No progress in disposing of 12 Daewoo firms: IMF

The International Monetary Fund (IMF) has recommended that creditor banks of the 12 affiliates of Daewoo Group now under corporate ¡°workout¡± programs put them up for sale or let them go bankrupt before their values further erode.

The IMF also recommended the government privatize banks it owns as soon as possible as far as the market conditions allow and consider expanding financing to ease the impact of the possible rapid economic downturn.

The IMF delivered these and other recommendations after it concluded the regular policy consultations with the Korean government from Nov. 1 to Nov. 14, a spokesman for the Ministry of Finance and Economy announced Wednesday.

The international financial organization observed that Korea¡¯s economic growth this year would register 9.5 percent and the current account surplus would reach $10 billion, but the growth rate would fall to 5.5 percent or below and the surplus would also remain at $5-6 billion.

It also said that most Korean companies still are heavily indebted in light of the international standards and fall behind in profitability.

Therefore, the government needs to boldly let companies which are impossible to survive go bankrupt and carry out additional reform of systems related bankruptcy, the IMF stressed.

The urgent task of the government is to conclude plans to revive six banks that submitted their self-rescue plans, it said.

The IMF also claimed that raising more than originally planed 4 trillion won of public funds could be an appropriate preparation for a possible emergency situation.

It added that the government should maintain the monetary policy neutrally and needs to keep inflation in check. The government has to be prepared to minimize the side effects of rising international crud oil prices.

Kim Yong-Duk, chief of the international financial bureau of the Ministry of Finance and Economy, said that there is no need for the government to accept the IMF¡¯s recommendation without fail because the policy consultation is an annual event any IMF member country has to have.

shkwon@donga.com