By Lee Hyo-sik
Staff Reporter
The government is considering making it harder for chaebol and foreign funds to acquire privatized state enterprises or companies that received public funds after the 1997-98 Asian financial crisis in the face of negative public sentiment toward them.
As it recently decided to privatize only a handful of state-run firms, stepping back from President Lee Myung-bak's campaign pledge for outright privatization, the envisioned steps will mainly cover the sales of Daewoo Shipbuilding & Marine Engineering (DSME) and Woori Financial Group, according to the Ministry of Strategy and Finance Sunday.
A ministry official said in principle anybody can bid for privatized firms and public fund-injected companies.
``But if the sale of certain entities is deemed to compromise national security and leak key industrial technologies out of the country, we will put a restriction on who can acquire them in accordance with the law. Also, we will prevent local conglomerates from taking over public companies if the acquisition creates a dominant market player or harms market competition,'' a ministry official said.
But some analysts say that the exclusion of foreigners and chaebol could make it more difficult for the government to dispose of its stakes in public fund-injected companies as there are not many potential buyers who can raise large sums of money.
But the government is more concerned about the potential public backlash when prominent state-invested private businesses are sold to family-controlled conglomerates or foreign investors.
Many Koreans hold animosity for chaebol as controlling families have committed illicit acts over the years to maintain managerial control or transfer wealth to their offspring without punishment.
The public sentiment is even more hostile toward Lone Star and other foreign buyout funds, which took over distressed companies after the currency crisis in late 1990s and later realized capital gains without paying taxes, making the government take steps against foreign funds' taking over soon-to-be privatized public firms.
Under the law, foreigners cannot own more than a 40 percent stake in the Korea Electric Power Corp. (KEPCO). They are also not allowed to buy domestic firms that produce military supplies or possess related-technologies.
The sales restriction will affect 14 public fund-invested companies as the government will not privatize large public firms responsible for providing ``vital'' public services, including KEPCO, Korail and Korea Express Corp.
Among the 14 firms, DSME is designated as a defense industry entity and Daewoo International is dealing with military supplies. Also, Hynix Semiconductor will not likely fall into the hands of foreign investors because the sale will create controversy regarding technology outflow.
The ministry official said DSME has state of the art shipbuilding technology and Hynix has the world's top-notch semiconductor manufacturing know-how. ``If these companies are acquired by foreigners, it will be a huge loss for the country. The government will also consider other merits and demerits of sales of other businesses to foreign investors,'' he said.
The official said the government may allow conglomerates and foreigners to form a consortium to jointly bid for public enterprises, while asking the National Pension Service and other state funds to participate in the takeover bidding.
``If the nation's large businesses and foreigner investors acquire public companies, it could create a controversy and invite public protest, which will incur huge social costs. We think such a restriction is necessary even if it fails to attract higher sales prices,'' he stressed.