DUP seeks to curb chaebol investment
By Chung Min-uck
Lawmakers of the main opposition Democratic United Party (DUP) proposed a bill Thursday that includes the reviving of the Regulation on Total Equity Investment.
The regulation, which restricts big conglomerates from acquiring shares of other domestic companies, was originally introduced in 1987 to hold back the so-called chaebol from indiscriminately expanding in the local economy. However, the incumbent Lee Myung-bak administration abolished it in 2009 so that the conglomerates could expand investment to hire more workers and play a main role in the nation’s growth.
Chaebol are family-owned and managed conglomerates in Korea.
The newly-proposed bill prohibits all the affiliates of the top 10 conglomerates from investing more than 30 percent of their net assets in acquiring shares of other domestic companies.
The move comes as a predatory expansion of chaebol to sectors suited to small- and medium-sized enterprises and mom-and-pop stores has become a core issue here as it is regarded one of the main causes for the rising income disparity.
A recently released report by chaebul.com, an institute monitoring the conglomerates, says country’s top-100 business groups combined controlled more than 1.446 quadrillion won (around $1.26 trillion) last year. This figure is equivalent to 95 percent of government assets of 1.523 quadrillion won.
According to the Fair Trade Commission, the total number of affiliates of conglomerates with total assets of over 5 trillion reached 1,831 in 2012, compared with 1,137 in 2009.
Meanwhile, leading presidential candidates of the ruling Saenuri Party and the DUP staged a pitched battle over the investment-restricting regulation in line with their blueprint for “economic democracy” which has become a buzz phrase for the upcoming Dec. 19 presidential election on both sides.
Rep. Moon Jae-in, a frontrunner DUP candidate and former chief of staff to the late President Roh Moo-hyun, in an interview Thursday, raised counterargument against earlier remarks made by Rep. Park Geun-hye, the governing party’s strongest presidential candidate and daughter of late President Park Chung-hee, on the issue saying “blocking only the new investments by big conglomerates is invalid.”
Park, earlier in a press conference held right after announcing her presidential bid on Tuesday, said “decisions upon companies are to be made regarding the already-invested portion” and that “restriction is needed only on new investments.”
The DUP’s proposed bill also prohibits the cross-shareholding of chaebol which is used as a means by families to maintain ownership and control many affiliates with a relatively small amount of investment.
Moon also attacked Park’s sudden turning towards the concept of “economic democracy” calling her version a “fake” one.
“(Park) just talks about economic democracy but it’s a fake one with no sincerity,” said Moon. “Park still backs her former slogan of reducing taxes, relaxing regulations, and establishing law and order which allowed chaebol to take over retail shops.”
The former Saenuri Party chairwoman, during the party’s presidential primary in 2007, released a string of pro-market policies underscoring the role of chaebol for the nation’s economic growth. However, in the announcement of her second presidential bid Tuesday, Park made “economic democracy” the keywords for her new set of campaign pledges, differentiating herself from the incumbent Lee Myung-bak administration.
“While helping the operation of businesses and removing unnecessary regulations, the government should make influential businesses bear social responsibility” Park said. “It is a major task to fulfill economic democracy by setting up transparent and fair market rules.”