[OUTLOOK]Finish the unfinished reformsIn the late fall of 1997, our economy was gasping. Creditors were calling in their foreign-exchange-denominated loans. The situation was urgent and getting worse, and because of the government's massive intervention in the foreign exchange market, our reserves were drying up fast.
Finally, on Nov. 21, 1997, we had to ask the International Monetary Fund to bail us out. The "IMF trusteeship" began, and none of us escaped the hardships that followed. Yet thanks to the innate ability of Koreans to rise again after falling, we were able to overcome our crisis. We received an international evaluation that we were the most successful of the countries that experienced the financial crisis.
Over the last five years, the administration has put forth "the parallel development of democracy and the market economy" as its basic philosophy for reforming finance, corporate governance, labor and the public sector. Five years have passed since the reforms began, and despite the overall improvement of our economy the reform results are uneven. There have been distinct improvements in the financial and corporate sectors, but reform of the public sector and labor are incomplete at best. Labor standards still lag behind international norms, and there have been no visible changes in the public sector.
Even the financial sector, which boasts of its restructuring efforts, still has problems. It is doubtful that Korean financial industries are now self-supporting and competitive. As measured by financial ratios set by the Bank for International Settlements, the industry is stronger, but that is only thanks to the massive amounts of tax money poured into the sector. Considering the costs, the benefits are nothing to brag about. The financial system still seems unable to direct liquidity into efficient production, and there are no advanced financial institutions that we can nominate as our examples of world-class enterprises.
The reforms started in the industrial sector with catchphrases like "global standards," "transparency," and "responsibility." Those reforms also involved some tactics that damaged the fundamentals of a market economy, such as limits on the value of shares in another company that a firm can own, enforcement of uniform debt-equity ratios and government efforts to close down companies. The Kim Dae-jung administration has directly interfered in the distribution of resources, just as earlier governments did, rather than working for a level playing field for all firms as it promised to do.
Our economy faces many difficulties, including new competition from China and a seeming lack of new business lines that could be the impetus for new national growth.
We cannot say for certain that the 1997 crisis will not be repeated. Before we get too carried away with our pride at having overcome the last crisis, we must evaluate the fruits of the past five years, examine the present needs of the economy and use them to set guidelines for future reforms. We also need more discussion of what we should be doing now and in what fields we should be investing for this country to be internationally competitive 10 years from now. The primary task for the government is to establish a law-abiding environment, make certain that we have a market economy in fact as well as in name and prepare a mid- to long-term plan for economic development. Despite the outward appearance of a developed country, and despite our ranking in the world's top 10 trading nations, we have yet to become a truly advanced country governed by systems and by law.
We must finish the unfinished reforms in labor and the public sector. We must modernize and privatize public enterprises and make our labor market more flexible. Otherwise, our businesses will never be internationally competitive. The financial sector is in better shape; the obvious flaws have been corrected at least to some extent, so it is time to turn to the "software" reforms like privatization, more responsible management and advanced financial management. It is also time for businesses to put more effort into making their books and management systems more transparent in line with the standards of international investors.
Our economy has been through some rough times in the last five years, but there is still a long way to go. The government, businesses and labor can all pat one another on the back for their past efforts, give each other pep talks and prepare their respective roles for Korea's great leap as an advanced economic power in the new century.
* The writer is the vice president and CEO of the Federation of Korean Industries.
by Sohn Byung-doo