By Kim Jae-kyoung
Since taking office a year ago, President Moon Jae-in has made all-out efforts to create more jobs and rehabilitate the economy, but unfortunately to no avail.
The unemployment rate hit a 17-year high in March, as companies have been reluctant to hire new employees and make fresh investments.
Why are Moon's efforts not making their way through to the economy?
There could be many reasons but the root cause could be mistrust between the government and business, which has impaired a virtuous economic cycle.
Jeffrey Jones, chairman of the AMCHAM board of governors, said that restoring trust is the most urgent task to produce jobs and revitalize the economy.
"One of the fundamental problems in Korea's economy is the distrust between government and business," Jones said in a recent interview.
"Government has a very low trust of business and believes that greater regulations and controls are necessary," he added.
Jones believes that this trend will have a stifling effect on the economy.
From his perspective, the economy falls into a vicious cycle when greater regulations prevent businesses from investing and growing, which leads to a decrease in job creation and consumption.
He said that there are reasons for this mistrust, much of which stems from poor corporate governance and a lack of transparency.
"Korean companies need to make dramatic changes to regain this trust. This will then permit the government to deregulate the economy and let businesses grow," he said.
Jones, an international lawyer at Kim & Chang, stressed that in order to address issues associated with corporate governance, more efforts should be made to reform firms' outside director system.
"One of the most severe problems with corporate governance in Korea is the practice of managing the outside directors of companies," he said.
He explained that a practice has developed in which management seeks to fill its outside board with "friends" who will simply approve its requests.
"It is the function of a board of directors to oversee and regulate the management of a company. This function is not being implemented as it should," he said.
In his view, the failure of boards to properly oversee management of a company requires government to step in and increase regulatory oversight. "It is a vicious circle," he said.
The former AMCHAM chairman suggested that companies reduce the number of former government officials and professors as outside directors.
Instead, he advised firms to bring onto the board individuals who have real business experience and who can look at the issues raised by management from a perspective of what is in the best interests of the company and its many stakeholders.
"With a much more effective board of directors, trust can be reestablished and deregulation can occur," he said.
Regarding the ongoing turmoil at GM Korea, Jones said that the most viable solution would be the proposed debt-for-equity swap.
"It seems the best solution is for GM to convert its loans to capital," he said.
"The Korea Development Bank (KDB) invests cash to preserve its equity position and the company downsizes to preserve as many jobs as possible."
The Detroit-based automaker has proposed to invest $2.8 billion in the Korea unit but demanded the state-run KDB, which is the second-largest shareholder with a 17-percent stake, participate in its debt-to-equity swap plan.
As for U.S. President Donald Trump's protectionism, he said that Korea is not actually a target of Trump's trade measures.
"The bigger problem is China and Japan. Trump is concerned of course about Korea, but I do not believe he is specifically targeting Korea," he said.
Since taking office a year ago, President Moon Jae-in has made all-out efforts to create more jobs and rehabilitate the economy, but unfortunately to no avail.
The unemployment rate hit a 17-year high in March, as companies have been reluctant to hire new employees and make fresh investments.
Why are Moon's efforts not making their way through to the economy?
There could be many reasons but the root cause could be mistrust between the government and business, which has impaired a virtuous economic cycle.
Jeffrey Jones, chairman of the AMCHAM board of governors, said that restoring trust is the most urgent task to produce jobs and revitalize the economy.
"One of the fundamental problems in Korea's economy is the distrust between government and business," Jones said in a recent interview.
"Government has a very low trust of business and believes that greater regulations and controls are necessary," he added.
Jones believes that this trend will have a stifling effect on the economy.
From his perspective, the economy falls into a vicious cycle when greater regulations prevent businesses from investing and growing, which leads to a decrease in job creation and consumption.
He said that there are reasons for this mistrust, much of which stems from poor corporate governance and a lack of transparency.
"Korean companies need to make dramatic changes to regain this trust. This will then permit the government to deregulate the economy and let businesses grow," he said.
Jones, an international lawyer at Kim & Chang, stressed that in order to address issues associated with corporate governance, more efforts should be made to reform firms' outside director system.
"One of the most severe problems with corporate governance in Korea is the practice of managing the outside directors of companies," he said.
He explained that a practice has developed in which management seeks to fill its outside board with "friends" who will simply approve its requests.
"It is the function of a board of directors to oversee and regulate the management of a company. This function is not being implemented as it should," he said.
In his view, the failure of boards to properly oversee management of a company requires government to step in and increase regulatory oversight. "It is a vicious circle," he said.
The former AMCHAM chairman suggested that companies reduce the number of former government officials and professors as outside directors.
Instead, he advised firms to bring onto the board individuals who have real business experience and who can look at the issues raised by management from a perspective of what is in the best interests of the company and its many stakeholders.
"With a much more effective board of directors, trust can be reestablished and deregulation can occur," he said.
Regarding the ongoing turmoil at GM Korea, Jones said that the most viable solution would be the proposed debt-for-equity swap.
"It seems the best solution is for GM to convert its loans to capital," he said.
"The Korea Development Bank (KDB) invests cash to preserve its equity position and the company downsizes to preserve as many jobs as possible."
The Detroit-based automaker has proposed to invest $2.8 billion in the Korea unit but demanded the state-run KDB, which is the second-largest shareholder with a 17-percent stake, participate in its debt-to-equity swap plan.
As for U.S. President Donald Trump's protectionism, he said that Korea is not actually a target of Trump's trade measures.
"The bigger problem is China and Japan. Trump is concerned of course about Korea, but I do not believe he is specifically targeting Korea," he said.
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