Gov¡¯t working out steps to address unemployment

The government has embarked on an effort to work out emergency measures to address the massive unemployment that could result from the dissolution of large insolvent companies such as Hyundai Engineering and Construction , Ssangyong Cement and Daewoo Motor.

In a separate move to help the subcontractors of Daewoo Motor and companies liquidated on Nov. 3, the government decided to double the firms¡¯ ceiling for special guarantees by credit guarantee agencies to 400 million won from the planned 200 million won per company.

The Ministry of Finance and Economy said Thursday that it would employ emergency measures if the year¡¯s average jobless rate of 4 percent soars to 6-7 percent due to the poor situation of large insolvent firms. The ministry is mapping out concrete plans along with related ministries such as the Ministry of Labor.

Measures to address unemployment now under consideration include investment in public projects and infrastructure or social overhead capital, providing jobs, employment education and loans for the jobless, and the expansion of the employment insurance fund, ministry officials said.

The government¡¯s corporate restructuring adjustment team held its second meeting Thursday, presided over by Vice Finance-Economy Minister Lee Jung-Jae, and decided to raise the ceiling for special guarantees to bankrupt companies and their subcontractors to 400 million won.

The team also decided to allow credit guarantee agencies to offer security for more than 400 million won to the companies, taking into consideration the situation of the firms.

To help stabilize the management of the subcontractors of the collapsed companies, the government also decided to extend emergency aid of about 60 billion won as an operational fund within this year.

The government will help prevent to the greatest possible extent a possible domino bankruptcy of subcontractors of Daewoo Motor and other bankrupt companies by exchanging the promissory notes they received from the ill-fated firms for the supply of goods with new notes, the officials said.

The ministry also began drawing up a framework for next year¡¯s economic policies, placing top priority on stable economic growth, conclusion of reform in the four sectors and the promotion of software reform, as well as the preparation of new engines for growth and improvement in income distribution, they added.

Based on present economic conditions, the ministry forecast that the economic growth rate would fall to 5-6 percent from this year¡¯s 9 percent and consumer prices would rise slightly to 2.5-3 percent.

The ministry also predicted that the current account surplus would decrease to US$5-7 billion from this year¡¯s US$10 billion.

However, a ministry official said that the projected macroeconomic index could change due to various variables affecting the economy. He said that his ministry plans to confirm the economic operation plan for next year by the middle of next month.

Kwon Soon-Hwal shkwon@donga.com