&#91VIEWPOINT&#93Economic pledges and the reality

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&#91VIEWPOINT&#93Economic pledges and the reality

Anyone involved with the economy these days points a sensitive radar to every movement and word coming out of the presidential transition team. People still have unpleasant memories of a hastily launched "100-day Operation" for economic reform as soon as President Kim Young-sam was inaugurated in 1992. Also fouling the air are memories of the fruitless clamor that came with the government of President Kim Dae-jung. It promoted the government-driven "big-deal" ordeal whose most prominent offspring was a monster named Hynix.

Unlike in the early hours of this administration, we have at hand today the fourth largest foreign currency reserve in the world, a potential economic growth rate of 4 percent, inflation and interest rates that are well in check and a climate for continued export success. We may struggle against some temporary crosswinds, but the big picture is positive.

Not surprising, some gleeful progressive transition committee members are bent on pursuing redistribution of wealth, corporate reform and an expanded role for labor. They will likely promote jaebeol reform, give more priority to income equity than economic growth and advocate handling labor disputes by increasing unions' role in business.

Nevertheless, the committee is causing disarray by promising 7 percent growth over the next decade. This pledge greatly exceeds Korea's potential economic growth rate. Such a task would entail forgoing labor-friendly policies and wealth redistribution to provide incentives to corporations, the driving force of our economic growth. The committee must choose between clinging to a progressive menu at the cost of growth or vowing anew to deliver the 7 percent figure.

Secondly, the incoming administration should refrain from avenging grudges or surrendering to the lure of a stimulus package and instead envision the economic landscape 20 years down the road, when an aging population will present budgetary challenges.

The area that will bring the most challenges is jaebeol reforms. The jaebeol system is an outdated concept whose heyday was before the opening of markets and adoption of measures to promote transparency. If class action lawsuits by shareholders are approved and the creation of more flexible holding companies and a system of external corporate directors are allowed, the present jaebeol system can be transformed into a transparent corporate structure where privileges and duties are balanced.

The transition committee is suggesting fiscal spending policies to stimulate economic growth; this includes transforming Korea into a Northeast Asian commodities hub and transferring the administrative capital to a provincial location. Yet the priority should be to forge long-term plans to secure a sound fiscal balance, patch up the social safety net, privatize banks and public companies and improve government efficiency.

Also urgent is a blueprint for a structure that maintains a high quality of life in our aging society 20 years from now, not to mention a periodic timetable to check economic progress. In particular, the nation's gap with other members of the Organization for Economic Cooperation and Development is greatest on government corruption, corporate transparency, environmental preservation, quality of education and the traffic accident mortality rate. Needless to say, these efforts require the continued aid of the government.

The new administration should re-establish government authority by implementing the law in an equitable fashion. The reason for the poor grades given President Kim Dae-jung's economic policies lies not in the absence of a discernible system, but in the fact that the policies did not adhere to consistent and equitable administration of the law.

Recent suggestions by the transition committee to dismantle corporate reform headquarters at companies, limit the financial ownership of corporate groups and implement a potentially unconstitutional system of gift and inheritance taxes might be stretching the law. These urgings no doubt disregard economic and social realities and would ultimately undermine the credibility of the committee itself. What we need is an enduring effort to build a system to deliver long-term security, not crude hastiness.

by Sonu Suk-ho

* The writer is a professor of business administration at Hongik University.
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