[Outlook]Still a long way to goAs stock prices and the value of the won inch up and interest rates decrease, an increasing number of people are under the mistaken impression that things are getting better. Certain high government officials seem to think the same.
It would be wrong to create an unreasonable sense of crisis but we shouldn’t have unwarranted optimism either. We’ve just entered a long and dark tunnel. In an emergency where the financial crisis spreads into the entire economy, special measures are required. All economic players - the government, banks and companies - must be changed. If they stick to old standards, things will worsen easily.
The restructuring of public corporations is a good example. As the government pushes public corporations to become 10 percent more efficient, the firms will likely reduce the number of workers, the easiest measure of all. There is no reason to oppose restructuring in public companies which have been managed in a lax manner.
The government also has reason to push for higher efficiency in public firms because the administration earlier pledged to privatize them. Opposition to privatization was strong during the candlelight vigils, and even if public corporations are for sale in the market it won’t be easy to find buyers. Thus, the government has planned restructuring instead of privatization.
But is this the right time? Although times are hard for everyone, public corporations and conglomerates still have it better. They should make investments and create jobs in order to overcome the crisis.
The government plans to forge a compromise with labor and management representatives next year to induce the private sector to fire as few workers as possible. Major conglomerates have already announced that they won’t restructure.
A person in the financial and economic field said that he received a request from the government several times through indirect channels to refrain from restructuring manpower. Private companies may think that they have no choice while public corporations cut staff.
The government is sending the wrong message by asking companies to refrain from restructuring while it cuts back first. But now allowing as many people as possible to have jobs is more important than reforms. Public corporations can set budgets for labor costs and increase the number of interns, contract workers and irregular workers.
Some might oppose this, saying, “When should reforms be carried out, then?” or “We should fix flaws or extra investments even though they cause agony.” But there should be other types of reforms than simply firing people and reducing the scale of a company. Work processes or corporate culture can be changed, or public corporations can seek new functions. Other countries are expanding expenditure and increasing investment in energy businesses. If the Korea National Oil Corporation, for instance, expands its business abroad, it can hire people and create a broader basis for the industry in the future.
A good example is the Rural Development Administration, which recently hired 2,757 contract workers. The RDA saved 17 billion won ($12.95 million) by reducing its nine research centers to five and changing its working methods. With the savings, the corporation created a large number of posts that paid 1 million to 1.3 million won in monthly wages. RDA Administrator Lee Soo-wha said he would use the achievements from reforms to create jobs and would hire 7,000 new workers next year.
When he was briefed about this case, President Lee Myung-bak reportedly ordered the RDA case be promoted as a good example. It is claimed that President Lee, when he was CEO of Hyundai Engineering and Construction, frequently said he didn’t fire people when times were really hard because they wouldn’t be able to find new jobs.
The credit issue must be resolved to increase employment. Capital doesn’t flow into the market because there is no trust. Banks don’t lend money fearing that companies will go bankrupt or house prices used as collateral will go down. Companies want to restructure but can’t because they cannot sell their assets.
First, banks’ standards for companies should be changed. For instance, financial statements are used as yardsticks of a company’s viability, so statements from the third quarter of this year and those from the first quarter of next year will be extremely different. As products don’t sell, financial statements from the first three months of next year will likely be dire.
Therefore, bank employees should visit companies and check the CEO’s disposition and competence and the firm’s business outlook. After this evaluation, if banks judge that a company has a good chance of making a profit within one or two years, they should find a way to fund the company.
The Korea Credit Guarantee Fund should help the banks in this difficult job. The easiest and most efficient way may be for the government to drastically increase its sponsorship of the Korea Credit Guarantee Fund. Even if the government did this, it wouldn’t lose the money.
Actions are more important than words. Necessary measures should be taken as soon as possible before unemployed people fill the cold streets.
*The writer is the economic news editor of the JoongAng Ilbo.
by The writer is the economic news editor of the JoongAng Ilbo.