Restructuring is key

The interim leader of the main liberal Minjoo Party of Korea, Kim Chong-in, said on Wednesday that he will cooperate with the Park Geun-hye government on restructuring insolvent local companies, as long as that process goes in the right direction. Kim underscored a need to aggressively carry out restructuring to find the best solutions to advancing the nation to a higher level of prosperity. He added that the government’s restructuring campaign during the 1997-98 foreign exchange crisis — mostly based on government bailouts — must not be repeated whatsoever.

On the same day, Finance Minister and Deputy Prime Minister for the Economy Yoo Il-ho stressed that he will orchestrate the corporate restructuring, announcing a bold plan to add “industry-wide restructuring” to the government’s earlier commitments to reform the public sector, finance, labor and education. In a conflict-prone political scene, the government and opposition have reached a rare consensus on a true political hot potato.

Restructuring our industries has emerged as one of the biggest issues facing our economy. Core industries such as shipbuilding, shipping, steel, petrochemicals and construction have entered a new phase, as seen in the hardships they suffer from declining exports and weakening competitiveness over the last few years. Electronics and the automobile sector fall in the same category.

Employees at the 30 largest business groups decreased by more than 4,500 last year for the first time since the 2008 global financial meltdown. That means our current industrial paradigm — based on exports by traditional industrial powerhouses like Samsung and Hyundai — cannot guarantee further growth, let alone maintain the status quo. This shift calls for far-reaching industrial reforms to find a new growth engine, while maintaining the competitiveness of our mainstay industries.

Nevertheless, the government and political parties have shied away from restructuring our corporate sector. The government has not held a meeting of a cross-government body for restructuring since November. While the former chairman of the ruling Saenuri Party, Kim Moo-sung, vowed to “disallow any easy layoffs” on the campaign trail, the main liberal party kept mum in order not to lose votes from unions, its major ally.

Fortunately, opposition leader Kim and Deputy Prime Minister Yoo have fanned the flame of restructuring. But the clock is ticking. The government, creditors and the National Assembly must speed up restructuring before it’s too late.

JoongAng Ilbo, April 21, Page 30