Global Standards and Koreas Economic Reforms

Abstract

Korea"s economic performance has undergone tremendous scrutiny since the devastating financial crisis of December 1997, and this has forced a reevaluation not only of the miracle of Korean economic growth but more importantly the underlying paradigm.

Unfortunately, countries in crisis have little recourse but to accept the prevailing wisdom as to how the international system operates, and indeed globalization and standardization impose a new discipline on countries that cannot be evaded. In the case of Korea, the authorities were confronted with the dual need of restoring confidence and growth to a demoralized economy and public, while at the same time instigating drastic changes in the conduct of public policy. But the basic policy dilemma between crisis management and institutional reform is seen in the dichotomy of treatment between the "top five" chaebol and the 6-30 or 6-64 firms.

The structure of this paper is to provide a Report Card on Korea"s reform from the following perspectives: ⅰ) what has the record or corporate restructuring since early 1998; ⅱ) what is the status of corporate governance reforms; and ⅲ) what progress has been made in financial restructuring, particularly the recapitalization and repositioning of the banks.

And the assessment of public policy reveals: ⅰ)the importance of sustainable corporate restructuring, both for the long-term viability of the Korean industrial sector but also for the long-term financial health of banks; ⅱ)the need to improve corporate governance and protect the public interest, which will require a further re-mooring of the roles of the corporation, the shareholders, the regulators, and the government; and finally ⅲ)the importance of dealing with the forgotten issue in Korea, namely, the respective roles of the taxpayer and the owners of the chaebol.