[Editorial] Liquidation of ailing firms is a must for economic viability

Both domestic and external conditions of the nation's economy appear grave as to cause us a serious concern. The domestic demand and consumption are at the almost lowest ebb without showing any factors to stimulate them.

The exports that have sustained the country's difficult economy cast gloomy prospects due to plummeted prices of computer chips as well as the sluggish market in the United States.

Amidst such difficult circumstances, the liquidation of the Dong Ah Construction and Hyundai Engineering and Construction's default to pay its checks are certain to produce enormous fallouts with their shocking ripple effects on our economy.

Unless the situation is arrested early, our profound concern here is that the anxieties and uncertainties may expand to aggravate the economic crisis as to make the recovery impossible.

Thorough self-examination and in-depth introspection over our economic policies up to now should be a starting point in our efforts to rescue the ailing economy. To review the factors responsible for the situation since 1998, the premature euphoria of the graduation from the IMF intervention has given rise to the heightened social atmosphere of moral hazard and laxity which has deeply permeated into overall sectors of our society.

The administration's preoccupation with the general election and inter-Korean affairs had the effect of virtually suspending its structural reform drives.

The insolvent firms like the Dong Ah Construction which was barely surviving by a workout process, resorted to its slush fund lobbying to court the political circles, while its labor union defied the structural reform efforts.

In the matter of resolving the Hyundai Engineering and Construction case, the administration has shown an impression that its efforts are being dragged, instead of playing a leading role, by its preemptive considerations about the Hyundai's possible adverse effects on inter-Korean affairs. The four self-rescue plans of the company have accomplished nothing. Its owner has systematically defied any rescue efforts by leaving the country whenever it came to the crunch.

Such delays in structural reforms which are of fundamental importance, resulted in, churning out many ailing business firms, and the consequential loss of market confidence in our economic viability in the end. For that matter, the Daewoo case is a good example of the administration's failed opportunities to act at a right moment that incurred input of astronomical amount of the public fund to rescue the impossibly ailing company, but the case is still unresolved.

Meaningful and telling implication here is the market's positive response to the administration's firm stand to liquidate the Dong Ah Construction, and its indication that the government and Hyundai creditors may possibly deprive the firm of its rights of business management by court receivership or changeover of their loans into capital investment in the company's stocks and shares.

The gains in prices of stocks and shares Tuesday and Wednesday and the increased purchase of stocks by foreign investors are indicative of the desirable directions of our future structural reforms. There should be no exception to the principle of our reforms, unless the failed companies show radical transformation of their management styles as to fund the firms with their private money.

To be sure, the steadfast stand to keep such reform principles may incur many short-term fallouts such as increased laid-out workers; cash crunch; and chain effects of insolvency on affiliated or subcontracted companies. In the long run, however, the liquidation of such corporations that snowballs debts, is the surest way to recover the nation's economy.

It should be noted here that the resolution of the five big conglomerates (Daewoo, Hanbo, Hyundai Engineering and Construction, Dong Ah Construction and Ssanyong) is watched by the world business community. The government must push its reform drives without no unseemly tactics in order to recover the market's confidence.

Granted, the creditor banks association will have gone through no small amount of pains and difficulties before the release, Friday, of the list to liquidate insolvent companies. But, they must realize that only the firm and transparent resolution of the ailing corporations will ensure the prevention of recurrence of the second economic crisis which appears looming large.