Chaebol defenders start to surfaceIn response to the moves by some politicians and the Fair Trade Commission to tighten punishment for owners of conglomerates, members of the local business community and other politicians have expressed their opposition.
According to the JoongAng Ilbo, Kim Yong-tae, a lawmaker from the ruling Saenuri Party, said yesterday he will never accept the proposed legislation to reform the country’s fair trade law. “Some ‘toxic clauses’ are never acceptable, and I will draw up a replacement,” Kim said.
Kim is known as one of few lawmakers opposed to the Park Geun-hye government’s economic democratization policy.
If he remains firm in his opposition, there is a possibility the bill will not pass the National Assembly this month.
Yoo Il-ho, another Saenuri lawmaker, also expressed doubts. “It is too much to jail [chiefs] even though there is no objective evidence,” he said yesterday.
Others said there is a need to enhance regulations on internal transactions, but that should not hurt businesses.
The FTC and legislators plan to add clauses to the current fair trade law, including imprisoning chaebol owners for three years or less if they are involved in unfair transactions among group affiliates.
Currently, only the involved affiliates are punished.
Another new clause deals with punishing chiefs if unfair internal transactions are discovered at a subsidiary in which the chairman’s family owns more than 30 percent. Even if there is no evidence of executive involvement, the chiefs can be punished.
The National Policy Committee and the FTC are coordinating details of the reform bill. Ruling and opposition party lawmakers have pounded out a general agreement. The committee is scheduled to deliberate the bill April 17 and send it to the floor by May.
If approved, the revised fair trade law would take effect in October.
According to the FTC, the proportion of internal transactions at conglomerates led by owners’ families stood at 26 percent in 2011, compared to 17 percent at companies without family members. At subsidiaries in which founding families held stakes of 50 percent or more, the portion of internal contracts was as high as 56 percent.
“There is a high likelihood that owner families intentionally set up unlisted companies to continue internal transactions for their own interests,” the FTC said.
The Federation of Korean Industries (FKI) has strongly opposed revision of the law, saying that internal transactions are normal operations at groups where subsidiaries are vertically integrated for higher efficiency and productivity.
“Even in the United States and Japan, internal transactions are not being regulated,” the largest business lobby organization said in a statement.
Meanwhile, the FKI released a survey of 33 U.S. economists, saying that excessive regulation of businesses is a threat to the Korean economy, and that 49 percent of the respondents cited government regulations as a liability.
“It is desirable to make an environment that emphasizes autonomy and responsibility rather than imposing rules and regulations, if the government wants to realize a creative economy and economic democratization.” said Bae Sang-geun, an official at the FKI.
By Song Su-hyun, Joo Jeong-wan [email@example.com]