South Korea and the U.S. scrambled fighter jets.
Park has maintained a promise of large-scale economic assistance if Kim shows he's serious about ending his nuclear ambitions and penchant for provocative behavior. She has called for starting from small-scale gestures such as reviving family reunions to build trust that could be the base for greater political reconciliation.
Peter Hayes, a professor of international security studies at Sydney University, questioned the South's decision to turn on the loudspeakers after 11 years of silence in response to the mine attack.
"The South is holding a very conservative line because it thinks the North has nowhere to go and will eventually capitulate," said Hayes. "That's a very unwise strategy against an adversary that's as tough and as seasoned as the North has shown itself to be. It's not about to collapse and it's certainly not going away."
South Koreans appear to approve of her performance and her job approval rating rose 41 percent, up 1.1 percentage point from the previous week, a poll by Realmeter indicated. That was the the first time Park had exceeded 40 percent in about three months.
The won slipped Monday to its lowest since October 2011 after China devalued the yuan this month, leading to a sell-off in currencies that compete with China on exports. The benchmark Kospi stock index declined for a sixth day and closed at a two- year low.
The won has lost almost 7 percent since the start of July — the worst performer in Asia after Malaysia's ringgit, which has dropped almost 11 percent.
"The financial market has been very anxious since the North Korean issue broke out," said Lee Dae-ho, a currency analyst at Hyundai Futures Corp. in Seoul. "It is awaiting further news on the high-level talks."
Park also asked government officials to closely monitor markets, while the Finance Ministry said it would act "pre- emptively" after the nation's largest exchange-traded fund suffered the biggest weekly withdrawal since its inception 15 years ago.
Global funds pulled $903 million from South Korean equities last week, fueling concern that the revival of tensions on the Korean peninsula will hasten outflows as investors withdraw from emerging markets.
The Bank of Korea held an emergency meeting Monday morning to discuss the crisis and would prepare measures necessary to stabilize markets while monitoring North Korea risks, the bank said in a statement.
original source: http://www.chicagotribune.com/news/sns-wp-blm-news-bc-korea-park24-20150824-story.html