Following is the second in a series of articles on President-elect Park Geun-hye’s key policies ― Ed.
Revamping the conglomerate sector was one of main campaign issues among presidential hopefuls amid the widening profit gap among industries and irregularities by their mammoth business groups.
Most candidates designated their proposed reform of chaebol ― Korea’s family-owned conglomerates ― “economic democratization.”
While liberal candidates had pledged to overhaul family-owned ownership structure of major conglomerates such as Samsung Group and Hyundai Motor Group, President-elect Park Geun-hye of the ruling Saenuri Party prioritizes establishing a fair market through strict application of the competition laws rather than big player-reform itself.
During the early stages of the presidential race, Park was an instigator of the economic democratization wave despite the term’s ambiguity and complexity, vowing to lean more liberal.
However, several weeks before the Dec. 19 presidential election, she excluded a drastic action plan ― blocking conglomerates’ business units from holding a certain portion of shares of their affiliates under cross deals ― from her pledges.
Park’s decision drew wide interest as the scrapped plan to penalize the circular shareholding structure had been suggested by her key economic policy adviser Kim Chong-in.
Instead, Park was seen to return to her nook of conservatism. She vowed to protect the economically weak, prevent large conglomerates’ exploitation of power and reinforce consumer protection.
“I will turn the conglomerate-centered economic structure into a satisfying economic system where small and medium-sized businesses and consumers can grow together via fair and transparent market order, equal opportunities and reasonable rewards,” she said in November.
The President-elect’s economic democratization measures feature fostering growth of small and mid-sized enterprises and restraining monopolistic position of large family-owned businesses. She also underscores that large businesses’ positive roles in fueling growth and creating jobs must be maximized.
Park pledged to remove discrimination between regular and irregular workers, limit conglomerates’ advances into areas better fit for smaller businesses, and curb large retailers’ abuse of power against smaller suppliers.
Stricter penalties with jail sentences would be introduced for chaebol owners for embezzlement or malpractice, and presidential pardons limited.
Any unfairly earned profits would be returned, while the rights of consumers would be reinforced by revamping the Fair Trade Act. Park also pledges to introduce a punitive damages system, expand the scope of class action lawsuits and prepare ways for minority shareholders to gain cumulative voting rights.
Without touching the existing cross-shareholdings, she promised to ban future ones while reinforcing the separation of industrial and financial capital by restricting their influence and limiting the allowed shares.
In Korea, the concentration of economic power with family-owned conglomerates, rather than financial capital, has reached the point that it could undermine other sectors.
Liberal economists say the Lee Myung-bak administration’s growth-over-all policy ― based on being “business-friendly” ― has brought a series of irregular practices including violation of antitrust rules in the conglomerate sector.
They claimed that “with no distinctions between heavyweights and flyweights due to relaxation of regulations under the incumbent administration, monopolization by dozens of business groups has grown worse.”
They stress the need for strong regulations against big business groups, calling on policymakers to ensure fair competition and fix the framework where the income disparity is continuously widening.
Meanwhile, chiefs of the nation’s major conglomerates recently called on policymakers and lawmakers to put more efforts into revitalizing the economy through deregulations.
The business leaders including Korea Chamber of Commerce and Industry chairman Sohn Kyung-shik expressed worries over the political sector’s turning up the heat on conglomerates.
“We want the political sector to actively foster the environment which can help local enterprises secure global competitiveness,” a KCCI official said.
By Kim Yon-se (email@example.com