Cabinet discusses 4 major reforms

Cabinet ministers reporting on the progress of reform programs in four major sectors at Chong Wa Dae on Dec. 4 looked tense. Restructuring must be completed soon to turn around the economic conditions in the second half of next year. Discussions centered on how to remove obstacles to these reforms.

Energizing capital market at the year's end:

A secretariat will be set up this month for the inauguration of financial holding companies led by the government so that one holding company can open during the first quarter of 2001. It should incorporate several financial institutions under its umbrella by next October.

Measures have to be worked out by the end of the year to streamline the 24 troubled mutual savings and finance firms; 11 of them will be induced to merge into two companies.

In order to stabilize the money market, plans should be finalized within December and begin to be implemented for the injection of public funds amounting to 25 trillion won, including 7.1 trillion won for nonviable banks and 8.3 trillion won for the Seoul Guarantee Insurance.

The ratio of primary collateralized bond obligations (CBO) will be raised from 50 percent to 70 percent. The ratio of guarantee will be adjusted upward from 38 percent to 50 percent to relieve the financial pinch among mid-sized enterprises. Creditor banks are required to issue asset-based securities holding loan assets as collateral so as to absorb company bonds.

A permanent system for corporate restructuring:

Of the 52 businesses blacklisted as nonviable Nov. 3, 23 will be either liquidated or face restructuring. The fate of the remaining 29 firms will be sealed before the year ends by means of merger, sale or liquidation.

Restructuring will be undertaken on 12 subsidiaries of Daewoo Group under programs of debt workout or managerial improvement. Daewoo Electronics and six other affiliates will be sold or disposed of otherwise through corporate restructuring vehicles (CRVs). Creditor banks should come up with measures to rescue 235 companies that are deemed to be viable, and the former will be held accountable for any liquidity shortfalls involving the latter.

Steps will be hammered out in December to normalize the operations of airline services by downsizing, asset sales and debt-for-equity deals, leading to the completion of the initiated massive business swap scheme.

Focus on public sector and labor reforms:

Reforms have to be accelerated in the public sector, which has fallen far behind in restructuring. With a view to ensuring accountability of management comparable to a private enterprise an employment contract needs to be made with the CEO of a public corporation -- a contract providing for his dismissal in case of poor performance.

Representatives of civic and advocacy groups will be named to teams to monitor and evaluate the managerial performance of public corporations. Any under-the-table agreement with unions to placate their tough stand or excessively generous fringe benefits should be subjected to minute scrutiny. Disincentives in budgetary appropriations will be given to such corporations as would be slow in reforming themselves. By next February reform of labor relations need to be completed, and special teams will be organized to deal with strikes.