Gov’t promises a better form of restructuring

Korea’s chief economic policymaker said Friday the government will launch a 1 trillion won ($910 million) fund aimed for corporate restructuring that will involve more than bailouts.

“From now on, we will push for corporate restructuring that is market-oriented instead of state-run banks taking charge,” said Finance Minister Kim Dong-yeon during a joint press conference with economy-related ministers, including industry minister Paik Un-gyu, at the government complex in central Seoul.

“To do that, we will create a restructuring fund worth 1 trillion won in the first half of next year to bolster the market’s role in corporate restructuring,” he said.

A market-oriented approach will minimize the cost to the treasury and taxpayers, he said.

Kim said the government will set up a pre-emptive screening system through which economy-related government bodies such as the finance ministry and Financial Services Commission will jointly analyze and assess companies for their industrial competitiveness and risk factors. Based on results of the joint study, the authorities will present guidelines on how they can raise their competitiveness and lower risk factors.

The government acknowledged Friday that its handling of companies on the brink of collapse has been less than effective in the past, which often led to state-run banks bailing companies out.

In the case of shipbuilder Daewoo Shipbuilding and Marine Engineering (DSME), the government injected 2.9 trillion won of taxpayers’ money earlier this year to keep it afloat on top of 4.2 trillion won it doled out two years earlier. Japan and the European Union filed a complaint with the OECD, arguing that the Korean state-run banks’ bailout of DSME violated World Trade Organization regulations.

When a company needs restructuring, Kim said creditors will be at the center of decision making with potential use of the trillion won fund to be set up next year, rather than state-run banks running the show.

The government announced it will set up a platform in which information about a company being restructured will be provided in a transparent manner to help facilitate the sale of companies.

On the shipbuilding industry, once the economic backbone of Asia’s fourth largest economy, the government said it would decide by May whether to expand a package of financial aid that is set to expire in June. Hit by a dearth of orders, the number of people employed in the industry fell to 140,000 as of October from 200,000 two years earlier.

BY KANG JIN-KYU [kang.jinkyu@joongang.co.kr]