By Kim Jae-kyoung
SINGAPORE ― Global credit ratings agencies said signing a peace treaty to end the Korean War officially won't immediately lead to a change in their sovereign ratings for South Korea.
They believe a treaty itself or declaring an end to the Korean War will neither guarantee lasting peace nor significantly reduce the geopolitical tension associated with North Korea's missile and nuclear programs.
"A formal peace treaty, if signed, would have little impact on the security situation on the Korean Peninsula," Kim Eng Tan, senior director of sovereign ratings for the Asia-Pacific at S&P Global Ratings, told The Korea Times, Wednesday.
He said a treaty would do little to change the fact that North Korea could still make threats to use its advanced weaponry and potentially fire nuclear missiles as far as the United States.
"Such threats, if they emerge, would increase the likelihood of U.S. retaliation," he said.
The Singapore-based analyst said even if the two Koreas declare an end to the Korean War at Friday's summit, the chance of an S&P ratings upgrade was "very unlikely."
S&P's view came after Finance Minister Kim Dong-yeon made a strong pitch for ratings upgrades during meetings with executives of S&P, Moody's Investors Service and Fitch Ratings in Washington, D.C., over the weekend.
At the meetings, held on the sidelines of the annual meetings of the International Monetary Fund (IMF) and the World Bank, Kim called on the world's top three agencies to reflect lessening geopolitical tensions in their sovereign ratings.
From Tan's perspective, one key scenario in which the security situation on the Korean Peninsula would improve materially is if the North were serious about engaging the world and pursuing economic reforms.
"Under this scenario, the stakes would increase for the regime to maintain a stable security situation on the peninsula; consequently, the likelihood of a threat to use its advanced weapons would diminish," he said.
"However, even if the policymakers in the North were committed to economic reforms, it will take a number of years before it will reach a stage when this scenario is likely."
Moody's also remains cautious over South Korea's ratings upgrades in the near future.
Christian de Guzman, vice president and senior credit officer at Moody's in Singapore, said the agency needs to see fundamental changes to geopolitical conditions on the Korean Peninsula to ensure "enduring peace."
Citing the absence of provocations on the part of all sides, including North Korea and the U.S., he said while tensions have indeed eased since the beginning of the year, there has yet to be tangible proof the current detente is enduring.
"Indeed, we have yet to see an agreement that binds all parties to a sustained peace," he said.
"To that extent, an agreement that durably reduces the risk of conflict on the Korean Peninsula would be credit-positive. Lower geopolitical risk would complement Korea's strong economic and fiscal fundamentals."
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| Kim Eng Tan |
They believe a treaty itself or declaring an end to the Korean War will neither guarantee lasting peace nor significantly reduce the geopolitical tension associated with North Korea's missile and nuclear programs.
"A formal peace treaty, if signed, would have little impact on the security situation on the Korean Peninsula," Kim Eng Tan, senior director of sovereign ratings for the Asia-Pacific at S&P Global Ratings, told The Korea Times, Wednesday.
He said a treaty would do little to change the fact that North Korea could still make threats to use its advanced weaponry and potentially fire nuclear missiles as far as the United States.
"Such threats, if they emerge, would increase the likelihood of U.S. retaliation," he said.
The Singapore-based analyst said even if the two Koreas declare an end to the Korean War at Friday's summit, the chance of an S&P ratings upgrade was "very unlikely."
S&P's view came after Finance Minister Kim Dong-yeon made a strong pitch for ratings upgrades during meetings with executives of S&P, Moody's Investors Service and Fitch Ratings in Washington, D.C., over the weekend.
At the meetings, held on the sidelines of the annual meetings of the International Monetary Fund (IMF) and the World Bank, Kim called on the world's top three agencies to reflect lessening geopolitical tensions in their sovereign ratings.
From Tan's perspective, one key scenario in which the security situation on the Korean Peninsula would improve materially is if the North were serious about engaging the world and pursuing economic reforms.
"Under this scenario, the stakes would increase for the regime to maintain a stable security situation on the peninsula; consequently, the likelihood of a threat to use its advanced weapons would diminish," he said.
"However, even if the policymakers in the North were committed to economic reforms, it will take a number of years before it will reach a stage when this scenario is likely."
Moody's also remains cautious over South Korea's ratings upgrades in the near future.
Christian de Guzman, vice president and senior credit officer at Moody's in Singapore, said the agency needs to see fundamental changes to geopolitical conditions on the Korean Peninsula to ensure "enduring peace."
Citing the absence of provocations on the part of all sides, including North Korea and the U.S., he said while tensions have indeed eased since the beginning of the year, there has yet to be tangible proof the current detente is enduring.
"Indeed, we have yet to see an agreement that binds all parties to a sustained peace," he said.
"To that extent, an agreement that durably reduces the risk of conflict on the Korean Peninsula would be credit-positive. Lower geopolitical risk would complement Korea's strong economic and fiscal fundamentals."
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