FTC chief Kim opposes move to revive equity investment cap for large conglomerates


Heads of government offices, starting with President Lee Myung-bak, have started voicing opposition to the recent political move of limiting the business expansion of conglomerates.

“Putting excessive pressure on companies can lead to decreases in new investment and job creation,” Lee said during a Cabinet meeting on Tuesday.

“All the political discussions are creating an environment that pushes companies too hard. That would not be helpful for the public.”

Both ruling and opposition parties pledged to toughen regulations on conglomerates such as putting a limit on their equity investment and imposing more taxes on the rich.

Especially controversial is a repealed law that bans the nation’s top 31 companies from investing more than 40 percent of their assets into affiliates or other companies.

Even though political parties say they aim to better protect smaller vendors and ordinary people, businesses and government offices express concerns about their claims of being “populist” ahead of major elections.

Following the comments by the president, Fair Trade Commission chairman Kim Dong-soo on Wednesday made clear his opposition to the potential revival of the equity investment cap.

“Limiting equity investment is an analogue style that doesn’t consider the global business environment and the characteristics of individual companies,” Kim said. 

“We should find the fundamental problems of conglomerates, not just focus on their size,” he said, adding that the real problem is their excessive expansion into smaller businesses.

He suggested that conglomerates lead the shared growth initiative, citing a recent fair-trade agreement among the nation’s top four groups Samsung, LG, Hyundai Motor and SK in the sectors of system integration, advertising, construction and logistics.

On Tuesday, Knowledge Economy Minister Hong Suk-woo expressed concerns over the ongoing political discussions, saying “What we need now is creating an environment where companies investment more and create more jobs.”

He also criticized that the push by politicians are populist appeals, not calls coming from careful analysis.

Finance Minister Bahk Jae-wan also said earlier on Monday that he opposed the “chaebol tax” that could weaken the global competitiveness of companies and hinder foreign investment.

The Lee Myung-bak government abolished the equity investment cap as part of its business-friendly efforts to revitalize the economy.

But there has been criticism that the abolishment has led some large companies to enter business areas such as restaurant franchises and neighborhood markets that have long being considered preserves for smaller vendors.

Coupled with the government’s initiative to seek shared growth between large and smaller companies, industry watchers say a major overhaul is unavoidable even though it may not exactly mean reviving the old law.

By Lee Ji-yoon (jylee@heraldcorp.com)