By Choi Sung-jin
After the much-heralded anticorruption law went into effect Friday, concerns about adverse effects on already sluggish private consumption have become a reality for many businesses.
Economic experts also agreed that the Act on Prohibiting Illegal Solicitation and Bribe Acceptance, or the "Kim Young-ran law," named after the former Supreme Court justice who drafted it, will exert negative influence on economic recovery in the short term, although it may benefit the economy in the long run by bringing more of the underground economy into the open.
Professor Baek Woong-ki of Sangmyung University pointed out that related agencies, including the Anti-Corruption and Civil Rights Commission, are not consistent in their interpretation of the legal provisions.
"It seems as if these officials are saying ‘Don't do it if you don't feel up to it,' which can dampen consumption," Professor Baek said. "Domestic demand will remain sluggish until the end of the year."
Chun Seong-in, a professor at Hongik University, agreed. "In the short term, the consumption of luxury goods is expected to decline and the business setback for some industries will likely be inevitable, darkening economic outlooks in the fourth quarter," he said.
According to the analysis of big data by BC Card, sales at restaurants and bars sank 8.9 percent and 9.2 percent, respectively, on Friday and Saturday, compared with the two-day sales of four weeks ago, Aug. 31 and Sept. 1.
As government officials tended to refrain from making lunch and dinner appointments, expensive restaurants around government office complexes saw their clients reduced to less than half previous levels.
Earlier, the Korea Economic Research Institute, a think tank affiliated with the Federation of Korean Industries, a lobby group for large businesses, estimated the Kim Young-ran law would lead to sales losses of up to 11.6 trillion won ($10.5 billion) a year, breaking down into 8.5 trillion won for restaurants, 1.97 trillion won for consumer goods and retail businesses and 1.1 trillion won for golf courses. The Ministry of Strategy and Finance also is publicly expressing concerns that the nation may not be able to attain its growth target of 2.8 percent this year.
But many experts agree that a cleaner society would provide momentum for economic growth in the longer run.
"You should not attribute the economic slump to the implementation of the anti-graft law alone," Professor Chun said, citing other factors such as the Hanjin Shipping's fiasco and possible increase in the U.S. interest rate. "If the law helps Korea move toward a transparent society, its fruits would more than offset the short-term business setback," he said.
Professor Baek agreed. "The new law will leave clear and positive effects on the economy by rooting out widespread illegal requests and removing stumbling blocks to economic advancement," he said. "Eventually, Korea's corruption will decline and the nation's social integrity will improve, affecting favorably its economy."
Other experts, while agreeing on the justifiable reasons for the new law, called for correcting problems in the course of its implementation.
"The Kim Young-ran law, as it is now, regulates not only unlawful requests but also ordinary economic activities, making it difficult to attain the policy goal of enhancing social integrity," said Professor Sung Tae-yoon of Yonsei University. "The law may change the social atmosphere by, for instance, popularizing Dutch treats, but that will not necessarily lead to the enhancement of social integrity."
He called for a narrowing of targets, namely to government employees, and applying far stricter standards to them, instead of spreading the net too wide and blurring the lines between allowable and unallowable acts.
Professor Kim Won-shik of Konkuk University also stressed the need to adjust the present rule of limiting the price of meals to 30,000 won, gifts to 50,000 and cash gifts on marriage and for funerals to 100,000 won. "The government should examine whether or not the 3-5-10 criteria is appropriate, and consider rectifying it by looking into foreign examples," he said.
After the much-heralded anticorruption law went into effect Friday, concerns about adverse effects on already sluggish private consumption have become a reality for many businesses.
Economic experts also agreed that the Act on Prohibiting Illegal Solicitation and Bribe Acceptance, or the "Kim Young-ran law," named after the former Supreme Court justice who drafted it, will exert negative influence on economic recovery in the short term, although it may benefit the economy in the long run by bringing more of the underground economy into the open.
Professor Baek Woong-ki of Sangmyung University pointed out that related agencies, including the Anti-Corruption and Civil Rights Commission, are not consistent in their interpretation of the legal provisions.
"It seems as if these officials are saying ‘Don't do it if you don't feel up to it,' which can dampen consumption," Professor Baek said. "Domestic demand will remain sluggish until the end of the year."
Chun Seong-in, a professor at Hongik University, agreed. "In the short term, the consumption of luxury goods is expected to decline and the business setback for some industries will likely be inevitable, darkening economic outlooks in the fourth quarter," he said.
According to the analysis of big data by BC Card, sales at restaurants and bars sank 8.9 percent and 9.2 percent, respectively, on Friday and Saturday, compared with the two-day sales of four weeks ago, Aug. 31 and Sept. 1.
As government officials tended to refrain from making lunch and dinner appointments, expensive restaurants around government office complexes saw their clients reduced to less than half previous levels.
Earlier, the Korea Economic Research Institute, a think tank affiliated with the Federation of Korean Industries, a lobby group for large businesses, estimated the Kim Young-ran law would lead to sales losses of up to 11.6 trillion won ($10.5 billion) a year, breaking down into 8.5 trillion won for restaurants, 1.97 trillion won for consumer goods and retail businesses and 1.1 trillion won for golf courses. The Ministry of Strategy and Finance also is publicly expressing concerns that the nation may not be able to attain its growth target of 2.8 percent this year.
But many experts agree that a cleaner society would provide momentum for economic growth in the longer run.
"You should not attribute the economic slump to the implementation of the anti-graft law alone," Professor Chun said, citing other factors such as the Hanjin Shipping's fiasco and possible increase in the U.S. interest rate. "If the law helps Korea move toward a transparent society, its fruits would more than offset the short-term business setback," he said.
Professor Baek agreed. "The new law will leave clear and positive effects on the economy by rooting out widespread illegal requests and removing stumbling blocks to economic advancement," he said. "Eventually, Korea's corruption will decline and the nation's social integrity will improve, affecting favorably its economy."
Other experts, while agreeing on the justifiable reasons for the new law, called for correcting problems in the course of its implementation.
"The Kim Young-ran law, as it is now, regulates not only unlawful requests but also ordinary economic activities, making it difficult to attain the policy goal of enhancing social integrity," said Professor Sung Tae-yoon of Yonsei University. "The law may change the social atmosphere by, for instance, popularizing Dutch treats, but that will not necessarily lead to the enhancement of social integrity."
He called for a narrowing of targets, namely to government employees, and applying far stricter standards to them, instead of spreading the net too wide and blurring the lines between allowable and unallowable acts.
Professor Kim Won-shik of Konkuk University also stressed the need to adjust the present rule of limiting the price of meals to 30,000 won, gifts to 50,000 and cash gifts on marriage and for funerals to 100,000 won. "The government should examine whether or not the 3-5-10 criteria is appropriate, and consider rectifying it by looking into foreign examples," he said.
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