Chaebol-bashing tops election agenda

Conglomerates worried and indignant about possible reforms


The country’s top three presidential candidates don’t seem to agree on much, but one policy initiative they all seem fixated on is “economic democratization.”

Generally speaking, the term indicates a process of leveling out the playing field so that all players, big and small, have an equal chance of success in the economic and financial markets, according to the key people who are configuring the pledges for each presidential camp.

The goal, therefore, may be the same for all three main candidates, as the public harbors expectations for the next president to have policies on how to reignite the tepid economy ― polls show that 80 percent of potential electorate support “economic democratization.”

There is also a certain degree of “anything but Lee Myung-bak-ism,” a sentiment wanting to eliminate anything that has to do with the past administration. This is the same whenever a new government is set to come in office. Some call it a political reflex. 

As Lee’s main pledge coming into office was to be “business-friendly,” it seems only natural for his successors to try and distinguish themselves with opposing ideas.

However, the stakes differ for each of the leading candidates.

For Park Geun-hye, the standard-bearer for the ruling Saenuri Party ― politicians closely associated with the chaebol ― she needs the support of the corporate sector, which means she can’t stray too far into chaebol-bashing.

Moon Jae-in, running on the Democratic United Party ticket, will be more inclined to be “progressive,” as many including his economic policy adviser, have said he would largely follow in the footsteps of the late president Roh Moo-hyun, the country’s second progressive leader and an advocate of the need to reform conglomerates.

Among the three, however, independent Ahn Cheol-soo is expected to be have the most freedom. His election is one running on the tagline, “change.” As a result, Ahn appears to be able to get away with anything he wants to say on economic policies, all in the name of “change.”

In the name of chaebol-bashing

Chaebol ― which means family-run conglomerates who rank at the top of the country’s corporate sector in terms of both sales and size ― has indeed become the key word for all the candidates.

This is mainly because to the everyday Korean, conglomerates ― especially the family owned businesses, many of which have fallen to wreak great havoc on the domestic economy ― are a public enemy in a sense.

Companies, therefore, find themselves easy targets for progressives.

Conservatives, such as President Lee Myung-bak himself, on the other hand, do not find it easy to show support for these larger corporations, despite their economic beliefs.

Park’s way of getting around the dilemma of having to stay friendly with the big firms while not appearing to do so is to lean on big campaigns for “equal opportunities, transparent markets, and constitutionalist principles,” while skipping over the details.

She did speak out against some of the better known irregular activities of conglomerates, such as allowing firms to make fresh circular cross-unit equity investments.

Conglomerates make circular investments through affiliates to get around regulations banning cross-unit investment.

But she is against reducing existing circular investments and doesn’t want to revive laws that restricted companies worth 10 trillion won or more from making investments exceeding 40 percent of their net assets in other Korean firms, nor those for limiting the investment non-financial firms can make in banks.

Ahn, on the other hand, is for most of these laws. He has added some ideas of his own, such as that he may even step in to separate the subsidiaries if they fail to comply with the reforms he proposes. In an interview with The Korea Herald last year, Ahn had stressed that foul play by conglomerates must be stamped out, saying companies like Samsung were “contaminating the corporate eco-system.”

His biggest hang-up with conglomerate Korea is the owner families, who he said must be corrected at all costs.

Moon also champions hardcore anti-conglomerate pledges.

He is against any kind of circular cross-unit investment, and said all existing investment links must be eliminated within the next presidency.

He believes in reviving the laws on investment restrictions and to curb reckless expansion of affiliates. Regulations limiting investment of non-financial companies in banks must be further tightened, according to Moon.

On Oct. 11, Moon said he would become “the president who succeeded in chaebol reform.”

Scared and bristling

Companies ask why attacking the chaebol has become a key priority of policymakers.

“The current economic downturn is not our fault. It was caused mostly by uncertainties in the global economy. We are nothing more than a scapegoat,” said an executive of one of the country’s chaebol retailers.

The Federation of Korean Industries ― representing the country’s top conglomerates ― recently spoke on the behalf of the conglomerates in a public address.

“We have grave concerns about these policies, as they fail to show us a specific vision for overcoming crises or for economic growth,” the federation said.

In particular, it criticized ideas for regulating circular investment and restricting holding companies, saying they would cause companies to withdraw investment, “to cause more damage on the economy,” the organization said.

A survey conducted by the Korean Chamber of Commerce and Industry earlier this month showed that out of 350 companies, almost 80 percent of large-sized companies and more than two-thirds of mid and small-sized companies believed anti-conglomerate policies would negatively affect the economy. More than 70 percent of the foreign companies in the survey answered likewise.

They said it was more about narrowing the reforms down to certain areas, such as how conglomerates were cheating the smaller players and not helping to create a level playing field, the smaller companies said.

All talk, no walk

On the whole, the media has more or less been dancing around the issue of economic policy pledges from the presidential candidates.

Part of the reason may be that news outlets don’t know what they’re talking about, but a bigger reason is that the candidates don’t have a lot of substance either.

All three candidates talk about creating jobs ― for instance, Moon has promised to create 500,000 jobs ― but they lack unique policies or ideas.

“It’s just like how so many voters want economic democratization, but in the same survey, the respondents said they didn’t really know what the phrase means, showing how much confusion and ambiguity is prevailing on the campaign grounds,” said Choi Byeong-il, president of Korea Economic Research Institute.

Others say that the type of policies will not be as important as the policymakers they appoint.

“Traditionally, macroeconomics have not been swayed by the policies, because we must be honest, policies have not changed much over the years,” said Kim Byung-joo, head of KL & P, a consulting firm.

“It’s more about the people who will be shaping these policies, the people that the candidates will name as policymakers once they become president,” he said.

“We need to wise up because this wouldn’t be the first time that some timely ideology dominated the elections, but fell short of reflecting reality. This time, the ideology seems to be economic democratization,” said Choi of KERI.

By Kim Ji-hyun  (jemmie@heraldcorp.com)