Strategy and Finance Minister Yoo Il-ho has said that the government will speed up its push for corporate restructuring. Meeting the press after a meeting of G20 finance ministers and central bankers in Washington, D.C., Friday, Yoo said that Korea can’t defer the restructuring of oversupplied and vulnerable industries any longer. The top economic policymaker’s renewed commitment to corporate retooling is welcome.
Given that the Korean economy has been losing its luster in this era of low growth, it’s long overdue for restructuring across the board. Failing to swiftly address chronic industrial problems such as oversupply might result in denting the financial sector, which would in turn bring the overall economy into crisis.
It’s no secret that there are a number of so-called zombie companies which are unable to even meet their interest obligations with operating profits. Hyundai Merchant Marine, for example, could fall under court receivership if the flagship unit of Hyundai Group fails to find a breakthrough in its talks over lowering rental fees for ships. Each of the nation’s Big Three shipbuilders suffered record losses last year. As a result of the sharp rise in the number of nonviable firms, the banking sector is also grappling with swelling nonperforming loans.
It’s true that the environment for corporate restructuring has improved as political uncertainties eased after last week’s general election that ended up with heavy losses for the ruling Saenuri Party.
Calls for restructuring have been dormant under pressure from the political community thus far. Political parties, in particular, have lured voters with sugarcoated promises even not to restructure the ailing shipbuilding industry.
So no one should raise an objection to the desperate need to speed up the pace of restructuring. Nevertheless, it’s almost certain that in the run-up to the presidential election scheduled for late next year, both ruling and opposition parties will hamper the retooling drive, which would certainly trigger mass layoffs.
After all, this means that the most opportune time for restructuring will be the next eight months until the end of this year, before the presidential race gets into full swing.
Given that the governing party no longer holds a majority in the 20th National Assembly, the ruling camp should solicit cooperation from the opposition parties through more active persuasion and compromise.
Restructuring our industrial sector is essential to lifting inefficient elements that have piled up because of excessive competition and looking for new growth engines. The government should carry out corporate restructuring swiftly and boldly.