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Grand National Party presidential hopefuls Park Geun-hye and Lee Myung-bak are speaking with the same voice on a political issue in a rare display of shared views, despite their bitter confrontations in recent weeks. Both are expressing opposition to the Financial Industry Restructuring Law, which prohibits the inter-dominance by financial and industrial capital.

Together Park and Lee are the overwhelming frontrunners for the presidential election slated for this coming December, and so when they express a position on policy the Korean public stops and listens, believing they may be listening to Korea's next president.

The law, which was passed by the National Assembly at the end of last year, stipulates that a financial company may not hold more than 5 percent in non-financial businesses that is part of the same business group as the financial company. Proponents of the law say that this is aimed at preventing conglomerates, or chaebol (jaebeol), from using funds that are in fact the general public's personal and business savings to give conglomerates' majority shareholders greater controlling power over their subsidiaries and affiliates.

Lee, at a forum hosted by Seoul Finance Forum on May 7, said, "This is a very sensitive issue, but someone should touch on it. It is time to make a political decision about separation of finance and industry." "The relationship between the financial capital and industrial capital hasn 't changed for the past decade. Foreign firms purchased banks by establishing funds. I think it is a reverse discrimination against domestic companies," he said. Lee wants to pave the way for domestic conglomerates to own banks by revising the current law which restricts industrial capital from owning banks.

Park, for her part, had said something similar on April 16. "Foreign capital groups rushing to Korea and are granted the right of self-control, while domestic investment capital is not granted that authority," she said. "It is a typical form of reverse discrimination to allow foreigners to have 10 percent of voting rights, but just 4 percent for their South Korean counterparts."

The views of both potential GNP nominees are largely consistent with what the country's chaebols have been calling for publicly in recent years. Samsung, Korea's largest business group, has tried to have the law repealed because its cross-investment system between the group's affiliate companies, which guarantees group chairman Lee Gun-hee's control of the group, has come under threat as a result of it. Samsung subsidiary Samsung Card, a credit card company, holds 25.64 percent of Everland, which in turn plays a major role in Lee's control of the whole group. Legally, Samsung Card can not exercise voting rights on more than 5 percent of its shares and sell the shares that exceed 5 percent within in 5 years. Samsung alleges the law could allow a third party to take over the conglomerate.

Some government officials, as well as influential presidential hopefuls, agree on conglomerate bank ownership. Financial Supervisory Commission (FSC) governor Yoon Jeung-hyun said February 14 that the country "needs to ease the rules on separating financial capital from industrial capital so that spare cash from industrial capital will be used to expand financial capital. Reverse discrimination against domestic capital won ' t happen in mergers and acquisitions."

However, some are questioning the renewed rhetoric about allowing big business to won their own banks. Jeon Seong-in, a professor of Hongik University, said, "They are plainly talking about transferring bank ownership to the conglomerates.'' "(The so-called presidential hopefuls) worry about the future of domestic financial industry and cite Lone Star Funds, but this problem was not caused because Lone Star represents foreign capital, but because a bank fell into the hands of a non-financial company. They may have correctly recognized a problem, but it is as if they have come up with the wrong solution. ''

Lee Geon-beom of the Korea Institute of Finance stressed, "If domestic conglomerates had owned banks when the Asian financial crisis hit the nation in the late 1990s, the financial system of the nation would have faced a serious crisis. Even if the Financial Supervisory Service (FSS) fully performs its mission, companies which are faced with financial problems can freely draw on their savings." "Therefore, even the United States, a nation with low industrial concentration, is fully observes rules on the separation of financial capital from industrial capital," he added.

The Ministry of Finance and Economy clarified that it will not change its position on the separation issue.

"Markets in advanced nations already accept the separation of financial industry from industrial capital even before it was part of their financial systems," said ministry official Im Seung-tae. "Currently the government has no plans to push for a revision to the law that would hurt rules on the separation of financial capital from industrial capital."

Please direct questions or comments to [englishhani@hani.co.kr]