[VIEWPOINT]Public money and accountability

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[VIEWPOINT]Public money and accountability

There is an old saying that even a person with a split lip should talk straight. With the recent controversy over the use of public funds, there are many people with normal lips who cannot talk straight. It is confusing to listen to them, not knowing whether they simply do not know what happened or have more sinister intentions.

Coupled with rampant forecasts that taxpayers will have to cough up most of the 150 trillion won ($117 billion) used to restructure Korean companies, the media headlined not long ago that over 7 trillion won of the funds were embezzled. Though a correction followed - heads of companies that received the funds own 7 trillion won in assets - people cannot get rid of their suspicion.

The media reports for the sake of sensation and their irresponsible attitude are to blame, but one fundamental problem is that there are too many things we misunderstood about public funds. There is an argument that all public funds possible should be recovered to reduce the burden on taxpayers. Public funds were used for the purpose of restructuring companies, so to come up with an accurate evaluation, the results of the use of the funds must be assessed. It would be better to make 40 by spending 20 than to make 15 by spending 10. "The principle of minimum cost" should be interpreted this way.

During the financial crisis, in the process of stanching mounting losses, a considerable part of the funds had to be spent even without good prospects for recovery. One could criticize those examples for poor restructuring results but not because the rate of funds recovery is low.

Since the government does not dare to clarify these points, there is loud criticism, as if the funds are supposed to be 100 percent recoverable. Some government advocates responded by saying that if it were not for public funds, Korea would not have overcome its financial crisis, which sounds like the logic of a primary school student. Because of these loud, talkative people, important problems have been left unsolved.

The evaluation criteria for the use of public funds should be whether the funds have been efficiently spent, which in turn can be used to estimate the ultimate taxpayer liability. What is really worrying regarding public funds is the damage caused by mistaken policy decisions. Inappropriate policies could lead to losses of trillions of won. In the case of the sale of Korea First Bank, the put-back option, which was to compensate the buyer for losses hidden from the buyer at the time of the sale, could have resulted in a lack of discipline in the management at Korea First Bank. It also set a bad precedent for the sale of banks to foreign companies. If the government had shut down Korea First and sold it to other banks, Korea could have seen far larger beneficial effects from restructuring despite the immediate costs in compensating for lost deposits.

Policy-making is, after all, a choice surrounded by uncertainty. We should not punish someone for failing to make the optimal judgment at the time, but we must evaluate the outcome in order to make a better choice in the future. We also should not blame the decision regarding the sale of Daewoo's securities, but clearly understand the lack of discipline, which people failed to consider at the time of the decision. Most importantly, all information must be available to the public for conscientious management of funds and correct policy decisions. It is nonsense that the Board of Audit and Inspection and outsiders, not government officials who are actually in charge of the use of the funds, are trying to estimate how the funds have been used. Wild rumors about embezzled public funds, misunderstood or not, prove that information disclosure has been insufficient.

It is difficult to understand why the Public Fund Oversight Committee's activity is so opaque when the committee is charged with the transparent use of public funds. It is also hard to accept that loan extensions have already been discussed before an evaluation of the outstanding loans has been made. A good politician would tell the truth with dignity at a hearing and escape from unfairly being made a scapegoat.

From now on, the government should first be upright. The nation just wants the government to spend tax money properly.


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The writer is a professor of economics at Ewha Womans University.

by Chon Chu-song

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