Call to enact law to boost economy

The government and lawmakers are calling for legislation on the so-called One-Shot Act to be implemented by the end of this year, to boost sluggish business sentiment and revitalize the nation’s growth.

The One-Shot Act is a special law designed to reduce legal procedures required by existing laws and provide tax cuts in cases of voluntary business sell-offs and purchases. The law also covers M&As on companies and industry sectors in crisis due to oversupply.

Korea is pushing to implement a benchmarked version of Japan’s Industrial Competitiveness Enhancement Act, implemented in 1999, which carries out successful M&As similar to the Mitsubishi Heavy Industries and Hitachi merger last year.

Saenuri lawmaker Lee Hyun-jae, the former head of Small and Medium Business Administration, and 27 fellow Saenuri lawmakers submitted a proposal to the assembly in July to establish the act. They hoped the Act can go in effect by early next year.

Rep. Lee hosted a public hearing along with the government, the nation’s five largest business lobby groups, the Korea Listed Companies Association and corporate policy scholars on Tuesday on how the special law is implemented and its impact on the Korean economy.

Minister of Trade, Industry and Energy Yoon Sang-jick, said, “The ongoing crisis of Korea’s major manufacturers could be a significant danger to the national economy as it basically means Korea’s economic competitiveness is on the verge and such a trend may remain for a long time.

“The One-shot Act will become a new paradigm for Korea, so that companies can move proactively and go ahead with voluntary corporate restructurings by selling off and buying businesses with other companies,” Yoon added. “Korea should break away from the past, when the only way of corporate restructuring was to inject massive amounts of public money after companies face a crisis.”

Akira Kawaguchi, a public policy professor specializing in corporate policies at Doshisha University, said, “Japanese government’s industrial competitiveness revitalization act played a crucial role in getting the country to overcome the so-called lost decades. Japan also faced controversies before actually legislating it, so Korea should definitely push the legislation.”

There was criticism that the One-shot Act has been designed to benefit conglomerates that are seeking easier and cheaper ways to sell-off and buy new business units, however, industry insiders argued the act’s benefit will be larger on small and midsize companies.

“In fact, small and midsize companies are highly interested in the Act. Getting the Act legislated will be a big opportunity for small businesses to expand in size and therefore gain business specialty,” said So Han-seob, head of the economic policy division at Kbiz.

According to a survey that the Korea Federation of Small and Midsize Enterprises (Kbiz) took on some 145 members, nearly 60 percent of its member companies showed interest in the Act’s implementation. Some 45 percent said they would like to go for a voluntary restructuring.

Jung Woo-yong, an executive director of Korean Listed Companies’ Association, explained that “small and midsize companies have carried out voluntary corporate restructurings rather than conglomerates, according to our study,” adding that allowing free restructuring will lead midsize companies to grow into a conglomerate.

However, business experts and scholars emphasized that the Act’s benefits shouldn’t be limited to conglomerates seeking big deals, but ensure to take care of small and midsize companies via easier rules for credit requirements by financial institutions.

Lee Byung-ki, head of the corporate research division at the Korea Economic Research Institute, emphasized the Act should cover all industrial sectors, not just those sectors suffering oversupply issues.

BY KIM JI-YOON [kim.jiyoon@joongang.co.kr]