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Seoul says it takes time to launch funds for corporate restructuring

Korea's finance minister said Monday that it will take time to decide the exact amount of bailout funds needed for corporate restructuring in Asia's fourth-largest economy.

Talks of corporate restructuring funds have been making headlines in Korea as the government is pushing to restructure loss-making shipbuilding and shipping industries, among others, which have been a drag on the Korean economy struggling with slumping domestic demand and faltering exports.

Finance Minister Yoo Il-ho (second from right) (Yonhap)
Finance Minister Yoo Il-ho (second from right) (Yonhap)

In particular, Korean President Park last week stressed the necessity of Korean-style quantitative easing to help state-run banks secure money needed to push for corporate restructuring and the possible role of the central bank in the process.

The Korean government has demanded the Bank of Korea (BOK) use its exclusive right to issue new banknotes to take over the liabilities held by state-run Korea Development Bank, while the central bank has not budged an inch in opposition to the growing call, noting that such a move would be illegal under current law.

Earlier this week, however, BOK Gov. Lee Ju-yeol said that the central bank "will actively fulfill its necessary role in the process," signaling that the bank may join the government-led restructuring move.

"We don't have to hurry to make a decision (on the issue)," Finance Minister Yoo Il-ho said at a dinner meeting with Korean reporters here. Yoo is staying here to participate in the finance ministers' and central bank governors' meeting of the Asian Development Bank to be held Tuesday and Wednesday.

He said a task force team comprised of officials from the finance ministry and the BOK put together to discuss ways to increase the capital of state lenders will start on Wednesday.

"There might be some progress during the talks, but I don't think they will come up with concrete measures," said Yoo. "We have to see how much money the companies need first. We can't expect the amount of the funds for the policy lenders right now."

But he said he is not intending to place all financial responsibility for corporate restructuring on the central bank.

"We're looking for the best combination of fiscal and monetary policies," he noted.

The finance minister, who also doubles as the deputy prime minister for economic affairs, refuted opposition parties' claims that the government should increase corporate taxes to raise the bailout fund.

"They say it needs 5 trillion won ($4.4 billion), but I don't think it's enough," he said. "It's not a good policy to collect taxes here and spend the money there."

The minister said he has no plans to lower the government's earlier growth target of 3.1 percent for 2016, as some economic indicators are showing signs of recovery.

But Korea's exports slumped 13.1 percent on-year in the first quarter, while gross domestic product (GDP) grew 0.4 percent from three months earlier, down from a 0.7 percent on-quarter expansion for the fourth quarter of last year.

The BOK slashed its growth outlook for 2016 to 2.8 percent from a 3.0 percent forecast three months earlier and the International Monetary Fund downgraded theirs to 2.7 percent. (Yonhap)

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