[VIEWPOINT]Transparency is key everywhereThe reforms of the past several years have had a remarkable impact on Korea, as shown in foreign investment statistics. Foreign investors have watched carefully the reforms by the government as well as the private sector and have been impressed with the results. Foreign investors have not just watched with curiosity, but they have responded with the surest sign of confidence that can be given to the reform drive. They have responded by investing their money in the Korean economy.
No amount of praise or talk can confirm that the reforms have been in the right direction. The surest sign that the reforms undertaken in Korea are for real and are having a positive impact is the market response. As we have come to know, foreign direct investment in the past four years alone has increased twofold over the investment attracted by Korea during the 30 years prior to the economic crisis and the reforms instituted by the Kim Dae Jung administration. Foreign investors have also increased their portfolio investments in the stock market to more than 30 percent of the current market value. These are remarkable and very healthy statistics for the Korean economy.
While the government has led the reform process, private companies have also played a major role in this process. Korean industry is now focusing on profitability, creating new products and technologies and seeking to build greater productivity. This is a remarkable change from just three or four years ago. All Koreans can be proud of what Korea has become and Korea's image is going through a remarkable transformation that will benefit generations to come.
This change for good is even more remarkable when a quick comparison is made to the current malaise that has overcome Japan. While Korea may be feeling a bit fatigued by the reforms and the upheaval that has resulted, the results have created a strong and resilient economy. Japan has failed to respond to the need for reform and we see an economy that seems to have lost hope for any recovery and continues in its steady decline.
The lessons we have learned from the Enron disaster in the United States have also been a poignant reminder of how important these reforms are to an economy. The losses sustained by Enron were not of sufficient magnitude by themselves to put the company into bankruptcy. The ultimate reason Enron ended up in bankruptcy was because Enron sought to hide those losses and engaged in accounting practices which were not in keeping with the spirit of accounting rules. The lack of transparency ?honesty, some might say ?in Enron's accounting practices caused a lack of confidence in Enron's books. Enron's customers began to pull away from the energy trading business because of this lack of transparency and attendant loss of credibility. This lack of transparency is ultimately what caused Enron's failure.
Since the Great Depression in 1929 in the United States, the U.S. government and industry have sought to create transparency and accountability in publicly listed companies. The U.S. government has sought to strictly enforce accounting standards and laws governing the conduct of companies. As we have learned from Enron's collapse, no company is immune from the impact of bad accounting and transparency practices. A commitment to honest and correct reporting and accounting standards, accountability by management and open corporate governance are essential to long term, healthy survival.
Both government and private companies should take a close look at the Enron case and the reasons for Enron's failure. It is important for government and oversight agencies to vigilantly enforce the rules. It is equally critical for management to be committed to a policy of compliance with the law and accounting standards.
Korea has achieved a lot since the beginning of the crisis in 1997. Let Enron be an example of what can happen if both the government and private companies do not stay committed to the policy of reform and the absolute requirements of transparency. The market has responded with generosity to Korea. Market responses are cold and impersonal, however, and this generous response will remain only if there is a continuous and consistent response to those principles that have brought Korea's success.
The writer is the president of the American Chamber of Commerce in Korea.
by Jeffrey Jones