Be upfront with businessesPresident Park Geun-hye said that some of the corporate reform bills being reviewed in the legislature are not part of her campaign pledge to “democratize” economic activities. She said some of the measures could be “excessive” while presiding over a senior presidential secretariat meeting on Monday. Her comments are being perceived as a warning against overly strict corporate bills that could hamper corporate and economic activities.
We have repeatedly called for restraint in excess regulations at a time when aggressive corporate investment and hiring are vital to stimulating the slow-moving economy. But regardless of the president’s words of concern, corporate insecurity and public jitters over economic democratization persist. It is unclear what economic democratization policies are part of the president’s campaign pledges and we don’t know whether she approves of certain proposed rules.
The president urged more aggressive corporate investment and disclosure of corporations’ cash assets and liquidity reserves. She said that just 10 percent of their spending would be tantamount to the government’s proposed supplementary budget. She is sending a message to large companies that she will defend them from harsh regulations if they beef up investment.
But her coaxing may not be enough to stimulate companies. The government is gearing up for broad-scale pressure and regulations against large companies. The Fair Trade Commission and Financial Services Commission as well as the Board of Audit and Inspection are gaining on large companies as they delve into antitrust issues, unusual profits and suspicious inheritance. The National Tax Service also plans to increase audits to raise revenue. With various authorities breathing down their necks, companies will hardly be relieved by words of assurance from the president.
Park also stressed that it would be unfair to discriminate against local companies while the government endeavors to attract more foreign investment. But we still don’t know exactly what she means. She said that deregulation is necessary to stimulate corporate investment and that support for companies can coincide with economic democratization.
Companies are refraining from investment due to concerns about new regulations, depressed demand at home and abroad and a lack of new investment targets. They will increase spending when uncertainties and risks clear up.
If the government sincerely hopes to help boost corporate investment, it should create a corporate-friendly and investment-inspiring environment instead of pressuring businesses to spend more. Before that, the government should coordinate policies and stop confusing the corporate sector with mixed signals.