[EDITORIALS]Quit Stalling on ReformThe Organization for Economic Cooperation and Development and the International Monetary Fund pointed out simultaneously that uncertainty caused by postponed restructuring is the root cause of instability in the Korean economy.
In its report on the Korean economy released Friday, the OECD said the slow progress of corporate reform after the financial crisis has lowered confidence in our economy. The IMF, in a report to its board of directors, urged that Korea launch firm measures to cure weaknesses in private and financial companies in order to restore market confidence.
The two international economic organizations' advice is in line with the repeated statements within the country that tangible progress in restructuring and the elimination of uncertainty are the only way to survive.
Despite such advice and the government's efforts to strengthen our economy, restructuring shows no progress. What is the reason?
When firms considered to be healthy get into trouble and must retrench or close their doors, financial companies come under enormous pressure to resolve bad debts and to increase their loan-loss provisions. Financial markets suffer and the situation worsens. The government has confidently insisted that it could conclude corporate reform with the 150 trillion won ($116 billion) that has already been poured to bailout troubled firms. Despite that confidence, it will have to use additional public money to prop up collapsing markets.
The government should not maintain its complacent attitude. The Financial Times noted that "the government's failure to move faster on corporate reform ranks as one of the biggest impediments to growth." Troubled companies delay restructuring because of labor union protests. Creditors avoid naming companies as troubled in fear making things worse. The government hesitates rather than acts. If this continues, the entire Korean economy will slowly but definitely fail.
We should accelerate the closure of failed firms and other restructuring in order to eliminate uncertainty. "We will do away with uncertainties in the market such as Daewoo Motor and Hyundai Investment by the end of the third quarter," Jin Nyum, economic deputy prime minister, promised. We shall see.