[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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