Pulling up reins of corporate reform

The government-owned shares in local banks (based on common stocks) worth 10.4 trillion won are to be gradually sold out starting in the second half of 2002, far behind the initial schedule. In addition, the procedure for legislating the holding company law will be rounded out around the end of September, while additional public funds will be publicly raised. Besides, supervision and control over corporate insolvencies are to be built up.

The Ministry of Finance and Economy and the International Monetary Fund had the final meeting today, reaching an agreement on those policy directions.

The government, however, decided upon to sell preferred stocks of six banks such as Kookmin, Housing and Commercial, Hana, KorAm, Shinhan and Peace, which totals 1.3 trillion won, by the end of January, 2004, as scheduled. In detail, the five banks excluding Peace Bank will buy back 20% of the government¡¯s preferred stocks by January 2001, another 30% by January 2002, 15% by January 2003, and 15% by January 2004. But those of Peace Bank will be repurchased at a time by 2004.

In relation to the macroeconomic target for this year, the government and the IMF agreed on the economic growth at 8-to-8.5%; keeping consumer price growth at less than 2.5%; sustaining current account surplus; and accomplishing a balanced budget by 2003.

In addition, in order to reduce default on corporations, which has been a major cause of bank insolvencies, local companies will likely be demanded much tougher restructuring efforts.

Meanwhile, David Coe, IMF senior resident representative in Seoul, held a press conference today, and warned that should the nation not continue to push its corporate and financial restructuring over the next year, Korea would lose market confidence and incur bad impact on its economy.