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Mr. Jongsoon Shin
This paper describes issues in Korea’s corporate sector, the need for restructuring, and the authorities’ initiatives and challenges. It then identifies lessons from other countries’ experience and conducts an econometric analysis based on cross-country aggregate data, compared with previous studies which mostly use firm-level data. This analysis finds that restructuring episodes, while sometimes challenging in the short term, have typically been associated with more rapid economic growth afterward. Corporate restructuring could have a negative effect on the labor and the financial markets in the short term, but is associated with positive growth through increased investment and capital productivity in the medium term, outpacing the negative effects.
International Monetary Fund. African Dept.

of the fourth review under the ECF arrangement . Concluding the fourth review will provide needed financing support to Guinea speedily. Staff fully supports the adoption and the implementation of the COVID-19 Emergency Plan, which is not yet included in the baseline scenario. Staff considers that including this plan and the program targets presented in this review remain achievable, with Guinea’s debt remaining at a moderate risk of external and overall public debt distress. Firm financing assurances are in place until the end of the arrangement, in view of

Mr. Jongsoon Shin

underpinned Korea’s past growth—for instance, shipbuilding and shipping—are confronting uncertain prospects. As in other countries, these and other industries—including the steel and petrochemical industries—have struggled with excess capacity. While Korean corporates overall appear relatively healthy, some corporates appear to require restructuring. Against this backdrop, the authorities and corporates alike have stepped up efforts to restructure debt-distressed firms in multi-pronged ways. Corporate restructuring is a daunting task, however, given its substantial

International Monetary Fund. African Dept.

(bank-exclusive) financing 1½-fold (for the median firm). This compares to an average 25 and 20 percent drop in bank and total financing, respectively, for firms with mixed financing ( Table 2 ). Table 2. Median Growth Rate of Bank Credit to Top 30 Firms, 2014–19 (Growth rate of total credit amount in 2019 with respect to 2014) By Financing structure Firms with only bank financing Firms with mixed financing 154% -20% By Debt sustainability Firms not in debt distress Firms in debt distress 197% 34% By

International Monetary Fund. African Dept.
Selected Issues
International Monetary Fund. Asia and Pacific Dept

has formed a 3-track restructuring strategy, based on urgency and risk, aiming to focus on key risks and facilitate industry-wide restructuring . Track 1 is to deliver industry-wide restructuring in cyclically sensitive industries—the shipbuilding and shipping industries. As the policy banks are the main creditors, the public sector is naturally closely involved in Track 1 restructuring. The main creditor banks have encouraged debt-distressed firms to come up with a comprehensive revitalization plan. The three major shipbuilding firms, as a result, revealed

Ms. Juliana Dutra Araujo, Jose M Garrido, Emanuel Kopp, Mr. Richard Varghese, and Weijia Yao

investment. For debt-distressed firms, there needs to be a comparison between liquidation value (that is, the recovery value of the assets if the firm were liquidated now) and the firm’s net present value (discounted future cash flows). At this juncture, the usual difficulties in determining firm viability are compounded by uncertainties around the extent of structural change induced or accelerated by the COVID-19 shock. Being mindful of these challenges and circumstances, some key practical considerations for viability determination include: ▪ Creditor-driven . The

Ms. Juliana Dutra Araujo, Jose M Garrido, Emanuel Kopp, Mr. Richard Varghese, and Weijia Yao
This paper presents principles that could guide the design of more targeted policy support and facilitate the restructuring of firms adversely impacted by the COVID-19 pandemic. To this end, the paper takes stock of vulnerabilities and risks in the enterprise sector and assesses countries’ preparedness to handle a large-scale restructuring of businesses. Crisis preparedness of insolvency systems is measured according to a newly designed indicator that includes five dimensions of the insolvency and restructuring regime (out-of-court restructuring, hybrid restructuring, reorganization, liquidation, and the institutional framework). Vulnerabilities tend to be more pronounced in jurisdictions with shortcomings in crisis preparedness, and those countries need to step up efforts to improve their insolvency systems.
International Monetary Fund. Asia and Pacific Dept
This 2016 Article IV Consultation highlights that Korea’s growth has slowed after decades of impressive economic progress. The economy is facing a number of structural headwinds, including unfavorable demographic developments, heavy export reliance, pockets of corporate vulnerability, labor market distortions, lagging productivity, and high household debt. Inequality and poverty are also of concern. Growth is projected to tick up to 2.7 percent in 2016 and 3.0 percent in 2017, with inflation remaining subdued. Credit is expected to continue to grow, partly reflecting the impact of interest rate cuts, but at a slower pace consistent with the tightening of prudential measures and the envisaged moderation in construction investment after 2017.
International Monetary Fund. African Dept.
This paper focuses on Guinea’s Fourth Review Under the Extended Credit Facility (ECF) Arrangement, and Financing Assurances Review. While performance under the IMF-supported program remains broadly satisfactory, Guinea faces significant downside risks related to coronavirus disease 2019 pandemic. The IMF will remain closely engaged with the Guinean country authorities as the situation evolves, and as the authorities further develop their policy responses and financing needs change. The ECF arrangement supports strengthening Guinea’s resilience, scaling-up growth-supporting investment and social-safety nets and promoting private sector development. Achieving the programmed basic fiscal surplus in 2020 will contribute to containing inflation and preserving debt sustainability. Mobilizing additional tax revenues and reducing electricity subsidies will create fiscal space to scale-up growth-supporting public investments and strengthen social safety nets. Implementing programmed tax revenues measures, adopting an automatic petroleum products price adjustment mechanism, and advancing the multi-year electricity tariff reform is key. A prudent borrowing strategy will support scaling-up growth-supporting public investment.