Asia Times: EDITORIAL: President Kim is not superman, but . . .



	April 27, 1999	atimes.com

The Koreas

EDITORIAL: President Kim is not superman, but . . .

. . . looking at the recent performance of the South Korean economy and the waythe man beats up on the once all-powerful chaebol (business conglomerates)and gets away with it, there is little question that he CAN leap thehighest hurdles in a single bound.

In its just published Word Economic Outlook, the International Monetary Fund forecasts 2 percentgrowth for South Korea in 1999 and 4.6 percent in 2000 - estimates that agreewith the governnment's, but may already be too conservative.

Meanwhile, the stock market has added nearly 35 percent in value this yearand, given the appreciation and stability of the won and asmaller-than-expected budget deficit, the government has room to implementadditional stimulus measures for a further growth kick.

That may well be necessary to alleviate high unemployment, now at 8 percentand still growing. South Korean workers, deprived by new labor laws of lifetimeemployment guarantees, are shouldering a heavy burden from corporatedownsizing and restructuring and justifiably feel left out of economicrecovery. President Kim Dae-jung must convey a clear sense and enactmeasures of burden-sharing lest the country's politically potent andwell-organized trade unions further drift into opposition to and underminehis economic reform program.

The fallout from the just announced plans of Daewoo Group to completelysell off its profitable Daewoo Heavy Industries unit is a case in point.Fearing more layoffs if and when DHI is sold to interestedinvestors - who most likely would be foreign investors - some 6,000 workers at the world's secondlargest shipyard laid down their tools. DHI shares nosedived on theKorea Stock Exchange.

The sell-off plan is part of the overall Daewoo restructuring strategy ofconcentrating on its core automobile, trade and financial servicesbusinesses, reducing the number of its subsidiaries from 34 to eight andreducing group debt in the process.

This is precisely the kind of move Kim and his economic advisers, using ever harsher language, have beenurging Daewoo and the other top chaebol to make - and rightly so. But, clearly, provisions must be made at the same time to prevent widespread social dislocation and hardships.

We are fully persuaded that President Kim's strategy of forcing partialbreak-up of conglomerates, refocusing of their business lines, anddrastic debt reduction down to 200 percent debt/equity ratios is the rightstuff if the Korean economy is to be transformed in depth and put on asutainable future growth path. And stepped-up public works spending forreplacement jobs is a necessary short-term relief measure toassure social and political stability, as is knitting a tighter social security net tocope with unemployment woes.

In the longer term, however, a quite different challenge awaits supermanKim if he is to realize his vision of a healthy, more prosperous and moredemocratic society. Reining in the chaebol and reducing the owner families'hold on Korean society is only a first step.

What must follow are determined moves toward the democratization of capitalaccompanied by the creation of opportunities for entrepreneurs withinnovative ideas to found and develop new enterprises that will create newand lasting jobs on a significant scale.

Over the past year and in the first quarter of this year the process offinancial system rehabilitation has made great strides and the FinancialSupervisory Commission is to be applauded for a job well done and nearlycompleted. But - much as the chaebol were prodded to get on with restructuring - banks must now be prodded to actively adopt new lending policies toencourage and support new small and medium enterprises, to fill the gaps(and opportunities) chaebol containment and downsizing is leaving open.

This is a challenge to Korean culture, business culture in particular, asit has evolved over the past four to five decades. We are not arguingfor redistribution of wealth. Rather, the challenge is to bring a much widersection of the population - well beyond the few families who up until now have seen it as their privilege and obligation - into the process of wealth creation.

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