Meager Outcome of 3 yr Restructuring, More Deregulation Required

The criticism on the government has been raised questioning the justification of the `regulation-oriented large business policies` to overcome the foreign currency crisis. The government also acknowledged the problem and had recently set for more deregulations.

The State owned Korea Institute for Industrial Economics and Trades (KIET) released its reports yesterday on `the evaluation of industrial restructuring and the projects of the large business policies,` evaluating that ``the outcome of the 3 year-long restructuring is not satisfactory.`` And the report urged the government for more drastic deregulation to revitalize the industrial activity. More attention has to be paid on this criticism because the report was made by the state owned institute.

The report pointed out that ``many polices related to the industrial restructuring were implemented all at once however the efficiency of some policies were not properly verified, including the big-deals (B2B exchange) and the 200 percent debt ratio. The unprecedented policies even in the international economy have no ground to persuade the industrial sectors and the outcome of the policy has turned out unsatisfactory.``

Regarding the designation of the 30 business groups, the report indicated that ``it is not appropriate to regulate, for example, Kohap, whose asset barely reaches 3.6 percent of Samsung, with the same standard. The low ranking companies among the 30 groups have suffered from disadvantageous regulations and unpredictable business circumstances.`` And the KIET report recommended the government to apply the Fair Trade Act to only 4 largest industrial groups.

In addition, according to the KIET paper, the industrial restructuring policy has too much concentrated on the sound financial structure and as a result ignored the business competitiveness. The work-out was also carried out without the thorough reviews on the supply demand situation and the prospects of the companies.

Meanwhile, the industrial sectors have demanded that the government should reduce the number of the designated industrial groups to five or adjust the designation criteria as a group over a certain amount of asset. The business sectors have also requested the abolition or significant deregulation of the total investment limit and the application of the 200 percent debt ratio with the consideration of the particularity of each business sector.

The government also expressed its positive responses to the deregulation to promote the export and the investment.

Finance and Economy Minister Jin Nyum recently hinted more deregulations such as an adjustment of the criteria for the designated groups, the permission to some large business for bank management, the deregulation of the local economic activities, more flexible application of the debt ratio to some business sectors including trade, construction, shipping, and aviation. The government will release more detailed deregulations by next month.

Kim Sang-Chul sckim007@donga.com