Stanley Fischer, ``General Election Should Not Affect the Economic Policies``

Stanley Fischer, first deputy managing director of the IMS said, ``The Korean government should not let the political factor, such as the next year presidential election, affect the economic policies.`` ``Although some corporations resist, the Korean government should push ahead with its restructuring of the corporate and financial system. The Korean government should no longer delay the prompt underwriting system of the corporate bonds, which was planned to be temporarily enforced until the end of the year,`` said Fischer at the morning lecture and the press conference held at the Lotte Hotel, Seoul. Fisher was invited by the Institute For Global Economics and the IMT Seoul Office.

Fischer said, `` Low profitability and excessive debt of the Korean companies can weaken the Korean economy.`` He counted the disagreement among the credit banks and the delay of sales due to the unrealistic estimation of the corporate value as the major stumbling block for the restructuring of the companies. Moreover, ``If there are many financial organizations in which the government is the majority shareholder, it is highly likely that non-economic factors can control the decision. If the government does not want to create conflicts as a majority shareholder and as the government, the government should privatize the government-owned financial organizations,`` Fischer added.

Fischer also said that, ``To maintain the weak companies with the government subsidies is to waste the public funds. The delay of the restructuring of the companies in Korea is due to the weak procedure of insolvency. The government should follow the principle rule, such as restructuring of the debts of the weak companies, and liquidating the weak companies which cannot survive.``

With regard to the prospectus on the Korean economy, he said that ``the Korean economy will show 4-5 percent of growth rate influenced by the recession of the world economy, including the U.S. The task is to reach the 6 percent growth rate in the long term.`` Regarding the controversial issue of introducing a collective law suit in Korea, Fischer said that ``it should be focused on the interests of the shareholders instead of worrying about the companies’ burden following the law suit.`` ``The Korean government has solved the unstable factors of the macro-economy through the introduction of the floating exchange rate system, securing the amount of the foreign exchange holding, and the introduction of the monetary policy in which the floating of the exchange is reflected. The government should continue to secure the transparency of the company management and to reform the company’s management structure,`` Fischer added.

Fischer, first deputy managing director of the IMF, was in charge of IMF related work in Korea during the foreign exchange crisis of 1997, and currently has an influential decision making power regarding the IMF.

Kim Seung-Jin sarafina@donga.com