With some new laws, companies here could grow, along with the economy.
President-elect Lee Myung-bak, front row, fourth from right, with top Korean business leaders. [Joint Press Corps]
What exactly are business-friendly policies?
This means that the Korean government will make it easier for companies to carry out their business without having to deal with a lot of cumbersome regulations. This will allow companies to easily build plants, develop new products and conduct other business activities.
Compared to many other countries, Korea has many business regulations that make it hard for foreign companies to conduct business here. Since working in Korea is so difficult, many companies prefer making new investments in other countries. Hence, you could say that those other countries are more “friendly” to foreign business.
But if all goes as President-elect Lee has planned, various regulations will be eased, leading more companies to expand their investments here. This could pull up the Korean economy’s growth rate and create more jobs for Koreans.
So what are these regulations that the new president would like to remove?
One is the limit on what very large companies, or conglomerates, can invest in other companies.
In the past, conglomerates, or jaebeol in Korean, took over other companies quite recklessly. These conglomerates were able to buy large stakes in smaller companies. Eventually, large companies were able to take over the smaller companies.
The limit was imposed on conglomerates in 1987 to give smaller companies a fair chance at competing. The only time the limit hasn’t been in effect since its introduction was during the Asian financial crisis in 1998.
This limit prevents conglomerates worth more than 10 trillion won ($10.59 billion) from investing 40 percent of their assets or more in another company. But this has provoked complaints from large firms. Conglomerates say this law prevents firms from investing or entering new businesses as freely as they’d like.
President-elect Lee agrees. “There are no regulations that put a cap on large conglomerates’ investments in any other country in the world,” he pointed out.
Japan used to have a similar regulation, but got rid of it in 2002. When this happened, big Japanese companies that had moved their production bases to foreign countries returned to Japan. Some of these companies were the auto giant Toyota, the camera company Canon and the electronics company Sharp. As of 2006, Japan has seen 1,782 new plants open, a sharp increase from 844 in 2002.
The new Lee administration hopes that Korea will see similar effects after the Korean law on the ceiling limit is removed.
Another business-friendly policy is President-elect Lee’s plans to ease laws that keep non-financial companies like manufacturers from owning financial companies like banks. The law was established in the early 1980s because of lawmakers’ fears that if non-financial companies own banks, they might use the money in the banks like it was money in their personal piggy banks.
Due to the law, even if large Korean companies have sufficient cash, they cannot purchase or establish a bank. So when many local banks were in financial trouble and put themselves up for sale during the 1997-98 financial crisis, foreign companies bought these Korean banks. Some of the banks that were sold were Korea Exchange Bank and Korea First Bank.
Currently, among seven Seoul-based commercial banks, six have foreign shareholders with more than a 50 percent stake. Lee plans to gradually allow non-financial companies to hold greater stakes in banks.
The new administration also plans to reduce corporate taxes. These are taxes taken from companies’ profits. Also planned is to easte the restrictions on large companies’ plant construction in the Seoul metropolitan area in order to reduce burdens on companies.
Lee’s team also plans to change an airport regulation to allow the top managers of businesses to use VIP lounges in airports. Currently, only high-ranking government officials, such as the president and his ministers, are allowed to use the lounges. Lee’s team has also asked the National Tax Service and the Fair Trade Commission, which are watchdog agencies, to stop excessively investigating companies. Lee thinks that this will reduce burden on the business community.
All of these planned changes are part of the president-elects’ plans to improve Korea’s economic growth. During Lee’s campaign in the presidential election, he pledged to raise Korea’s economic growth to 7 percent during his five-year term.
He thinks the best way to do this is to allow companies to earn as much money as possible by allowing more investments. This will provide more money for production. Lee thinks this activity will create more jobs for Korean people and raise the national income.
President-elect Lee thinks it’s very important to let companies freely conduct their business and attract more investments.
But not all people think Lee’s plan is good.
Some people say that Lee’s plan to ease business regulations will only help large conglomerates, since they’re the businesses that are mainly affected by these regulations.
Other naysayers think these regulations will make conditions for small firms worse. These new laws could make it difficult for these small companies to survive and compete with conglomerates.
Civic groups and labor groups are expressing concerns.
Other people say Lee’s plan to spark Korea’s economic growth to 7 percent is unrealistic. As a country’s economy gets larger, its growth rate tends to slow. Some say Korea has already grown to the level of a developed county, so it will be difficult for it to grow by 7 percent. Over the last five years, Korea’s annual economic growth has been 4.5 percent on average.
By Sohn Hae-yong JoongAng Ilbo [symoon@joongang.co.kr]
with the Korea JoongAng Daily
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