Politics hurting foreign investmentA multibillion-dollar investment deal may be lost due to a delay in legislation at the National Assembly. Needless to say, corporate investment is vital to shake the economy out of stagnation and create new jobs.
Large-scale capital investment could spur much-needed domestic demand and help the job market. However, such a great opportunity could be wasted because the legislature has been dragging its feet on revising the related bills.
SK Global Chemical and GS Caltex planned to bring Japanese capital worth up to 2.31 trillion won ($2.06 billion) to build a new chemical facility. If local and foreign companies jointly put up and create a subsidiary, they can build and run the multibillion-dollar new production facility here. But under the current Fair Trade Law, if a subsidiary of a company affiliated with a holding company wants to create a smaller unit, it must invest a 100 percent stake - a regulation imposed to prevent parent groups from sprawling into other fields using relatively small stakes.
But the problem is that this regulation also applies to cases in which domestic companies have no other choice but to invest jointly in particular projects with foreign partners. Local companies often need to tie up with their Japanese counterparts for their raw material supplies, technological developments and production-saving costs, but the local Fair Trade Law has been a stumbling block to such synergistic investments.
Under President Park Geun-hye’s orders, the government decided in May at its first trade promotion meeting to revise the foreign investment promotion law to make foreign investments an exception to this particular fair trade regulation.
But the revised foreign investment law has been thrown out by the current National Assembly subcommittee session, as it revises relevant industrial regulations.
Lawmakers from the opposition party are vehemently opposed to the change because they regard it as favoritism toward Korea’s conglomerates, so the bill has become a victim of partisan wrangling.
But our legislators overlook how desperate and thirsty our economy is for new capital investment. The government plans to reintroduce the law during the regular session of the National Assembly slated for September. Without legislative support from the Assembly, however, there is no hope that the local economy will be back on track in the second half.