[EDITORIALS]Time to Ease Pressure on Companies

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[EDITORIALS]Time to Ease Pressure on Companies

Signs of growing discord between the business community and the government are raising concerns. Park Yong-sung, chairman of the Korea Chamber of Commerce and Industry, and Jwa Sung-hee, president of the Korea Economic Research Institute, recently pointed out problems caused by the government's policies toward chaebols and its excessive regulations on companies and requested reform. Lee Nam-kee, chairman of the Fair Trade Commission, has offered to hold a press conference to flatly reject their demands. He used tough expressions, saying "The chaebol system is lethal to the nation's economy," and "Do they demand the government should not crack down on even drunken driving?" Such antagonism between the business community and the government, the two leaders of the Korean economy, is not helpful in weathering the current difficult situation, including the export slowdown and business downturn.

First of all, the government should open its ear to the voices of the business community instead of denouncing it as "anti-reform." Of course, the business community still has a lot of things to set straight. The business environment has changed. Now, corporations abstain from careless business expansion, since a random expansion can cause the collapse of a firm. The relevant regulations now require extensive reform because they are suppressing firms' will to invest and the vitality of the economy by hindering flexible decision-making. Even Deputy Prime Minister Jin Nyum has acknowledged the problem of the "regulations made under crisis situation."

The government should use the situation a chance to reduce restrictions and secure freedom in corporate activities. Through reinforcing the institutions to stem the dictatorship of a largest shareholder, such as outside director system and outside audit system, the government will solve the problems which it has been worried about. First, the government should abolish the 30 major conglomerates designation system or reduce the number of major companies. Among the 30 conglomerates, the top four business groups and the remaining firms have great differences between them in their scale. Accordingly, it is irrational to bundle 30 companies to supervise indiscriminately. And, what company would make efforts for its business, if it is suppressed by double or triple regulations, including restrictions on total investment, pressured into unraveling cross-affiliate guarantees on debts and the tracking of deposits to investigate cross-affiliate trading. If it is considered that foreign companies operating in Korea are not suppressed by such regulations, it is natural that some complain of discrimination. As for the limitation on total investment amount, a more rigorous inspection is needed on whether abolishment of the system would cause problems such as reckless expansion to fleet-like business. Since the system was abolished in 1998, there have been no big problems, while financial structures of the 30 major conglomerates have improved. The number of affiliates have increased but it has resulted mainly from spin-off of the firms. The more basic problem is the view of the government and politicians of the business community. The business community is worried that the government holds a hostile attitude toward it. The assertion, "control of the capital by the people," by the head of Center for Free Enterprise, represents the atmosphere in the business community. Such anxiety about the basic issue is lethal to the Korean economy. The government should make efforts to remove such worries from the business community.
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