The Park Geun-hye government is backpedaling on her much-touted hard-line stance against large conglomerates as it appears that her administration will ease regulations in their favor

2013-08-28 18:11

Park backpedals on chaebol policy

By Choi Kyong-ae
The Park Geun-hye government is backpedaling on her much-touted hard-line stance against large conglomerates as it appears that her administration will ease regulations in their favor, political analysts said Wednesday. “President Park is definitely backpedaling on her trademark policy of ‘economic democratization’ after she called in chaebol leaders (to Cheong Wa Dae) to ask them to make investments to stimulate the economy,” Lee Phil-sang, invited professor of the department of economics at Seoul National University, said in a telephone interview with The Korea Times.The meeting was the first of its kind since Park took office in February, ahead of back-to-back business schedules in the coming months such as the G-20 summit talks in Russia in September and the APEC summit in Indonesia in October.
Faced with growing uncertainties such as a possible U.S. exit from its quantitative easing plans and a possible economic crisis arising from emerging markets, Park urged leaders of the country’s 10 biggest companies to make a “preemptive” investment at a time of economic difficulty.
In the January-June period, the country’s 30 biggest companies executed a “lower-than-expected” 41.5 percent of their planned capital expenditure of 154.7 trillion won ($139 billion) for the year amid an extended economic slump, the Ministry of Trade, Industry and Energy said in a statement.
The top 30 companies added a combined 78,700 on their payrolls in the first half, or 61.7 percent of their overall recruiting target of 127,700 this year, said the statement.
“Creating jobs most desired by the general public depends on the will of companies, not that of the government,” President Park told the executives who attended the meeting, according to the presidential office. They included Samsung Electronics Chairman Lee Kun-hee and Hyundai Motor Group Chairman Chung Mong-koo and LG Group Chairman Koo Bon-moo.
Park, the daughter of military dictator Park Chung-hee, also said that the government will make sure that economic democratization won’t arm-twist conglomerates nor over-regulate them.
“To soothe conglomerates which have fattened their coffers without investing at home, chances are high Park may overhaul the revised commercial law to be up for a vote in the September session of the National Assembly,” Lee said. “It’s like conglomerates have taken the economy hostage to make their demands heard.”
The main ideas of the revised commercial law are to prevent big company owners from theft or misuse of company money and to grant a bigger say to small shareholders to allow them to name an auditor or director to block the owners from abusing their power, said the professor.
In the latest case, Lee Jay-hyun, chairman of CJ Group, a food-to-entertainment conglomerate, was arrested in July for his involvement in dodging some 70 billion won in taxes by stashing secret funds and misappropriating 100 billion won of company funds. He was temporarily released to undergo a kidney transplant operation Wednesday, CJ said.
Shin Yul, professor of the department of political science at Myongji University, said Wednesday that as companies argue, “the passage of the revised commercial law will put further pressure on their investment activities. This, coupled with escalating external uncertainties may lead to diminished investments” in the second half.