Corporate overhaul efforts unsatisfactory: survey

SEOUL, April 5 (Yonhap) -- Current corporate restructuring efforts are
"insufficient" according to local banks and think tanks here, as lenders face
difficulty in pinpointing ailing firms amid a protracted economic slump, a survey
showed Sunday.
A total of 10 respondents out of 12 heads of economic institutions and banks
surveyed assessed ongoing bank-led efforts to weed out troubled companies as
unsatisfactory, a poll conducted by Yonhap News Agency showed.
South Korean creditor banks have sought to isolate ailing companies for fear that
a possible bankruptcy chain reaction could undermine the soundness of the banking
sector and deal a harsh blow to the economy.
"As the corporate restructuring process is being led by creditor banks, they
cannot help but be less aggressive in selecting nonviable firms," said Kim
Tae-joon, president of the Korea Institute of Finance.
Local creditor banks decided to end support to seven ailing companies and
reschedule debts at 24 builders and five shipbuilders. But they have been under
growing criticism for their reluctance to weed out troubled corporate clients, a
step the government says is necessary for providing much-needed liquidity to the
real economy.
The survey showed that unlike the 1997-98 Asian financial crisis, current
conditions make it difficult for banks to assess and preemptively respond to the
possible insolvency of companies. A decade ago, several Korean conglomerates
collapsed under a pile of mounting debt, prompting the government to pour public
funds into the teetering financial firms as part of revamp efforts.
"Due to economic uncertainty, it is not easy to elicit consensus over the depth
and direction of the corporate restructuring process," said Kang Chung-won,
president of Kookmin Bank
Meanwhile, eight respondents predicted that the Korean economy may begin to
recover in the first half of next year.
"It is too early to say that the Korean economy is bottoming out," said Kim
Joo-hyun, president of Hyundai Research Institute. "Sharp falls in exports and
consumer spending eased, but that does not mean that their declines have ground
to a halt."
Several economic indicators raised cautious hopes that Asia's fourth-largest
economy might hit a bottom.
In February, declines in the country's industrial output slowed 10.3 percent from
a year earlier, slowing from a 25.5 percent on-year fall the previous month.
Production gained 6.8 percent on-month in February after posting a 1.6 percent
advance in January.
South Korea's trade surplus reached a record US$4.6 billion in March as imports
declined faster than exports.
Others point to uncertainty surrounding the global economic slump and sluggish
job markets as signs that it is premature to say the economy is entering a
full-blown recovery phase.
The Korean economy shrank 5.1 percent in the fourth quarter from three months
earlier, the worst performance in 11 years, due to tumbling exports and weak
domestic demand. Asia's fourth-largest economy is widely expected to post
negative growth this year, with the government predicting a 2 percent
contraction.
sooyeon@yna.co.kr
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