To Quell Popular Ire, S. Korea Tells Jet Set to Cool It

Murphy Kim thinks his government is "treating people like children."

A director at the Seoul Travel Service, Mr. Kim is miffed by official appeals for South Koreans to take fewer trips abroad and spend less extravagantly.

Since the announcement that South Korea's international payments deficit for the first six months of 1996 had already surpassed estimates for the entire year - $8 billion - the government has sought to cool hot wallets. The punctilious media has helped by following vacationers with TV cameras, exposing their free-spending habits and going into stores that sell imported goods.

Suspicions toward wealthy

This conscientious scrutiny appeals to many frugal Koreans, who are always suspicious that the rich have accumulated their wealth illicitly and harbor resentment toward those who flaunt it. When statistics on declining savings rates, changing consumer preferences, or trade deficits are released, public ire often rises exponentially.

"Overconsumption is excessive," says Kim Jong-o, a taxi driver here. "If you go to Apkujong [an upscale shopping and entertainment district], there are expensive imports everywhere. You should see it!" Says Kim with a red face: "I get mad if I drive there."

Chanel and Donna Karan-clad women politely decline to comment as they shop in the swank districts of Seoul. Others are blunt: "The government has no right to tell us how to spend our money," says Lee Chai-ro, on his way to Canada to study English.

But the public isn't sympathetic toward free spenders. President Kim Young Sam capitalized on a Korean preference for austerity when at the beginning of his administration he served a modest noodle soup to presidential house guests.

Recently, the government has limited to $5,000 the amount of purchases vacationers can bring home. Customs agents are stepping up inspections of returning vacationers this summer, and the tax office plans to audit thousands of businesses involved in entertainment and the import of luxury goods. Public prosecutors announced last week that they would investigate 15,000 people for spending more than $5,000 overseas with their credit cards, the monthly limit.

Also, a new $25 to $37 tourist exit tax has been proposed. Some say its aim is to punish South Koreans for vacationing abroad.

It may appear that this is a case of a government that is used to telling people how to behave having trouble breaking that habit. But it is probably just appeasing a public stirred up by the news media, says one Western diplomat. At a downtown rally recently, a Christian youth group burned effigies of expensive imported alcohol and cigarettes.

The antiforeign tone of recent events worries George Williams, president of the American Chamber of Commerce here. South Korea is America's sixth-largest overall trading partner. Mr. Williams says the present campaign represents a red herring. "If you take all the imported goods, consumer goods really amount to less than 10 percent of the [trade] deficit," he says.

Economists agree and point out that part of the deficit is due to a great reliance on the import of capital goods and machinery. These goods - which have helped fuel South Korea's development - make up 35 percent of imports.

In addition to relying heavily on imported capital goods, South Korea depends on only a few key exports, like semiconductors, petrochemicals, and cars. This makes it more likely for a trade deficit to suddenly expand. When the price of one of these suddenly drops, it underlines the need to diversify South Korea's exports, rather than limit consumer imports, some observers say.

Asking people to cooperate

The government agrees, but also says that everyone should help out. "In order to reduce ... [the] deficit, part of the effort should be shared by the citizens," says Shim Sang Dal at the finance ministry.

Another official says that local consumer behavior "should be more rationalized." So although "it's too much to say that [there is] an 'anticonsumption drive' " going on, Mr. Shim says, the government "is asking that people cooperate and not spend extravagantly."