Park makes urgent call for restructuring

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Park makes urgent call for restructuring

President Park Geun-hye said there is an urgent need to restructure insolvent companies, saying they put the nation’s economic future at risk.

“Restructuring is a must,” said Park during a meeting at the Blue House on Friday to discuss mid- and long-term strategies for the nation’s economy. “A person could die if they forego a necessary surgery out of fear.”

The government has recently been emphasizing the need for corporate restructuring, particularly within the debt-ridden shipbuilding industry, which has been struggling for several years with falling demand abroad.

There are already signs that major shipbuilders including Hyundai Heavy Industries and Samsung Heavy Industries are either planning or in the process of laying off several thousand workers.

Hyundai Heavy Industries, which was once the world’s top shipbuilder, is planning to lay off 3,000 workers, more than 10 percent of its 27,000 employees, according to sources in the industry. The company already fired 1,500 employees working in desk jobs in January.

Samsung Heavy Industries and Daewoo Shipbuilding and Marine Engineering (DSME) have said they are accepting applications for early retirement.

It has been reported that last year a total of 15,000 people lost their jobs at both shipbuilders and their smaller business partners. Last year, Hyundai Heavy Industries, DSME and Samsung Heavy Industries reported combined losses of 8.65 trillion won ($7.56 billion).

Other industries that are potential targets of restructuring include shipping, steel and petrochemicals.

Park, however, stressed the need to cushion the blow of restructuring, adding that the government should do more than provide welfare measures like unemployment benefits or job training to workers who will lose their jobs.

“We need to simultaneously push ahead with labor reforms while reducing regulations and increasing support for new industries to help create more jobs that people [who were laid off] could transfer to,” Park said.

Bank of Korea Gov. Lee Ju-yeol supported the government’s drive for restructuring and added that the central bank will cooperate.

“Local financial institutions might face hardships if corporations move into restructuring programs one after the other, but the BOK will try its best to assist local banks to successfully help companies undergoing restructuring,” Gov. Lee said Friday.

The president also noted the need for restructuring the way the government’s own financial affairs are handled, including budget spending, to raise efficiency while securing the nation’s fiscal soundness.

“The unfavorable situation is continuing with major institutions lowering our economic growth outlook amid persistent uncertainties in the global economy,” said Park. “We can’t be relaxed about the government’s coffers as the national-debt-to-gross-domestic-product ratio is expected to exceed 40 percent this year while welfare populism is spreading in the regional governments.” The president added that in order to keep the economy moving and promote restructuring reforms, the government’s budget needs to be managed in such a way that it is consistently supportive. Although the Ministry of Strategy and Finance will try to be conservative in its spending, it told the president that next year’s budget will likely need to increase higher than it previously thought - possibly in excess of 400 trillion won - to prevent the economy from retreating.

The Finance Ministry earlier was planning to increase the budget by 2.7 percent to 396.7 trillion won by lowering spending growth below that of revenue growth.

The government last year estimated that annual spending growth will increase on average 2.6 percent between 2015 and 2019 while revenue during the same period would grow at 4 percent.

BY LEE HO-JEONG, KIM YOUNG-NAM [lee.hojeong@joongang.co.kr]

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