Gov't to ahead with corp. restructuring

The government has decided in a meeting of the nation`s top economic policymakers to step up its corporate restructuring drive.

Companies that do not act in accordance with proposed restructuring efforts will be subject to administrative sanctions, economic ministers said. The government will also mobilize the police and prosecution to expose firms engaging in unlawful practices and mete out appropriate punishments. This marks the start of the second phase of corporate restructuring, which is intended to weed out unhealthy or uncompetitive firms, but quickly revive viable ones. The government has set the deadline for the program at the end of this year.

As for the establishment of a permanent joint monitoring body as proposed by the Ministry of Finance and Economy, the ministers have decided to discuss the proposal again. Until then, close cooperation and exchanges between the police, prosecution, Financial Supervisory Commission, Fair Trade Commission, Office of National Tax Administration and related organizations will replace it. The ministers believe simply stipulating the cooperative system will have a significant psychological impact on firms.

Of special interest is the role of the Financial Supervisory Board (FSB) in the future course of corporate restructuring. The FSB has so far indirectly exercised its influence on firms through creditor banks, but under the new arrangement is now able to directly intervene in the questionable practices of individual firms.

The move for stronger monitoring is also seen as intended for the Hyundai Group, which is driving the market into confusion due to management disputes and its liquidity crisis. It is for the same reason that the government has decided to extend the tracing of accounts by the Fair Trade Commission, which ends in February.

A member of the FSB said no detailed talks have been held on the creation of a joint monitoring body. But he said officials would continue to examine whether a permanent or temporary one would be more effective. The government is poised to revive firms that show promise, disapprove the return of managers responsible for administrative blunders, and seek punishments for unlawful management practices. The government also made clear its plans to decide on the fate of 12 Daewoo affiliates under workout programs by the end of September and non-Daewoo firms under workout programs by November. Underlying this move is the government`s attempt to reorganize the workout system, which has been showing signs of slackening although it succeeded in rescuing some firms. Another likely reason is that unless the corporate restructuring of workout firms is completed, creditor banks are likely to suffer from further insolvency. This would in turn bring instability to the financial market.