US Congressmen Review Alliance

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A group of U.S. legislators began reviewing matters related to the Korea-U.S. alliance here, including the relocation of U.S. bases to south of Seoul and the transition of wartime operational control.

The 12-member delegation, led by Rep. Ike Skelton, chairman of the U.S. House Armed Services Committee, arrived Wednesday and had a series of meetings with Foreign Minister Yu Myung-hwan, Defense Minister Lee Sang-hee and others Thursday. The group also paid a courtesy call on President Lee Myung-bak.

``The U.S. congressional delegation expressed full support for the Korea-U.S. alliance's future-oriented development and close cooperation between Seoul and Washington on resolving North Korea's nuclear issue,'' an official of the Ministry of Foreign Affairs and Trade said.

During their three-day stay, the delegation is scheduled to visit U.S. bases here and meet officials of the U.S. Forces Korea (USFK) to discuss the quality of life for U.S. servicemembers, such as the three-year, family-accompanied tours in South Korea, which was approved by the Pentagon in December, he said.

About 28,000 U.S. troops are stationed here.

``The USFK is very interested in the lawmakers' visit here,'' said the official. ``The representatives will be looking into the issue of the scheduled relocation and quality of life of U.S. servicemembers.''

Budget support for the 11-trillion-won U.S. base relocation program is also high on the agenda, as the USFK was granted only about 1 trillion won from Washington, according to sources at the Ministry of National Defense.

Under a master plan drawn up by the two governments last year, South Korea is to bear half of the cost.

The relocation was scheduled to be completed by 2008 but the plan hit a snag due to protests by anti-U.S. groups and local farmers. Seoul and Washington later readjusted the target year to 2012 but have yet to set a firm timeline.

Meanwhile, North Korea Thursday blasted a planned South Korea-U.S. military exercise as a rehearsal for invading the North and vowed military action against them.

``The war preparation maneuver by the United States and the South Korean government that will bring in the wind of fire of war to the Korean Peninsula will be forced to pay an expensive price as it is against peace and against the era,'' the North's Korean Central News Agency said.

South Korea and the United States are scheduled to hold Key Resolve and Foal Eagle exercises March 9-20.

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Financial jitters are deepening in South Korea as a host of bad news, including the possible economic crisis in eastern Europe and mounting concerns about North Korea's imminent missile launch, hit local financial markets.

The Korean currency was trading at 1,472 won to the dollar as of 9:13 a.m., down 16.50 won from Tuesday's close. The won fell to 1,476 at one time after opening at 1,466.70.

The South Korean stock market also continued its slide Wednesday morning on growing anxiety about a global recession.

The benchmark Korea Composite Stock Price Index (KOSPI) fell 24.90 points, or 2.21 percent, to 1,102.29 in the first 15 minutes of trading. The index bounced back to 1,112.11 as of 10:29 a.m.

Separately, concerns are again mounting that South Korean banks may face potential dollar shortages as they struggle to repay overseas debts amid soaring dollar funding costs.

A number of local banks, including Hana Bank, are putting off raising foreign funds after Woori Bank, the banking unit of Woori Finance Holdings Co., decided not to exercise an option for early repayment of foreign debts maturing in 2014.

"The move roiled investors expecting earlier repayments," Lee Chang-wook, an analyst at Mirae Asset Securities, was quoted as saying by Yonhap News. "It helped undermine market credibility for local banks and in turn boosted funding costs."

Lingering concerns about potential dollar shortages at Korean banks were compounded by Woori's decision and have prompted speculation among investors that the Korean economy could experience another sharp blow from the ongoing financial crisis, analysts said.

The deepening global credit crunch, a weakening won and sizable foreign debts scheduled to mature in March are adding fuel to investors' worries.

According to financial authorities, local banks' foreign borrowing totaled $125 billion as of the end of December. When loans from the government and the Bank of Korea are excluded from the figure, their foreign debts reached $85 billion.

About $35 billion in foreign debts are scheduled to mature this year, with $18 billion in repayments due before the end of March.

However, the government has shrugged off such concerns, saying local banks' demand for dollars has decreased as the amount of foreign debts maturing every month this year is half that of last year.

Vice Finance Minister Hur Kyung-wook said during a recent radio interview that South Korea is unlikely to face a liquidity crisis next month as it has sufficient foreign reserves to cope with any contingency.

"Volatility in the local foreign currency market has recently increased but it is still excessive to talk about a crisis," Hur was quoted as saying. "Considering the nation will likely post a current account surplus of around $13 to $15 billion this year and holds around $200 billion in foreign reserves, it is an exaggeration to raise concerns over a liquidity crunch."

Nonetheless, the nation's top economic policymaker said Wednesday that South Korea's economy is slowing faster than expected as domestic demand and exports slump.

In an effort to turn things around, the government will work hard "to save and create jobs through which it aims to bolster sagging domestic demand," Finance Minister Yoon Jeung-hyun told the first crisis management meeting after taking office last week.

To that end, he is currently crafting an extra budget program with a plan to send it to the National Assembly for approval by the end of March. "We will do our utmost to make the effect of the extra budget felt from the second half," he was quoted as saying.

Yoon earlier expected that the economy will contract 2 percent this year, a stark downgrade from the previous forecast of 3 percent growth. In the final quarter of last year, the economy contracted 5.6 percent from three months earlier, the sharpest contraction in more than a decade.

The minister noted that the South Korea's economy is so small and heavily dependent on exports that it remains highly vulnerable to external factors.

"The current economic structure needs to be improved in the mid and long-term period," Yoon said.

"We need to bolster domestic demand by boosting high value-added service industries and the government will consider easing related regulations to spur their development as part of efforts to strengthen our growth potential."