his paper shows that after the 1997 foreign exchange crisis, Korea sufferednegative net capital gains from international investment equivalent to 2.3percent of GDP on average annually, or about 370 billion dollars in 2014prices, while before the crisis the amount of net capital gains was negligible.The negative net capital gains after the crisis does not reflect mutuallybeneficial risk-sharing between Koreans and foreign investors: Korea had todo asset fire sale immediately after the crisis; Korea is unlikely to havereduced the probability of another foreign exchange crisis; there is no negativecorrelation between net capital gains and GDP. It is also unlikely that thenegative net capital gains are offset by the rise of growth rate or improvementin distribution: growth rate fell and distribution deteriorated, but there is littleroom to argue that the reform and capital market opening after the crisisenhanced growth rate and improved distribution but other factors more thanoffset the effect of the reform and capital market opening. The paper thendiscusses the nature of the 1997 foreign exchange crisis and the issues relatedto the capital market opening to clarify how Korea came to the situationwhereby Korea pays such a large cost.