(EDITORIAL from the Korea Herald on Dec. 1)

Putting out fire

Former Deputy Prime Minister Lee Hun-jae, who was in charge of the Financial
Supervisory Service as Korea weathered the Asian financial crisis that battered
the country more than 10 years ago, lambasted the government for its response to
the current crisis.
Speaking at a lecture last week, Lee said that the current economic situation is a
crisis in progress and added that the government sometimes needs to take "quick and
deep" market intervention measures even if they are unpopular and controversial. A
truly pragmatic approach is to not delay ordering a prescription for fear of public
disapproval and thus allow the wound to fester, Lee said.
He also warned that vague policies only create uncertainties and advised the
government to produce a package of policy initiatives rather than announcing a
string of new policies.
Indeed, there have been numerous policy announcements since the financial crisis
originating in the United States, began to impact Korea's financial market and
the real economy. However, they have failed to improve the situation in any way.
There are signs that several business sectors will not be able to escape
restructuring. The construction industry, shipbuilding industry and savings and
loans institutions need immediate restructuring. Red flags are going up in other
sectors, including the automobile, semiconductor and steel industries.
Yet, for all the talk of restructuring, there has been little action.
Construction companies are still reluctant to join a debt rescheduling program
because of its uncertainties. The fast-track program offered to ailing
shipbuilders is proving to be largely ineffective.
As Lee, who oversaw restructuring of industries during the financial crisis of
1997, pointed out, restructuring needs to be prompt and decisive. The government
should provide a clear standard and direction for restructuring in order to earn
the trust of the market and businesses.
The report that a group to oversee corporate restructuring - an organization
similar to the Corporate Restructuring Committee that operated during the last
financial crisis - may be formed is an encouraging sign. Between June 1998 and
the end of 1999, a group of financial experts, accountants, lawyers and credit
evaluation experts played a decisive role in determining the fate of businesses
when there were disputes between companies and creditors regarding workout plans.
The group had the final say on whether companies were given another chance or
not.
Lee Hun-jae said watching the current crisis unfold is like watching the
Sungnyemun gate burn to the ground because of inadequate initial response. There
are plenty of warning signs that the economic troubles will continue well into
next year and beyond. With the economy now predicted to grow at a 2 percent level
next year, companies that are vulnerable now may not last the next few months.
The collapse of one industry may lead to a string of other industries collapsing
in a domino effect.
The government should act promptly to put out the fire now and not allow it to
rage on. Although such efforts may not be popular with the public - and an
administration which has a 20 percent approval rating may find it politically
difficult to take the gamble of instituting unpopular measures - the government
cannot afford the luxury of waiting for public approval on the matter.
(END)