[KS] Big Bang -Korean -style/ opinion 6/28
Frank M. Tedesco
tedesco at uriel.net
Sat Jul 11 13:45:23 EDT 1998
> [All Things Korean] A Big Bang in the
> Korean Way
> 06/28
>
> By Sohn Hong-keun
>
> In making a decision on which of many Korean ways to
> undertake economic reforms and stay in line with the IMF's
> recipe, there has been some debate and confusion on
> priorities _ ``banking and the financial sectors, versus
> large business corporations and industrial conglomerates.''
> Some of the past debates on this were largely based on the
> participants' vested interest in the relevant sectors of the
> economy, and their arguments were self-serving and biased.
> These confrontations even reached the IMF and IBRD, both of
> which have now suggested means to carry out our tasks by way
> of simultaneous reforms in both these sectors of the economy.
>
> Without a clear cut set of priorities to provide a road map
> for reforms, the Korean economy will wander pointlessly
> during the government's aimless restructuring. The result
> will be additional delays in recovery, probably as long as 5
> years. A growing concern in all corners of society focuses on
> two basic bread and butter issues; that the tripartite
> national consensus on labor market flexibility and layoffs is
> being used for the benefit of employers to the workers'
> detriment; and, that the direction to reduce the
> debt-to-equity ratio of 30 conglomerates, which now stands
> some 500 percent plus, to a 200 percent level by the end of
> next year, now appears to be loosing its initial momentum.
> Furthermore, even without a full measure of vocational
> education and retraining programs for the unemployed, some
> 8.4 trillion won will be spent to assist the unemployed as a
> temporary measure to alleviate immediate hardships of those
> people affected by the IMF shake-up. Unlike job training,
> this provision will only be a temporary relief for the
> unemployed, and it will certainly not be a long-term solution
> to the unemployment problem, which the International Labor
> Organization (ILO) quickly dubbed as the major threat to
> social and political harmony. The ILO further added that
> lower labor demand and higher inflation from the financial
> crisis is ``disturbing to the social system.''
>
> For a country like Korea, where the social safety net is not
> fully recognized and systematized as a built-in guide in the
> welfare system, the expected level of unemployment as a
> result of reform programs in the banking and financial
> sectors alone will certainly raise some serious social
> issues. Gradual processes of structural adjustment, while
> they might suggest an alternative route to the fast-track
> reform of the economy, however, are no longer a beneficial
> road for us, as our level of usable foreign exchange
> reserves, ever-mounting foreign debt and interest redemptions
> are constantly threatening us. Unless we make our shake-up
> soon, and make some drastic reforms to our economy on a scale
> comparable to the Big Bang in England of 1986, specifically
> overhauling our banking and financial markets as well as
> large business corporations and industrial conglomerates
> simultaneously, our Korean way of reform will keep us further
> behind in the world's economic revolution, which is currently
> taking place in the form of building economic blocs both in
> Europe, which quickly moves to adopt the single euro currency
> starting next year, to form the second-largest financial
> market in the world, and in continental America where
> hemispheric economic integration is taking place from Chile
> to Canada with combined consumers of some 800 million.
>
> The usual Korean ways of rectifying irregularities, amending
> traditional forms of management to make it more transparent
> with consolidated financial statements, window-dressing
> touches of structural reforms on many non-performing loans,
> and delaying tactics of organizational shake-up of industrial
> conglomerates and their subsidiaries, will only delay a quick
> solution of our economic problems. There appears to be lots
> of talk on insolvent debts and unhealthy banks, yet no
> mergers or amalgamations of any form are taking place, nor
> influx of capital investment from overseas realized. The
> initial shock of the IMF rescue on the part of the Korean
> people is fast disappearing, and the bandwagon spate of
> so-called ``IMF Sales'' ``IMF Discounts'' or ``IMF Menus''
> are seemingly disappearing. President Kim said when he
> assumed the presidency that the government would lead the way
> and would show the people how to fare these difficult times,
> yet many levels of highly inefficient and unproductive public
> servants are still roaming around the country, conducting
> business as usual in their typical bureaucratic way.
>
> The President's words must be honored by policy makers in all
> sectors, and they must present a lead to undertake reform,
> not by rhetorical presentations but by taking action in
> implementing programs of reform and setting priorities. It is
> certainly not a role of the Chief Executive to elaborate
> policy programs and to micromanage. Rather, he should ensure
> that the nation's mission, goal and the strategic plans are
> firmly in place. It is a meaningless debate on which sectors
> must be leading the reforms followed by the others. All
> sectors of the economy, with the leading role of public
> sectors, state-run enterprises and government employees, must
> be part of the reforms, and this has to be a set of
> simultaneous reforms, a genuine Big Bang. The government has
> finally directed unhealthy banks to disband, named some 55
> firms which are financially nonviable and insolvent, and has
> set a timetable of September to complete the initial stage of
> financial restructuring and liquidating these firms. These
> recent moves are now seen to follow the President's
> directives, though the government's belated announcement did
> not contain fundamental action programs for the follow-up
> procedures of mergers and liquidation's. While the strict
> guidelines to remove these debt-ridden firms and ailing banks
> are nonetheless welcomed, time will only tell whether or not
> the government-led financial shake-up at this juncture is
> bold enough to be the beginning of our country's success.
> This is however an opportune time to show others in the world
> what is, as I see it, a Korean way of making a Big Bang to
> deal with the IMF shake-up.
>
> --------------------------------------------------------------------
> (C) COPYRIGHT 1998 THE HANKOOKILBO
http://www.korealink.co.kr/14_8/9806/t4851123.htm
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