중앙데일리

[EDITORIALS]Wrong Track on Regulation

May 15,2001
We are deeply concerned that the controversy over the government's policy on reforming business conglomerates, or chaebol, is unfolding in an irrelevant direction. The Federation of Korean Industries, a leading business association, proposed Monday that the government ease 33 business regulations, following the business community's demand to scrap the ceiling on domestic companies' equity investments in other companies, which now stands at a maximum of 25 percent of their net assets.

The administration and the ruling Millennium Democratic Party were quick to convene a policy coordination meeting and decided not to accept the demands. Lee Hae-chan, the ruling party's chief policymaker, strongly denounced the business community, making it clear that the existing chaebol reform policies will remain intact. The Millennium Democratic Party blasted the opposition for "defending the chaebol," while opposition lawmakers blamed the ruling party for trying to dismantle them.

We are concerned that the administration and the ruling party see such demands as a challenge to the government's authority and reforms. For instance, it is a political approach for them to criticize the demands for eliminating the equity investment limit as attempts to go back to the era before the 1997-1998 financial crisis. It is a fact that chaebol are responsible for the foreign exchange crisis, but a more fundamental cause was the government's faulty opening of the financial markets, bad financial policies and loose management of its foreign exchange reserves. In addition, the sputtering economy and social disorder were caused by the government's excessive market intervention. Nevertheless, the government seems to be blaming everything on the large conglomerates in an attempt to escape blame.

The business community, of course, has its own problems. Equity investment by the nation's 30 biggest groups in other companies stood at 32.9 percent of their net assets as of April, far exceeding the 25 percent limit. Some businessmen deserve blame for corrupt practices, but most corporations are no longer what they used to be; they are now closely watched and subject to many more market forces.

It is time that the government adjusted the specific direction of its chaebol policies while maintaining the principle. In other words, it should separate business activities from ownership issues. It should implement rules to prevent owners from monopolizing management control and beef up penalties for illegal inheritance or transfer of wealth. The government should also be flexible on the equity investment limit. Can a 25 percent limit curb the chaebol's overdiversification, while a 26 percent ceiling cannot? The government is also wrong in defining business conglomerates as evil and independent firms as good. It is against market principles to apply uniform standard for regulations without distinguishing well-performing companies from poor performers. More importantly, there needs to be a realistic change of understanding: Large corporations are not the problem; they are partners for economic development. With such a change, the issues of deregulation will be solved automatically.

Our immediate challenges are to strengthen corporate competitiveness and economic recovery. Without a recovery, it is impossible to lower the unemployment rate and achieve social stability. It is counter to national interests to be embroiled in an empty controversy over whether to defend or break up the chaebol without contemplating such urgent and essential issues.



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