Staff writerDespite the current economic turmoil involving major business conglomerates and financial institutions, South Korea says it will maintain its deregulation and liberalization policies."We launched this market principle to strengthen company management, and it should help increase international competitiveness of (Korean) companies," said Lim Chang Yuel, South Korea's minister of trade, industry and energy. Lim visited Japan last weekend to attend the Asia-Europe Economic Ministers meeting.Major South Korean conglomerates experienced financial trouble earlier this year due to investment failures. Financial institutions that extended loans to those industrial groups were hit hard.In the most recent case, a cash flow problem at the Kia Group pushed the eighth-largest business conglomerate and owner of Kia Motors, South Korea's leading automaker, close to bankruptcy. Korea First Bank, which extended loans to the Kia Group, now faces huge loan problems.The economic turbulence hit South Korea just as deregulation and liberalization efforts in labor and finance were being imposed to meet the standards of the Organization for Economic Cooperation and Development. South Korea joined the OECD in December.Lim said these troubled companies are moving toward a solution, citing progress in restructuring efforts and the government's rescue package announced to save Korea First Bank. "In my opinion, all companies have exposed all of their problems," Lim said. "Some other companies expressed their will to accept the troubled firms. So, I expect that action will follow in that direction."He also said failures caused by company mismanagement should be resolved through rehabilitation and change of ownership. He added that he hopes the bitter experience will lead to improved quality of management and increased international competitiveness. "The problems this time can be a good lesson to other companies as well," he said. "They thought that expanding their business can solve cash flow problems. But they will understand that increasing the quality of management is important."Despite the series of financial failures, Lim is confident of the overall performance of the economy, citing stable macroeconomic fundamentals and the recovery of exports under the declining won against the dollar. "South Korea's macroeconomic indicators show speedy recovery," he said. "We estimate the economic growth rate in 1997 at 6 percent. Our economic growth rate is higher than that of Japan. Exports grew very fast in July and August."The government plans to further improve the investment environment for foreigners through deregulation to attract value-added industry and technical transfers, Lim said, adding that the government may even allow 100 percent ownership by Japanese companies.Although the won is falling against the dollar, Lim said the current currency crisis in Southeast Asia will not affect South Korea, citing the ongoing liberalization efforts of the financial market. "In Thailand, the government adopted a policy that does not reflect fundamentals in the exchange market," he said. "Under our system, fundamentals are reflected in the market."Lim also showed confidence that the decline of the won will not be a serious blow to the economy. "Many countries are facing a strong dollar policy," Lim said. "The decline of the won is moderate compared with the yen. Also, the won is more stable than those currencies in Southeast Asia. I don't think that the decline will harm the economy seriously."
