[Contribution] True restructuring would boost economy

During the past 45 days, the Korea Composite Stock Price Index dropped sharply to 553.25, and the Kosdaq index plummeted to 76.46.

The indexes fell 20.9% and 38.3% since the birth of the introduction of the economic team. It is pointed out that the Korean economy has been shaky.

When stock prices were rising, the government claimed that it was because of successful structural reform. Now it is blaming the bearish market on external circumstances such as the oil price climb, Ford's withdrawal from buying Daewoo Motor and the slide in the Nasdaq index.

The government typically blames others rather taking responsibility for its own faults.

It is true that the failure in selling Daewoo Motor will put its creditors and parts suppliers in difficulty, but it is not bad enough news to drive the stock market to a disastrous situation. Rather, the exposure of the vulnerable capability of the government to the international financial market is even more serious problem.

The sale process for Daewoo Motor was good enough to show investors whether the government is capable of properly handling the question of Daewoo Group.

First of all, the government unveiled the bidding prices offered by participants, which is a big mistake in international transactions. Once the bidding price was revealed, it put both the bidder and the seller in politically difficult positions. Also, it also made it difficult to negotiate on final terms and conditions for the projected sale.

Also, the current economic team found the reason of the failed bidding from Ford's management problem, including recall of bad tires. It must have annoyed Ford. Even General Motors protested about the release of details regarding the transactions. In fact, shoppers have the choice whether to buy the product.

What is more, the embarrassed government announced that it will sell first and then settle the transaction, noting that it would complete the sale process within a month. It clearly showed that nervous state of the government. At a time when the financial market shows a sign of instability, policy makers are required to be cautious in their remarks to restore reliability of the market.

In short, the uneasiness of the stock market is a result of revealing the government's lack of capability to cope with critical situations in the outside world. Still, the fundamental reason for it lies in sluggish restructuring and the lack of reliability resulting from it.

Now the government is required to implement visible restructuring. In particular, those hopeless corporations that failed to pay financing costs for more than three years need to be ousted from the market. Also, the most insolvent bank has to be closed. Such measures are required to recover the lost reliability.

It is a question whether the ministers who worked for the government for more than 30 years could take such drastic measures. There are some members of the economic team who are directly or indirectly responsible for the foreign exchange crisis under the administration of President Kim Young-Sam.

How could they solve the problems that they have made? Also, the current economic team is largely consisting of officials who were engaged in economic planning during the era of development dictatorship in the past, so they are weak in dealing with delicate matters. It would be difficult to solve the current critical situation with those who are goal-oriented.

Finally, the current economic team consists of officials from a specific region. Under the presidential system, it would be desirable to work with those who the president feels comfortable to implement a responsible politics. However, their performances so far are far from success. They should take responsibility.

Currently, the market is demanding concrete changes. The president is required to work hard to build up the belief in restructuring in the market by utilizing all possible means, including replacement of the economic team.

In fact, President Kim Dae-Jung needs to initiate it. We hope that Kim does not remain simply as a president who has achieved a horizontal change of power, overcome the foreign exchange crisis and improved South-North Korean relations.

We want a strong economy-oriented president. If the economy is not working well, everything could end in smoke.

by Chung Un-Chan, Professor of School of Economics, Seoul National University