Preconditions for Saving Hyundai

The Korean government has stepped up its efforts to prop up Hyundai Engineering and Construction. It has decided to provide new funds through payment guarantees on foreign loans, and Deputy Prime Minister Jin Nyum has hinted at a debt-for-equity swap. It appears that the government and creditor banks have rolled up their sleeves to save Hyundai Construction. The government explains that the move is unavoidable in view of the huge cascade Hyundai Construction''s default might cause. Even if we recognize the necessity of such a judgment, however, the move entails serious problems of credibility and policy fairness. In addition, questions abound as to whether the decision originated from a purely economic judg- ment, whether Hyundai Construction can indeed be saved with these measures and whom the assistance is really for.

The government announced in its November liquidation of ailing companies that no more new support would be extended to Hyundai Construction. Has the plan changed in just two months, or did the government lie? Many people are scornful, saying no firm will fail if so much money is injected. The government explains that the decision has been made to minimize economic shockwaves. This amounts to government acknowledgment of the suspicion that no big companies are to be allowed to go bankrupt. If non-economic factors, such as Hyundai''s North Korean projects, entered into the government''s decision, that, too, may prove to be unwise.

What is more important, what will the government do if Hyundai still has trouble receiving orders abroad and recovering its strength even after such measures are carried out? In such a case, the problems cannot be solved by dismissing a cabinet minister or two. Does the govern- ment have a countermeasure against such a scenario? The government says due diligence will be observed in the management of Hyundai''s assets. The utmost transparency and thoroughness are required, and policy-making decisions should be based on the results. If the government is unswerving in its resolve, rather than going through motions, it will make efforts to persuade the public by leaving no trace of doubt. Only then can suspicions be dispelled and market confidence be restored. Even if the government opts for the path of Hyundai''s rescue, several preconditions should be met to minimize the burden on the national economy and taxpayers. First of all, Hyundai Construction must make strong self-rescue efforts. Several times last year, the firm failed to keep its pledges of self-rescue plans. Without such endeavors, the assistance this time around, too, is likely to go to waste.

It goes without saying that basics such as selling assets and cutting costs and the work force are urgently needed, including the shedding of domestic segments with low profitability. In particular, the focus of the Hyundai rescue operation should be the corporation''s survival, rather than the protection of one individual, the Hyundai chairman. The government must make this point clear. The government puts forth the national economy as an excuse for its actions, but in the Hyundai case, the citizenry and the market are looking on with suspicious eyes. The Korea Development Bank''s prompt takeover of corporate bonds has been in fact aimed at Hyundai affiliates, a highly unusual move for the bank. The government should never forget that such decisions have been made with the national economy and taxpayers as a collateral.