Editorials
Wednesday, August 18, 1999Korean conglomerate
submits to reformsTHE Asian economic crisis that began two years ago focused attention on lax banking practices and excessive borrowing. In South Korea, the economy is dominated by huge conglomerates, called chaebol, which were severely damaged by the abrupt downturn.The issue: South Korean conglomerates, called chaebol, were severely damaged by the collapse of the economy.
Now two of the three largest chaebol have finally accepted the need to face the new realities. Creditors of the stricken Daewoo Group on Monday approved a restructuring plan that will reduce the country's second-largest conglomerate -- with 22 affiliates and assets of some $65 billion -- to a core group of six auto-related companies.
Daewoo is so big that it accounted for 5 percent of Korea's gross national product last year and 10 percent of its exports. But it had debts of at least $50 billion. Foreign companies have expressed interest in buying Daewoo Electronics, Daewoo Motors and other units.
Also on Monday another troubled conglomerate, Samsung Group, pledged to cover $2.32 billion owed by its bankrupt affiliate, Samsung Motors Inc. In exchange, Samsung's creditors agreed to drop financial sanctions, including a freeze on new loans. Samsung is Korea's third-largest conglomerate. It put its auto unit into court receivership in June and had resisted creditor demands to guarantee the debts.
THE twin moves were viewed as a shift in power from the chaebol chiefs who have long dominated the economy to newly assertive bankers. The era of easy bank credit and of chaebol propping up unprofitable units seems to be coming to an end.
President Kim Dae-jung, addressing the nation on Sunday, called for more reforms by the chaebol, promising that the growth of young seedling companies would no longer be stunted by the banyan trees of the chaebol.
"I will become the first president in South Korean history to reform the chaebol and straighten our economy so that it can grow on the basis of the middle class," the president declared.
AS in Japan, the Korean conglomerates have led the way to unprecedented national prosperity, but their heavy use of credit left them vulnerable to a downturn. Restructuring of Daewoo and other chaebol is a necessary though painful step in restoring the Korean economy to health.
Korea has gone farther with its restructuring than other Asian countries. The stock markets, which are up substantially this year, took the latest developments in stride.
A major question is whether Korea's bigger neighbors, China and Japan, will be willing to tackle comparable painful reforms.
Puerto Rican sentences
COMMUTATION of lengthy prison sentences being served by Puerto Rican activists for crimes committed during the 1970s and early 1980s seems to have been an appropriate gesture by President Clinton, although it fell short of satisfying demands for unconditional amnesty.
The terms of the activists' prison release may require some tailoring, but total amnesty should be rejected because of the serious nature of their crimes.
The president and Hillary Rodham Clinton, a prospective candidate for the Senate from New York, were under pressure from New York's sizable Puerto Rican community to commute the sentences of the 16 prisoners. Rep. Nydia Velazquez, a Puerto Rican from Brooklyn, complained that the 16 "never caused personal injury to anyone" and should have been released unconditionally.
However, the Puerto Ricans could not be considered simply "political prisoners." They were convicted not only of sedition and conspiracy but such charges as armed robbery, possessing unregistered firearms, manufacturing bombs and taking hostages.
THEY were given prison sentences ranging from 35 to 90 years, of which they have served 14 to 25 years. Two already had been released from prison, and Clinton's action relieves them of paying outstanding fines.
The substantial time served may have been adequate. A White House spokesman explained that their sentences were "far out of proportion to the nature of their crimes."
The White House said the Puerto Ricans' release carries only the condition that they renounce the use of violence -- a reasonable stipulation. An official denied the assertion that the commutation forbids them from engaging in political activities.
A standard rule for parolees is that they avoid association with known felons without the knowledge of paroling authorities.
Parole boards often make exceptions to allow contact with spouses and other relatives. Similar arrangements should be made in the case of the Puerto Ricans, many of whom are related to each other.
Clinton's action may have been influenced by anger about a Navy firing-range accident that killed a civilian security guard on the Puerto Rican island of Vieques as well as by his wife's ambitions in elective politics.
Whatever the motivation, the decision appears justified by the circumstances of the cases. Despite the criticism, the commutation of the sentences should not be extended to unconditional amnesty.
Published by Liberty Newspapers Limited PartnershipRupert E. Phillips, CEO
John M. Flanagan, Editor & Publisher
David Shapiro, Managing Editor
Diane Yukihiro Chang, Senior Editor & Editorial Page Editor
Frank Bridgewater & Michael Rovner, Assistant Managing Editors
A.A. Smyser, Contributing Editor
