A POINT MAN ASSESSES THE DAMAGE (int'l edition)
You Jong Keun, now economic adviser to South Korean President-elect Kim Dae Jung, is the first major appointee of the administration. He spoke with Asia Correspondent Mark L. Clifford and Seoul correspondent Moon Ihlwan about layoffs, more chaebol failures, and his hope that Korea will emerge with a sounder economy than Japan's.
Q: How is Kim going to persuade Koreans to accept painful reforms?
A: He doesn't have any collusive ties with chaebol. So he has moral authority. I think reforms will be painful enough that there will be resistance for sure. We should offer carrots and sticks. The carrot is the vision for a better future. We can become a true economic power based on sound economic structures and institutions. And the stick is that if we refuse, then the pain will be prolonged.
Q: Kim Dae Jung changed his pre-election position on laying off workers and now favors it. Why the reversal?
A: Layoffs are inevitable for Korea's restructuring. In order to save the majority of workers, you have to accept sacrifices. Only then can you take care of those who get laid off. If they resist layoffs altogether, the whole boat sinks. We cannot survive this crisis with IMF-led assistance alone. Assistance from private financial institutions and investors is vital. They want us to reform our system so that we can revitalize our economy and earn enough hard currency.
Q: Why are the chaebol so resistant to change?
A: They have been cheating people and the international community by keeping three, four different sets of books. They now have to come out with transparent bookkeeping. When the facts are known, there will be calls for retribution from workers.
Q: What is your vision for Korea?
A: If we can stick to these reform measures--we have no alternative--then we will come out with a much more sound system that will enable us to overtake Japan [in enacting economic reforms]. Prime Minister [Ryutaro] Hashimoto has tried very hard but gets nowhere. We have an advantage because we have a heavily concentrated power structure, which I criticized in the past as a source of many ills in our society. But when wisely used, this can also be a blessing.
Q: Do you expect more bankruptcies among the top 30 chaebol?
A: It is inevitable. Some have piled up enormous amounts of debt. In a market economy, you would expect them to go bankrupt. In the past, the government kept them alive. We can no longer afford to do that. We will be paying the price of the sins of the past.
I think chaebol leaders will have to come up with voluntary measures. They can do it voluntarily, or they can be forced. The IMF program it-self will be very tough medicine for them, and we can toughen it up by providing additional incentives to restructure.
Q: Labor is threatening to go on strike if a bill to lay off workers is passed. How will you deal with that?
A: Labor is bluffing. If they really carry out their threats to call a nationwide strike, they will find themselves alienated by the people, and that will be the day of reckoning for them. I don't think they are that unwise.
Q: What is at stake in Korea for the international community?
A: I think the IMF and the U.S. have a great stake here, making Korea an example of success. The IMF has been blamed for prescribing wrong medicines, but it needs to show that they work here. We do not have a huge budget deficit, but we need to squeeze from the budget enough money to restructure and to build our social safety net.
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