[OUTLOOK]Candidates compared on economyThree principal issues of corporation policy reveal the presidential candidates' views on the national economy. The issues are:
* Whether to allow class-action lawsuits by shareholders;
* Whether to loosen the limit on investments by the largest business groups, and
* Whether to cut the corporate taxes.
The candidates' answers to the question about class actions will show their views on the current state of corporate transparency in Korea. Their reply on investment restrictions on conglomerates will show their approach to the concentration of economic power in the jaebeol. And their stance on corporate taxes will reveal views on companies' contributions to society, income redistribution and government finances.
Lee Hoi-chang, the presidential candidate of the opposition Grand National Party, attaches importance to guaranteeing liberal management to companies and relieving burdens on them. Accordingly, he says the 25 percent ceiling on investments in other companies by the largest conglomerates should be raised, and the corporate income tax should be reduced. But he says that under current conditions, such changes should be promoted slowly.
On the other hand, Roh Moo-hyun, the candidate of the governing Millennium Demo-cratic Party, seems to have somewhat negative views on Korean companies. He proposes very rigorous prerequisites to the relaxation of regulations on firms. He also opposes cutting the corporation tax.
Mr. Lee says it is too early to introduce class-action lawsuits, because Korea's corporate governance is not yet transparent. "Even U.S. companies, which are known to have relatively transparent governance, are suffering from excessive lawsuits by shareholders. So how will Korean firms fare?" Mr. Lee says.
Accordingly, "the government should make efforts to improve the transparency of companies' management through reinforcing supervision and punishing accounting misstatements" before introducing the class-action system, Mr. Lee says. And, he adds, "the government should set up a system to prevent shareholders from filing too many lawsuits."
Mr. Roh also has negative views on Korea's corporate governance. But unlike Mr. Lee, he believes that the introduction of class-action suits should be hurried all the more because companies' management is not transparent. If there are excessive lawsuits by shareholders, Mr. Roh says, it will be because the companies invited them by their conduct. And abuse of the class action system will not be serious, Mr. Roh says, "because the government plans to apply class action to only a few serious cases, such as stock-price manipulation." And even if class actions have some negative effects, he adds, they can be corrected after introduction.
Both candidates say the management activities of Korean conglomerates should be improved to permit the relaxation of the investment restrictions on the largest conglomerates. But they have different views on the effectiveness of the restrictions.
Mr. Roh resolutely says, "I will keep the restriction system for a while as it is." He thinks the concentration of economic power is a serious problem. He adds he would loosen the restriction step by step, as conditions improve.
But he proposes many prerequisites to the relaxation, such as "proper functioning of the automatic regulation of companies by the market economy" and "improvement of company management to meet global standards." He says that he will "relax the limits step by step and will completely lift the limits at the point that all the affiliates of conglomerates operate independently from each other."
On the other hand, Mr. Lee says the restriction on investment by conglomerates has no effects on the concentration of the economic power: "Fifteen years have passed since the system was introduced. But it has contributed little to the jaebeols' imperial management and excessive expansion of businesses."
Mr. Lee says companies' investments should be based on the opinions of shareholders. "So it is related to the matter of corporate governance," he says. "It is not a problem to be solved by the fair trade act."
Regarding corporate taxes, both candidates are cautious. Mr. Lee says a reduction is needed. Mr. Roh says it would be difficult, considering the government's finance conditions.
"I will make the government's finances sound first, considering its current hardships in collecting public funds," Mr. Lee says. "And then I will cut the corporation tax, if needed, to attract foreign investment."
Mr. Roh is opposed to cutting corporate taxes. Compared to foreign countries, he says, corporate taxes in Korea are not high. And if they were cut, the tax burden on middle- and low-class consumers would expand, he adds.
Analysts express concerns about the candidates' views on the economy, because both men are reluctant to make any promises that would hurt the interests of particular groups.
Both candidates admit that free trade talks with the World Trade Organization are necessary in line with international trends. But regarding the opening of the agriculture market, especially the rice market, both men say that they will do their best to delay it as long as possible.
* The writer is a senior economic affairs writer of the JoongAng Ilbo.
by Kim Chung-soo