Priorities for Government in Solving Economic ProblemsDuring a cabinet meeting yesterday President Kim Dae-jung defined the current situation in Korea as a crisis and told ministers to put a spur on reforms in all four sectors: financial, public, corporate, and labor. This constitutes a belated but welcome change in stance on the part of the president.
However, high government officials still put forward views of astonishing naivete. Finance and Economy Minister Jin Nyum reportedly blamed external factors, such as high oil prices, for the current economic setback. In fact, internal factors appear to be a larger factor than external elements. Despite robust macroeconomic indices, the financial market and real economy have been struggling for quite some time. Even before any external factors hit Korea, the list of worrisome indications was long: the liquidity crunch, a stagnant stock market, soaring short-term foreign debts, unstable prices, slowed growth rate, polarization of regional economic activities, and worsening trade conditions.
The government must be more alert in recognizing and responding to the circumstances. Here are some suggestions.
First, the government has to recognize that the current situation constitutes a crisis across the board, and is not confined to the economy. The fact that the National Assembly is idle has meant that urgent economic measures, including the creation of financial holding companies and the approval of additional public funds, have not been put in place. This has contributed to public anxiety. Pending political and social issues, such as the suspicion that government officials are involved in the Hanvit Bank scandal, further fuel public distrust in the government. These issues have deterred businesspeople because they instinctively avoid risks. Therefore, the government must take a clear look at the big picture and suggest solutions befitting it. At the same time, the government must conclude matters cleanly and definitely, however insignificant they appear. For example, nothing has yet been conclusively fixed in the arena of financial and corporate restructuring. If the government approaches each problem carefully, public confidence will grow.
Second, the economic problem must be approached with economic logic. One after another, moral hazard issues have come to light in public corporations. These problems are rooted in the political appointments of executives in public corporations. Another example is the ruling party＇s recent remark on the sale of Daewoo Motor. It announced that Hyundai should not be allowed to take over Daewoo Motor, thus placing creditor banks in a difficult position. The Daewoo Motor case itself stemmed from a logic contrary to market principles, the ＂swapping＂ of businesses among conglomerates. Plans announced by various government officials, such as selling Daewoo Motor within a month or completing four-sector reforms by next February, do not follow the logic of a market. The economy is like flowing water: it must be allowed to follow the course that best fits it. When a deadline is set, mistrust and distorted ideas follow.
The most urgent task for the government is to dispel public anxiety. The government must maintain a cool head and develop working strategies and tactics, including the reinforcement of competition and our transformation into a knowledge-based economy, that will speed - and not impede - our economic development.
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