The U.S. Export-Import bank will continue to give economic support to South Korea despite pressure on the Carter administration to demonstrate disapproval of the recent military takeover, the bank president said today.
John L. Moore Jr. said it is "unlikely" that any loans would be rejected as a measure of American disapproval of the military's seizure of power and its cancellation of democratic reforms. He said the Carter administration was "disappointed" at the setback to reforms but believed that the country's first need is for economic stability.
With about $3.1 billion in outstanding loans here and South Korea asking for $631 million more this year, the Ex-Im Bank is one of the most powerful economic influences in this country.
Moore's visit to talk with high government officials was anticipated as a test of whether that influence might be used to roll back the total control of generals who took power May 17. Moore said in an interview that it would not.
But he said he warned government leaders that the international banking community is worried that the country's instability would be heightened by any signs that the military would overrule experienced technocrats on important economic decisions.
Meanwhile, the military clique completed its consolidation of power with the appointment of 30 persons -- 18 of them generals -- to a standing committee headed by the most powerful military leader to emerge, Gen. Chon Doo Hwan.
Through a system of subcommittees, operating under Chon's supervision, the members will control every facet of public life, including economic affairs. The economic affairs subcommittee is headed by an experienced economic planner, Kim Jae Ik, who is highly respected in the Western business world. His unit, however, will report to Chon.
The Carter administration already has ruled out the possibility of withdrawing U.S. troops from South Korea as a protest against the military takeover. There have been discussions of using various kinds of economic pressure to sway the generals, but Moore's visit showed that the most powerful economic weapons will not be used.
"I doubt that we would say that we would hold up a specific loan because of the political situation," Moore said as he departed for Washington. "We recognize there has been a setback here and we are disappointed, but there is also the need for stability because of the threat from North Korea.
"We would prefer that it be in a democratic mode, but it is not up to the United States to tell South Korea what its politics should be.
South Korea's economy was in serious trouble even before the latest cricis, with inflation soaring because of oil price icreases and growing unemployment. Its underpinnings are foreign loans from both private and public sources, and a lending cutoff could plunge it into a deep recession.
Moore said he told government officials today that foreign private banks have grown cautious and will probably make no more long-term contracts for about three months until they determine that instability has ended.
Part of the test, he told them, will be the extent to which the military permits a revival of the reforms began after president Park Chung Hee was assassinated in October.
"If, after three or six months, the military feels secure enough to allow democratic processes to open up again, that will be regarded as helpful by the banking community," Moore said he told the government. "There has been disappointment that it was set back."
Another test, he added, would be whether the generals, who are inexperienced in economic affairs, decide to overrule decisions made by the government's Economic Planning Board, an agency that enjoys considerable respect in the financial community.
"If the military is not "over-calling,' but helping, the EPB to implement policies, it will be taken as a good sign," Moore said.
The latest governmental realignment, which was announced today, places Chon at the top of a 30-member standing committee of the new special committee for national security measures. It was established under the authority of martial law, which was proclaimed nationwide when the generals took controls.
The standing committee includes 18 generals and 12 civilian government officials. The generals are among those who rose to high rank after Chon directed a coup against other generals in December.
The standing committee in effect replaces the authority of both the Cabinet and the National Assembly, which has been banned from meeting. It will run the country through a system of 13 subcommittees, six of which are headed by generals and all of which are responsible to Chon and his new secretariat, also announced today.
Each subcommittee has from seven to nine staff members, drawn from among Army officers and civilian officials.
One of the new units is entitled the "Purification Subcommittee," which, according to a government spokesman, will be charged with rooting out alleged corruption among public officials.