By Kim Yon-se
Staff Reporter
President Lee Myung-bak has reiterated that he expects a variety of revisions on the deregulation of business groups to be passed at the 18th-term National Assembly whose four-year term begins May 30.
Following the inauguration of the unicameral legislature, the Lee administration will likely begin to implement its pro-chaebol policies.
Lee insists that easing regulations and cutting corporate taxes will be one of the cornerstones of his economic policy.
The governing Grand National Party (GNP) has 153 seats in the new 299-member legislature, while the main opposition United Democratic Party (UDP) has 81 seats. Lee was elected president last December on the GNP's ticket.
After winning the Dec. 19 presidential election, one of the first things Lee did was to visit the Federation of Korean Industries (FKI), a lobbying group for big firms.
Observers say that Lee needed the cooperation of the family-run conglomerates more than anything else to make good on his campaign pledges of attaining 7-percent growth and creating 350,000 jobs a year.
The President also called in the owners of major business groups to Cheong Wa Dae to make similar requests.
The situation has since become more urgent, as shown by the revised targets for economic expansion and employment to 6 percent and 200,000 jobs, respectively.
The Fair Trade Commission (FTC) is likely to see its status shaken as the nation's top corporate regulator, as its top posts are filled with figures who oppose various regulations against enterprises, according to sources.
Baek Yong-ho and Seo Dong-won, chairman and vice chairman of the commission, respectively, took part in the presidential transition committee to lay the groundwork for the Lee administration's fair trade policies.
Under Lee's guidelines, a former chief executive of Hyundai Engineering and Construction, Baek and Seo played a leading role in setting the keynote of fair trade policies, typified by the abolition of various regulations on chaebol, or family-controlled conglomerates.
Baek, an ardent advocate for abolition of the equity investment ceiling system, expressed negative views about introducing alternative measures to the regulation. ``Regulations only create more regulations,'' he said.
Designed to make corporate governance structures more transparent and prevent the concentration of economic power, the investment limit guideline has been a symbol of regulations on chaebol for the past two decades.
But the commission, which backed the rules during the Kim Dae-jung and Roh Moo-hyun administrations, made a policy shift after the election. Lee has promised a ``business-friendly'' administration.
Seo, a senior advisor at the legal services giant Kim & Chang who formerly served as a director-general at the FTC, is also known as a figure who has long called for the abrogation of the investment limit rules.
After presenting a letter of appointment to Seo at Choeng Wa Dae in mid-March, Lee said that the FTC will have to drastically change its way of thinking.
``The commission should introduce a totally new system. It should support businesses by easing regulations as much as possible so that all enterprises can conduct their business well,'' he said.
FTC officials say that the organization will strengthen its supervision of companies instead of abolishing various corporate regulations so that competition can be promoted in a transparent manner.
However, civic groups and activists argue that the FTC will become just a ``toothless tiger'' if chaebol are unleashed from the regulations.
``The commission seems to have already given up its role as corporate regulator,'' the Citizens' Coalition for Economic Justice said. ``We doubt if it can watch and punish unfair business practices of the chaebol.''
Under the Roh administration, the antitrust regulator intensified investigations into suspected unfair business practices from price-fixing to the creation and the use of slush funds involving large business groups.
``Even if the keynote of our policies is shifted, concrete cases will be dealt with in accordance with principles and procedures,'' an FTC official said. ``So our function and work won't be affected so much.''
Lee has pledged to remove all corporate regulations, and business leaders responded with a promise of nearly 100 trillion won in new investments in 2008.
He called on the country's antitrust regulator to be more lenient toward South Korea's ``overly regulated'' conglomerates, a demand that would significantly ease stiff investment conditions for domestic businesses.
``The commission must undergo aggressive change. So far, the FTC has been a hindrance to local economic growth,'' he said.
Lee, who has been championing a business-friendly environment, rebuked the fair trade regulator for upholding ``backward rules,'' which prevented companies from keeping up with fast-moving global trends.
Lee's latest position fits in line with his policies that accommodate businesses, which he claims are the main engine powering the domestic economy.
He has stressed that decision-makers shouldn't take a timid approach due to public criticism that the current administration is too friendly toward corporations.
``If policies aren't implemented out of this fear, then we're never going to witness change,'' Lee said.
As part of a series of deregulation measures, the watchdog said it will first ease a contentious equity investment limit on chaebol, a move to encourage businesses to take cash out of their coffers.
Currently, subsidiaries of companies with assets of 2 trillion won or more are prohibited from making equity investments or offering loan guarantees to each other.
The commission said the change, to take effect by year-end, will raise the asset ceiling to 5 trillion won, which will cut down the number of firms subject to the rule from 79 to 41.
Companies such as KT&G, Hite Brewery and Nong Shim are among those who will benefit.
The regulator also said it plans to ease the process for firms to switch into holding companies if they meet the current requirement of a debt ratio below 200 percent.
The agency plans to lift the corporate debt-ratio requirement, as well as the rule that limits an investor to hold a maximum stake of 5 percent in a non-affiliate firm.
Another expected change from deregulation will allow companies with assets surpassing 6 trillion won to buy stakes in their affiliates in excess of 40 percent of their net worth, said the FTC.
Big-sized corporations that are currently subject to this rule are expected to make bolder investments after the change takes effect, as they have been complaining that the regulation limits good investment opportunities.