How to restructure?

The Ministry of Strategy and Finance, the Financial Services Commission and the Bank of Korea have convened a tripartite meeting aimed at expanding capital for a restructuring of ailing industries — led by state-run banks — for the first time. Yet conclusions from the trilateral consultative body to increase funds for government-run banks seem too commonsensical given the fierce confrontation between the government and BOK over the implementation of a Korean equivalent of quantitative easing (QE) programs.

In the meeting, the three parties agreed to determine by the end of June how to raise capital of such state banks as the Industrial Bank of Korea and the Export-Import Bank of Korea and to demand those banks come up with strong self-saving measures. The three parties also reached consensus that restructuring calls for a policy mix of fiscal and monetary prescriptions. After their agreement, the sharp conflict over a Korean version of QE appears to subside.

In retrospection, this type of controversy was not necessary from the beginning because the Korean equivalent of QE refers to the central bank filling the coffers of state-run banks by printing more money as they are running out of money after pumping funds to insolvent companies. That’s in sharp contrast with the original goal of QE, which aims to provide liquidity enough to turn the market around. The government should have found what it can do with its fiscal tools — instead of unwittingly pressuring the central bak to print more money. If the government was not able to find appropriate means, it could still ask the National Assembly to support its expansionary fiscal policies. But the administration skipped such essential steps and deepened the friction. It is shameful of the government to spend nearly ten days reaching such obvious conclusions Wednesday despite its repeated warnings for urgency.

As the government says, restructuring should be drastic and speedy. It also must play by the book rather than employ an expedient. In a new political scene with a minority ruling party and majority oppositions, restructuring is not something the government can push forward on its own. That calls for support from the central bank and the legislature. To achieve it, the government must first present them a blueprint for restructuring which can minimize costs involved and maximize desired effects. That’s an indispensable step for setting priorities brefore seeking a public consensus on how to share the cost.

As the saying foes, “More haste, less speed.” When it gets tough, you must respect the principle. The government must not forget the lessons from a Korean version of quantitative easing. It must put the challenge of restructuring on a test for “co-governing” the country in a new political landscape.

JoongAng Ilbo, May 5, Page 26