Position of Korean Federation of Clerical Labour Unions on The Current Situation Precipitated by IMF Stand-by Credit Arrangement
1. The Causes and Roots of the Ill Health of Korean Economy
A. Chaebol Groups
- The average 'ratio of stockholders' equity to total assets' for the top thirty conglomerate chaebol groups is less than 20%. This has meant a constant high demand for credit and heavy upward pressure on interest rates. The practice of excessive borrowing by these chaebol groups to finance indiscriminate business expansion and diversification, to build up large slush fund for underhanded political contribution (among other things), and to speculate in land and property is the root cause of the current malaise of Korean economy.
- Small to medium enterprises (SMEs) were heavily disadvantaged by high interest rate and burdensom property and land cost. They were, as a result, unable to engage in technology development. Many have been forced into insolvency, bankruptcy, and closure. As a result, Korea has come to have a very lopsided -- or distorted -- economy. The lack of life in SMEs and complacent excesses of the chaebol groups have led to the general deterioration of Korea's competitiveness. Given this, the primary task of reform lies in breaking up the chaebol structure which has exercised unchallenged power and dominance in the economy.
B. Government
- The current economic ills of Korea stems from the failure to consolidate the domestic foundation, the government management of the economy under political motivation. The inherent weakness, however, had surfaced and aggravated -- to the extent of triggering the current crisis by government's mishandling of the liquidity shortage suffered by the Kia Group.
C. Primitive Government and Employer Attitude to Industrial Relations
and Constant Victimisation of Labour
2. Our Concern Over the Policy Recommendations of IMF
A. Recommendation for the Closure of Finance Companies
- We recognise that companies stricken with ill health -- even if they are finance and banking companies -- can be closed. However, we believe that such closures or fates of companies need to be in accordance with market mechanism. This means that we oppose the arbitrary efforts to restructure -- in shock treatment manner -- the finance institutions, which have operated for a long time in particularly Korean context, overnight along American pattern.
B. Recommendation on Employment Policy
- Korean society has arrived at a broad social consensus over employment issues. This was achieved through full debate -- at times involving confrontation. As all social consensus, the current consensus on employment issues involved considerable social cost. An effort to bring about a radical shifts in policy in this area without a process of building a social consensus will be perceived as identifying the working people as the roots of the current economic ills and forcing. It may trigger an explosive resistance given the sentiments and objective conditions pertaining in Korea.
- An approach which deals with unemployment and labour market flexibility issues in purely economic terms may result in extracting even greater social cost.
C. Liberalisation of Foreign Investment in Financial Institutions
- The IMF recommendation to open up financial institutions fully to foreign investment may be perceived by Korean people that IMF is carrying out an American agenda seeking to control all aspects of Korean Economy. As a result, it may give rise to a serious breach of Korean sentiments.
- Korean people would arrive at a conclusion that a full liberalisation of the financial sector recommended by IMF is a demonstration of the influence of an American interest. We cannot, given the situation, accept such a situation.
3. Measures for the Recovery of Korean Economy
A. Establishment of Transparency in Corporate Governance
-- Dismantling of the Federation of Korean Industries, the umbrella organisation of top 30 chaebol groups.
B. A suspension of talks for the closure of financial institutions -- creation of the favourable environment for self-regulated structural adjustment
C. Institutional Guarantee for Labour Participation in Debates for Labour Market Flexibility and Layoff
D. Establishment of A System for Employee Stockholdership
4. We Call for An American Explanation
- Korean government had appealed to the U.S. and Japanese governments before turning to the IMF. This appeal, however, was turned down. Korean people understand that the IMF stand-by credit is in fact serviced by American fund. Regardless of official American denial, Korean people believe that the U.S. agenda is behind the IMF actions.
- Given this, the call for a full liberalisation of the financial market for foreign investment can only be perceived as a preparatory measure for eventual American control of Korean economy.
- Internatinal speculative fund -- the so-called hot money -- is perceived as the vanguard of the American transnational interests. Once the financial market is openned fully to foreign investment, Korean financial sector will most likely become the playground of currency speculation of American funds. This will either bring about a total subjugation of Korean financial market or a even more devastating crisis.
- We call on the U.S. government to provide a full explanation to the concerns of Korean people. We will, in due course, request a meeting with the newly appointed American Ambassador to Korea.
5. Conclusion
In having put forward our views, we call on the IMF Team in Korea the following:
- Take serious note of our concerns and views
- Make arrangements, as soon as possible, to a consultation process with the representatives of the trade unions to discuss about our concerns and views. Towards this end, appoint a person responsible for the preparation of the consultation process
- In the absence of reasonable response to our requests, we shall undertake other actions as a part of our patriotic endeavour to upright the Korean economy on sound foundations.
December 2, 1997
IMF Taskforce, Korean Federation of Clerical Labour Unions