Time to join forces to negotiate fair solution
Controversy is heating up over how to raise funds needed to restructure troubled industries such as shipping and shipbuilding. President Park Geun-hye last week called for the Korean version of quantitative easing to recapitalize state-run banks. In response, the Bank of Korea expressed de facto opposition to that, saying there must be a national consensus.
The government-led restructuring drive is feared to drift from the outset as the ruling and opposition parties are also split over the bank recapitalization plan.
At issue is how to raise funds for the impending industrial restructuring. The government and the ruling Saenuri Party have been asking the central bank to conduct a Korean-style quantitative easing by printing money. By contrast, the Bank of Korea and the opposition parties have urged the government to take fiscal measures. Both sides have a point.
To pump money into state-run banks through fiscal measures, the government has to draw up a supplementary budget and have it endorsed at the National Assembly. But that is never easy, considering that the opposition parties will retain a majority in the next legislature. Even if that's possible, it would take much time to persuade the opposition, let alone concerns about the nation's deteriorating fiscal soundness.
On top of that, the government might face accusations of using taxpayers' money for the restructuring of specific companies.
To the contrary, the central bank fears losing credibility if its monetary power is compromised to recapitalize some ailing state-run banks. Also, it's possible that printing money will make the whole nation poorer indiscriminately by devaluing the currency and risk fueling inflation.
One has to worry about missing the time for corporate restructuring, while the government, the central bank and political parties wrangle over the quantitative easing program. This is all the more so, considering that restructuring is a race against time. As we suffered during the Asian currency crisis in the late 1990s, the more our restructuring drive is delayed, the greater corporate insolvencies and the people's burden will be.
Hanjin Shipping and Hyundai Merchant Marine, the two flagship shippers, need urgent surgery as they grapple with liquidity woes. There also must be huge capital injection to keep three big shipbuilders, including Daewoo Shipbuilding and Marine Engineering, afloat. There is no question that the Korea Development Bank and the Export-Import Bank of Korea, the main creditors of the troubled companies, must be recapitalized without delay.
Labor unions of these firms facing forcible restructuring staged massive rallies Sunday. Their protests are understandable, given the impending mass layoffs. Nonetheless, this time must be different, especially considering that the industrial realignment will determine the future of Korea Inc.
All this requires the government and the central bank to meet and negotiate a fair solution rather than stick to their positions. It is encouraging in this regard that Bank of Korea Governor Lee Ju-yeol vowed to fully support corporate restructuring, Monday.
The time for restructuring is only eight months in the lead up to the end of this year, given next year's presidential election. At this crucial juncture, the parties concerned must not waste time on futile arguments.
Controversy is heating up over how to raise funds needed to restructure troubled industries such as shipping and shipbuilding. President Park Geun-hye last week called for the Korean version of quantitative easing to recapitalize state-run banks. In response, the Bank of Korea expressed de facto opposition to that, saying there must be a national consensus.
The government-led restructuring drive is feared to drift from the outset as the ruling and opposition parties are also split over the bank recapitalization plan.
At issue is how to raise funds for the impending industrial restructuring. The government and the ruling Saenuri Party have been asking the central bank to conduct a Korean-style quantitative easing by printing money. By contrast, the Bank of Korea and the opposition parties have urged the government to take fiscal measures. Both sides have a point.
To pump money into state-run banks through fiscal measures, the government has to draw up a supplementary budget and have it endorsed at the National Assembly. But that is never easy, considering that the opposition parties will retain a majority in the next legislature. Even if that's possible, it would take much time to persuade the opposition, let alone concerns about the nation's deteriorating fiscal soundness.
On top of that, the government might face accusations of using taxpayers' money for the restructuring of specific companies.
To the contrary, the central bank fears losing credibility if its monetary power is compromised to recapitalize some ailing state-run banks. Also, it's possible that printing money will make the whole nation poorer indiscriminately by devaluing the currency and risk fueling inflation.
One has to worry about missing the time for corporate restructuring, while the government, the central bank and political parties wrangle over the quantitative easing program. This is all the more so, considering that restructuring is a race against time. As we suffered during the Asian currency crisis in the late 1990s, the more our restructuring drive is delayed, the greater corporate insolvencies and the people's burden will be.
Hanjin Shipping and Hyundai Merchant Marine, the two flagship shippers, need urgent surgery as they grapple with liquidity woes. There also must be huge capital injection to keep three big shipbuilders, including Daewoo Shipbuilding and Marine Engineering, afloat. There is no question that the Korea Development Bank and the Export-Import Bank of Korea, the main creditors of the troubled companies, must be recapitalized without delay.
Labor unions of these firms facing forcible restructuring staged massive rallies Sunday. Their protests are understandable, given the impending mass layoffs. Nonetheless, this time must be different, especially considering that the industrial realignment will determine the future of Korea Inc.
All this requires the government and the central bank to meet and negotiate a fair solution rather than stick to their positions. It is encouraging in this regard that Bank of Korea Governor Lee Ju-yeol vowed to fully support corporate restructuring, Monday.
The time for restructuring is only eight months in the lead up to the end of this year, given next year's presidential election. At this crucial juncture, the parties concerned must not waste time on futile arguments.
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