‘One Shot Act’ kicks in

There is a glimmer of hope in our industrial restructuring. The government approved restructuring plans by three companies that will become the first beneficiaries of the so-called One Shot Act, a new law designed to facilitate and speed up voluntary corporate restructuring. The three — Hanwha Chemical Corporation, Unid Company and Tong Yang Moolsan Company — will receive a range of state-led support including tax benefits and subsidies on top of fast-track procedures for mergers and acquisitions under the new Corporate Vitality Enhancement Act.

The law had been disparaged by the opposition as a bone thrown to large companies. The government argues the law can give a second chance to a company in trouble through tax and financial support for restructuring.

Hanwha Chemical will sell a chlorine and caustic soda factory in Ulsan to Unid. Capacity in caustic soda is at 2.04 million tons although domestic demand tops off at 1.34 million tons a year. Hanwha can pay corporate tax on the sales proceeds in installments over the next three years.

Tong Yang Moolsan, an agricultural machinery maker, will aquire shares in local rival Kukje Machinery, and scale back their combined output. Kukje has been offered for sale by Dongkuk Steel to improve its balance sheet. The two companies have been supplying the same turbines and tractors to the small local market and needed streamlining to become profitable.

Under the new law, the M&A proposals of the three companies were reviewed and approved within 24 days. Before the law, companies could not easily retool weak businesses due to lengthy and complicated administrative processes.

The new law will encourage the streamlining of overlapped companies operating over capacity. The government must expand the regulations and benefits beyond the manufacturing sector and beyond large companies for the sake of small and medium-sized enterprises.

Korea needs to become leaner and more competitive to prepare for the so-called fourth industrial revolution. More and more enterprises must make use of the new law so that our economy can regain vitality.

JoongAng Ilbo, Sept. 9, Page 30