Regulations on big companies mushrooming, claims FKI

The government over-regulates companies with assets of 5 trillion won ($4.4 billion) or more, putting a damper on corporate activities, a report from the Federation of Korean Industries (FKI), a top business lobbying group, said Monday.

Corporations classified as “large companies” are subject to 60 regulations under 27 acts, the report said. Rules dictated by the Fair Trade Act account for the largest portion at 27 percent, followed by the Capital Market Act at 17 percent and the Distribution Industry Development Act at 7 percent. The Customs Act and Inheritance and Gift Tax Act took up 5 percent each.

By types of rules, prohibitions on large companies entering specific industries totaled 19; limits on shareholding structures numbered 18; and separation of industrial and financial capital at large companies totaled 13.

The lobbying group for the chaebol, or conglomerates, stressed the fact that the 19th National Assembly, whose session began on May 30, 2012, and is set to end on May 29, passed the largest number of new rules for large companies than any assembly in the past. That contradicts the standard wisdom that the 19th Assembly under the Park Geun-hye government and with a majority held by the conservative Saenuri Party is pro-chaebol. The previous 18th Assembly passed 15 new rules governing large companies. The 17th passed eight and 16th six.

The report came a week after controversy surfaced over the Fair Trade Commission’s new designation of six firms as large companies.

The six include Kakao, Celltrion, Harim Group, Korea Investment Holdings, Kumho Petrochemical and SH Corporation.

Not all of them welcomed the label because it means they will be governed by an array of regulations. Some complained that it is inappropriate to lump companies together merely because of the size of their assets.

“It would be unfair to classify Kakao, whose assets are 5.1 trillion won, and Samsung, with 348.2 trillion won, as the same ‘large company,’” an industry insider said.

The asset floor for large corporations has been raised as the economy grew. It began in 1987 with 400 billion won, and the yardstick between 2002 and 2007 was 2 trillion won.

The latest revision to 5 trillion won was made in 2008, when there were 41 large companies.

“Korea’s gross domestic product grew 1.4 times compared to 2008. We demand that the government either raise the asset floor for large corporations from 5 trillion won to 10 trillion won, or limit the list of large companies to the top 30 in terms of asset size,” said Lee Chul-haeng, head of the corporate policy team at the FKI.

“We also recommend that the government give a probation period of three years until various regulations are applied to newly designated large companies. Korea should scrap rules that drag down corporate competitiveness in this age of convergence.”

BY SEO JI-EUN [seo.jieun@joongang.co.kr]