The government has unveiled a plan to finance the restructuring of the ailing shipping and shipbuilding industries.
The plan calls for the government and the central bank to create an 11 trillion won fund to recapitalize state banks that will lead the restructuring. Separately, the finance ministry will inject 1 trillion won of capital into the Export-Import Bank of Korea by September this year to help bolster the state bank's capital ratio.
The government will try to streamline troubled shipping and shipbuilding companies through an infusion of funds and retrenchment instead of merging and splitting them. The government also plans to create a control tower to oversee the restructuring of the beleaguered industries over the next two years. The control tower will be led by Strategy and Finance Minister Yoo Il-ho.
The restructuring plan is long overdue, given the dire straits of the nation's flagship industries amid the protracted global economic downturn. But it is fraught with problems.
First and foremost, the government deserves criticism for "pressuring" the Bank of Korea to provide 10 trillion won in loans to the fund. Recapitalizing state banks rests with the government, but it resorted to the central bank merely to avoid National Assembly deliberation of a fresh supplementary budget. This brings back the nightmarish memory of the 1980s when the Bank of Korea printed money to keep nonviable companies afloat.
Also, there are underlying concerns that the nation might have lost an opportunity for restructuring its major industries. The government decided to roll up its sleeves for restructuring only after the April 13 general election, apparently because of political disputes. The fact is that the failure to launch a preemptive restructuring drive following the 2008 global financial crisis has resulted in the shipping and shipbuilding industries facing a threat to their survival.
The bigger problem is that policymakers have failed to suggest a grand blueprint for our industrial sector, being content with only offering piecemeal programs for vulnerable industries. This means that the nation's hitherto restructuring efforts have only served as a lifeline to prevent nonviable companies from going under at a time when the industrial sector needs radical surgery. It is without doubt that corporate restructuring should serve as an occasion to nurture new growth industries.
What matters most though is whether the government can speed up its retooling pace. The point here is to boldly let insolvent companies go. If not, there is no denying that Korea might suffer another round of economic crises.
The plan calls for the government and the central bank to create an 11 trillion won fund to recapitalize state banks that will lead the restructuring. Separately, the finance ministry will inject 1 trillion won of capital into the Export-Import Bank of Korea by September this year to help bolster the state bank's capital ratio.
The government will try to streamline troubled shipping and shipbuilding companies through an infusion of funds and retrenchment instead of merging and splitting them. The government also plans to create a control tower to oversee the restructuring of the beleaguered industries over the next two years. The control tower will be led by Strategy and Finance Minister Yoo Il-ho.
The restructuring plan is long overdue, given the dire straits of the nation's flagship industries amid the protracted global economic downturn. But it is fraught with problems.
First and foremost, the government deserves criticism for "pressuring" the Bank of Korea to provide 10 trillion won in loans to the fund. Recapitalizing state banks rests with the government, but it resorted to the central bank merely to avoid National Assembly deliberation of a fresh supplementary budget. This brings back the nightmarish memory of the 1980s when the Bank of Korea printed money to keep nonviable companies afloat.
Also, there are underlying concerns that the nation might have lost an opportunity for restructuring its major industries. The government decided to roll up its sleeves for restructuring only after the April 13 general election, apparently because of political disputes. The fact is that the failure to launch a preemptive restructuring drive following the 2008 global financial crisis has resulted in the shipping and shipbuilding industries facing a threat to their survival.
The bigger problem is that policymakers have failed to suggest a grand blueprint for our industrial sector, being content with only offering piecemeal programs for vulnerable industries. This means that the nation's hitherto restructuring efforts have only served as a lifeline to prevent nonviable companies from going under at a time when the industrial sector needs radical surgery. It is without doubt that corporate restructuring should serve as an occasion to nurture new growth industries.
What matters most though is whether the government can speed up its retooling pace. The point here is to boldly let insolvent companies go. If not, there is no denying that Korea might suffer another round of economic crises.
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