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In an indication of the gravity of the economic situation, the government unveiled a second major package on Tuesday following the announcement of a US$130billion (Bt4.5 trillion) package of measures to stabilise the financial market.

The government plans to spend about 9 trillion won (Bt219 million) to bail out construction companies, an action that it hopes will buoy the industry, which accounts for 15 per cent of Korea's GDP. Three trillion won will be used to buy idle land from homebuilders and 2 trillion won will be used to buy up unsold apartments. The government will also allow 2 trillion won worth of contracts signed by the Korea Land Corp and private builders to be dissolved. To breathe life into the virtually frozen realestate market, the government said that some areas in Seoul and the greater Seoul area would no longer be "speculationwatch zones". The government expects the move to boost demand for housing as buyers will be able to take out bigger mortgages.

Capital gains tax will be exempted for two years for homeowners who purchase a second house, and those who buy new housing in the "speculationwatch zones" using a conditional mortgage loan will be given two years to sell their existing homes, instead of the current one year. Other measures aimed at stimulating demand include extending homeequity loan periods and reducing the cost of mortgages by lowering the interest rates on certificates of deposit.

Given the significant size of the construction industry and its impact on the economy, the government had no alternative but to step in to avert a major crisis, particularly in light of the unfolding global economic crisis. This marks the first time since the financial crisis of 1997 that the government has injected public funds into the building industry.

As the country weathers the global economic crisis, there will be times when the government will be pressed to take quick, decisive action. In doing so, it must also take into consideration the longterm effects of its actions.