State authorities are pushing to give three more years to the government’s stimulus policies for corporate restructuring, financial sources said on Sunday.
The existing corporate restructuring stimulus policy, scheduled to be in effect until Dec. 31, 2013, will be extended to the same day of 2016 if the policy proposal is able to gain lawmakers’ approval.
The restructuring stimulus act in question, which allows indebted firms to continue business operations over the course of clearing debt, is considered more favorable to companies than the previous bankruptcy declaration act, which altogether halts a troubled firm’s business.
The proposal was made by ruling Sanuri Party lawmaker Kim Jong-hoon, and is pending at the National Assembly.
Such a move is reflective of the government’s attempts to escape a possible “domino” of bankruptcies of companies that have become nonviable amid a sluggish economy, industry watchers said.
The need for stimulus extension has been raised as low interest rates seriously undermined financial groups’ profit in the first half. KB Financial Group reported on Friday that net profit in the first half dipped by 50.3 percent from a year ago.
Engineering and construction firms, shipbuilders, and shipping companies altogether reported gloomy performances as well. Lotte Engineering & Construction won zero overseas construction bids in the first half, and is not optimistic about the second half either, a source closely related to the matter said.
As banks and exporters began to falter, smaller, economy-sensitive businesses also have been drawn into negative territory.
But the breaking pitch is expected to see tangible effects only when and if the government is able to keep its distance from political interests and prevent moral hazard posed by the chief executives of embattled companies, the sources said.
The Financial Services Commission, the country’s highest financial decision maker, has not officially given its stance about the policy extension.
“The crew in charge of that matter has not yet answered our confirmation inquiry,” a FSC spokesperson said.
By Chung Joo-won (
joowonc@heraldcorp.com)
