[FORUM]Think twice about missing funds

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[FORUM]Think twice about missing funds

"Seven trillion won ($5.5 billion) of public funds are cached away somewhere." That the money is missing and some persons have diverted it is the wildest speculation that can be made on the subject. Here is the substance of the "7 trillion won" announcement last week by the Board of Audit and Inspection in the results of its audit of public funds.

The Korea Deposit Insurance Corporation (KDIC) tracked down the assets of persons responsible for driving companies and financial institutions into insolvency. But the KDIC did not get its data from the National Tax Service. The tax office refused to provide that information, saying its provision was "impossible due to laws on personal information protection." But after the beginning of the investigation of the Board of Audit and Inspection - a powerful government organization - the situation changed.

The KDIC could get data from Korea Securities Deposit, the national administrative network, and even data from the land ownership network as well as the tax office. As a result, the KDIC now has more data on the assets of the people responsible for the insolvencies and how they were acquired. Most of the data are as of the end of 2000 and some are as of the end of 1999. The 7 trillion won is among those assets. Are those funds really "hoarded assets" or "hoarded public funds"?

Now it is the responsibility of the KDIC to sort out each item in the list of assets and to decide whether it is possible to seize it or not. On the top of that, according to a KDIC official, about 2 trillion won is in the form of stock of non-listed firms and another 2 trillion won is in stock of listed firms. He says that the KDIC must investigate whether the stocks are "mere scraps of waste paper" or valuable securities, so the deposit insurance firm must track down their value as well.

I am not supporting the KDIC or the people responsible for the insolvencies - not at all. I am not saying that there are no problems in the public funds - not at all.

What I am saying is that we have to understand the substance of the public funds problems as they are, without emotion. It takes a close reading of the documentation or some phone calls to understand what is going on. In an atmosphere heated by news of successive scandals, you can miss the essence of the problems and only grasp that you should be indignant. Already people are saying that the grievances of labor unions and the agricultural communities are increasing because of "the hoarded 7 trillion won." Workers and farmers are suffering while 7 trillion won has been stolen!

If the worst happens, a huge "moral hazard" will cover this country; the government will lose its authority and social rules and market principles will be toppled.

This sense of moral hazard - of widespread illegality - into which we Koreans have fallen is the key of the public funds problems. Though people are saying that the public funds are "taxes paid by the sweat of the people," they - politicians, policymakers, directors of financial institutions, workers and investors - have not regarded public funds as "my precious money."

If they had regarded public funds as "precious money earned by the sweat of our brows," political considerations would not have influenced financial sector restructuring to decide which of the nation's financial institutions should be liquidated. Laymen in finance would not have been appointed as heads of the KDIC and KAMCO, which manage public funds.

They would not have objected to the sale of Daewoo Motor, the delay of which lead to "pouring away public funds." They would have succeeded in enacting corporate bankruptcy laws for the management of insolvent companies.

Though we now have a little time to discuss the problems of public funds and to study what we should do to avoid the same mistakes, political leaders are just saying, "All cabinet members must resign," or "That's too much!" I wonder if they have even fully read the audit report. I worry that they are just trying to find a few scapegoats as they did during the financial crisis and leave the punishment for mistaken policy judgements to the courts. The level of understanding that this society is showing in dealing with the public funds problem disappoints me.


The writer is the chief economic news editor of the JoongAng Ilbo.

by Kim Su-gil

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