[Focus] Nobody accountable for public funds

"If we liquidated the company before placing it on an workout program in 1998, we would be able to greatly reduce the input of public fund," an official at Dong-Ah Construction Industrial's creditor bank said when the government finally decided to liquidate the construction firm.

He pointed out that financial institutions had failed to carry forward corporate restructuring properly with the government assuming the attitude of an onlooker, resulting in a waste of taxpayers¡¯ money.

Hanvit Bank accepted 3.2 trillion won in capital investment from the Korea Deposit Insurance Corp. (KDIC) last October. The bank used the money as bad-debt reserve in anticipation of bankruptcy of insolvent companies. Of the total, the bank poured 2.2 trillion won into Daewoo affiliates under the government¡¯s corporate workout program.

Seoul Bank, which received 3.3 trillion won of public funds in 1998, has made the money fly with bankruptcy of Dong-Ah Construction, Woobang and Mijoo after failures of Hanbo and Kia.

The direct reason why nearly 8.3 trillion won of taxpayers¡¯ money has been wasted is corporate insolvency.

However, many experts say that the government left the corporate restructuring to the hands of financial institutions, noting that such an attitude has made the public funds fly.

In fact, public funds totaling 2.0166 trillion won were poured into five companies, including Daewoo Motor, Dong-Ah Construction and Woobang, which were placed under court receivership after they have gone through workout programs.

Insolvent banks largely are responsible for the situation because they used the fund as if it were blind money. For example, they lent to their employees at lower than fund costs. Dong-Ah Construction even used the financing as a slush fund for the presidential election.

Despite such a waste of tax money, no one in the government has accepted responsibility for it. In its recent report, the Korea Development Institute contended that someone should be held accountable for the failure in restructuring as well as additional input of the public fund.

As for the primary responsibility, the current and former Ministers of Finance and Economy such as Lee Kyu-Sung, Kang Bong-Kyun, Lee Hun-Jai and Jin Nyum might have to take responsibility for using 149.6 trillion won of public funds since 1998.

Also, high-ranking officials of the Ministry of Finance and Economy and the Financial Supervisory Commission (FSC), who were involved in policy-making, might not be able to avoid accountability.

In this connection, an official at the FSC said that it would be difficult to ask officials for unlimited responsibility, although they are responsible for the money.

"If someone has to take unlimited responsibility, who would be willing to work to their convictions?" the official said.

Park Hyeon-Jin witness@donga.com