[VIEWPOINT]Corralling firms fences in hopeRecently, the things I worry about have changed quickly. The economic downturn has accelerated, stock prices have plunged and entrepreneurs are rushing for the investment exits. Major Asian stock market indexes slid an average of 3.35 percent from the beginning of the year until March 5; the Korean stock market dropped 10.72 percent over the same period.
Other than war rumors and rocketing oil prices, there are two additional uncertainties in South Korea. One is the security problem related to North Korea’s nuclear ambitions and the other is uncertainty over the new administration’s business policies. Though the South Korean government alone cannot be held responsible for North Korea’s nuclear issue, the alliance between South Korea and the United States, which must cope with North Korea’s threats, is a matter of grave concern.
Uncertainty over the new administration’s business policies is based on two factors. One is doubt whether the new government can really carry out its pledge to improve the nation’s business environment. A good example is the difference over cutting corporate income tax. Deputy Prime Minister Kim Jin-pyo announced recently that the finance ministry plans to lower the corporate tax gradually over the next five years to match the level of Singapore. One day later President Roh Moo-hyun seemed to reverse Mr. Kim’s announcement. This inconsistency is just a teaser for the many contradictions that will emerge. The contradictions will be between growth and distribution, economic liberalism and anti-globalization.
The major goal of the new administration, to establish Korea as a financial and trade hub in East Asia, can be achieved by opening and liberalizing our economy. Critics doubt whether the new forces in power, which emphasize the equitable distribution of wealth, can open our economy.
Let alone the conflict surrounding these economic philosophies, the new government is creating unnecessary uneasiness among businessmen. Why the prosecution detained the chairman of SK Corp. just a week before the new government was launched is unclear. One of the two reasons, announced by the prosecution, was a case that happened several years ago and was investigated by the financial watchdog, and the other has to do with the method used to state the stock price of an unlisted company.
In addition to that, the Fair Trade Commission announced that it will investigate alleged illegal internal transactions at six conglomerates just a week after the inauguration of the new president. These measures will aggravate the economic slowdown. And I wonder if it is prudent of the government to adopt measures intimidating businessmen just a week after its launch.
Every new government over the last 30 years has scapegoated large companies. The so-called jaebeol reforms used to be a basic menu for all the new governments. But large companies these days have been reborn through restructuring carried out after the financial crisis in 1997. Since then half of the top 30 jaebeols have closed or come under new ownership, and surviving companies have introduced new management and strategies. Now is the time for us to closely watch structural reforms in the coming years.
A company’s fate should be decided by market rules, not by government intervention. A president’s legacy is judged every five year when he leaves office, but companies are judged every day. Consumers, both domestic and foreign are holding scorecards.
The new administration set sail just two weeks ago. I hope President Roh’s administration gives people hope. And I hope the new government refrains from intimidating companies for the time being.
Who would dare defend a company in this difficult business environment, defying the government?
* The writer is a professor of business administration at Yonsei University.
by Jung Ku-hyun