On Monday, the government made the required official announcement about the revision of ordinances for the Fair Trade Act. The changes include an easing of restrictions for investment within companies of the same conglomerate, or jaebeol, and still big business is upset and not satisfied, which is unfortunate. Furthermore one worries that investment restrictions will end up being without any substance, since there are signs the government might accommodate big business's displeasures.
The Fair Trade Commission (FTC) has announced concrete standards for "graduating" from the restrictions and those standards are strict, but they are unavoidable if there is the country wants to assure transparent corporate management structures. Big business complains that if those standards are applied to the jaebeols none among them will make the grade and be able to make the desired investments. The very fact they're complaining is evidence of how they still lack transparency. They should endeavor to increase their own transparency before they point fingers at strict standards.
In actuality there are now far too many exceptions to the restrictions. Cross-investment for the purpose of restructuring is back and standards for exceptions on investments in new industries have been lowered. It's not that we don't understand how the government is agony over how to get conglomerates to invest at a time when the economy continues to be slow. But if there are an excessive number of exceptions, the restrictions lose effectiveness. It also goes against the FTC's earlier claim that the restrictions do not block investment.
This time around the level of assets outlined in the investment restrictions is W5 trillion did not go up, but many predict that it will, at least a little. Big business asserts that the amount has to be raised, considering the speed at which conglomerates grow. But if the level of assets does go up, it is likely the restrictions will come to exist only in name because only a few jaebeols with enough reserves to make financial ventures will be subject to them. Raising the W5 trillion mark is unnecessary because the scale of net property increases with corporate growth, and subsequently so does the ability to engage in financial ventures.
The restrictions are not about limiting corporate investment. They are about assuring stable jaebeol ownership and control structures. The FTC has to make sure the intentions behind the restrictions are not further diluted during the official period it has to wait while the public reviews the changes.
The Hankyoreh, 25 January 2005.
[Translations by Seoul Selection (PMS)]
[Editorial] Don't Go Too Far Easing Corporate Investment Rules |
