IMF 기자회견문(전문)

PRESS CONFERENCE (MOFE, July 14, 2000) Opening Statement David T.Coe IMF Senior Resident Representative As you know Minister Lee, Hun-Jai and Governor Chon, Chol-Hwan have signed a letter of intent(LOI) addressed to Mr.Horst Kohler, Managing Director of the IMF: ◇The LOI and the Menmorandum of Economic Politics attached to the letter were discussed with the government when the IMF mission was here during the first two weeks of June. The Fund mission worked closely with staff of the World Bank, particularly in the area of corporate restructuring, as we have throughout the program. ◇The LOI is for the final review of the IMF program with Korea, which ends on December 3, 2000. The letter of intent and a report by the IMF staff will be discussed by the Fund"s Executive Board in late August. The review of the program is not complete until it is approved by the Executive Board in that meeting. Before taking questions, I would like to briefly highlight a number of important points in the LOI and the Memorandum of Economic Politics. ◇First, the Korean ecomony continues to perform strongly and the economic outlook is very positive. The conduct of monetary and fiscal policies has been appropriate, and both are contribution positively to robust growth and low inflation. ◇In the area of social protection, policies are being redirected away from short-term emergency measures toward a longer-term strategy that preserves incentives, such as the new livelihood protection law. With the macroeconomic situation in solid shape, much of the LOI deals with issues related to financial sector restructuring. ◇The government indicates in the LOI that it is committed to withdrawing from its involvement in the commercial banking system that resulted from the 1997 crisis. To this end, the government will announce a strategy to divest itself of the shares in the commercial banks obtained in the context of recapitalizing the banking system during the crisis. ◇The government has taken steps to create clean banks based on forward-looking criteria for loan classification and provisioning, including loans to companies in workout programs. The data on the level of non-performing loans and necessary provisioning released by the FSS on June 30 were an important step forward in that forward-looking criteria were fully applied to all loans. While it will take time to gain full expertise in applying forward-looking criteria, loan classification requirements have clearly moved much closer to international best practice. The figures released on June 30 indicate that additional provisioning requirements are manageable, which should bolster market confidence. ◇Now it is up to the banks, under the supervision of the FSS/FSC, to exercise continued vigilance and ensure that asset quality is preserved. Thus will help to convince markets that the known credit risks have been provisioned for, and that banks are making operating profits sufficient to meet any new credit costs in the immediate future. ◇Full disclosure by banks of their financial condition, together with improved auditing and governance, will be necessary if depositors are to be able to impose market discipline on the banks in an informed way, which will be necessary once partial deposit insurance is restored on January 1 of next year. ◇In the investment trust sector, the move-to-market valuation has gone relatively smoothly because the amounts invested in book-value funds had declined considerably. The ITC industry needs to move from a quasi-banking operation to genuine fund management, where fund managers act in the interest of investors, and where investors bear the risks. Important steps have been taken to improve governance and disclosure, and the supervisory authorities will need to ensure that they are forcefully implemented. Financial sector reforms are closely interwined with corporate reforms, since banks are only as strong as their borrowers. ◇Continued vigilance by banks over the quality of their balance sheets is not only important for the banks, it is also critical for corporate restructuring because it means that banks will exercise market discipline on the corporate sector. ◇Further corporate sector reform and restructuring are essential to restore the health and competitiveness of the corporate sector and to ensure that improvements in financial institutions" balance sheets are durable. Market discipline imposed by shareholders will be important to discourage the chaebol from ill-advised and excessive investments financed by debt. ◇Successful corporate reform will require the strict application of prudential regulations, enhanced risk management techniques, elimination of anti-competitive practices, insolvency reform, and improved corporate governance. In closing, let me say that Korea deserves well functioning and well governed, worldclass financial and corporate sectors. We believe that the government"s program, summarized in the LOI and MEP and supported by the IMF and the World Bank are clearly moving Korea in that direction. The Korean people have come a long way and worked hard to recover from the recent crisis. To ensure sustained future prosperity and improve the functioning of the financial and corporate sectors. Thank you. I will be happy to take questions now.