hankyoreh

Fair Trade Commission Chairman Kim Sang-jo responds to a reporter’s question during a press conference at the Korea Fair Trade Mediation Agency in Seoul

“Chaebol need to meet society and the market’s expectations for change. For those chaebol that do not meet those expectations, the Fair Trade Commission (FTC) and administration plan to take appropriate action.”

FTC Chairman Kim Sang-jo’s explanation on the aims behind a planned meeting with South Korea’s top four corporate conglomerates, delivered during a talk with reporters at the Sejong Government Complex on June 19, provides a more concrete look at the Moon Jae-in administration’s three-stage plan for chaebol reform.

The first stage is active communication with the chaebol.

“Since companies have expressed concern about the way the president stressed stronger legal enforcement for the top four and ten groups during his presidential campaign, there is a need to explain things and dispel uncertainties,” Kim explained on the reason for the meeting with the four groups.

“It appeared advisable to have the meeting before [representatives from] chaebol accompanied the president on his late June visit to the US as an economic envoy delegation,” he added.

Kim went on to say the meeting plan had been “reported to and discussed with the President, Prime Minister, and Deputy Prime Minister for Economic Affairs beforehand, and all of them expressed their agreement.”

Signaling that this dialogue with business leaders would not be a one-off event, Kim said the President and Deputy Prime Minister “plan to meet directly [with the four groups] once the administration has finished taking shape.”

The second stage involves encouraging chaebol to implement their own changes.

Kim said that he, the President, and the Deputy Prime Minister had “fully agreed that chaebol reform should be pursued in a rational and sustainable way.”

“Chaebol reform shouldn‘t be imposed as a one-time thing or something used as a stick to bash [companies] with. There need to be continued improvements through efforts by all economic actors and market pressures,” he stressed.

“We hope chaebol will continue to grow as invaluable assets to the South Korean economy, and a more efficient approach would be a ’positive campaign‘ where the chaebol themselves produce example cases of cooperation and mutual benefits between large and small businesses,” he added.

The third stage involves strict enforcement of the law against chaebol.

“The FTC and administration plan to take appropriate action against companies that continue defying the government, society, and market’s expectations,” Kim said.

In a June 14 address after taking office, Kim previously stressed that he would “not back down an inch” in his efforts to establish a fair market order.

Noting that past meetings between Presidents and chaebol leaders resulted in accusations of backtracking on reform and government-business collusion, Kim said Moon was “aware that government-business collusion would be suicidal.”

On the issue of establishing a permanent channel for consultation with chaebol, he said the Park Geun-hye administration‘s (2013-16) government interference scandal “was the result of those kinds of inappropriate meetings with business figures.”

“The new administration isn’t going to do that,” he declared.

Kim went on to say the administration’s chaebol policy “shouldn’t be something the FTC pursues on its own, but something pursued by various government agencies working as a team,” adding that there would be “continued discussions” by the Euljiro Committee (a workers‘ rights group that mediates industrial disputes), the job commission, the Office of the Prime Minister, the Ministry of Strategy and Finance, and the Financial Services Commission.

The initial results of the new administration’s reforms will depend heavily on how actively chaebol participate in reforms.

“The companies themselves agree there is only so much that can done under the past approaches, and that they need to change to reach the level of the advanced economies,” said a senior official with the Korean Chamber of Commerce and Industry (KCCI).

“But since each company is facing different conditions, the right approach would be a stepwise one,” the official suggested.

Hongik University economics professor Jun Sung-in said autonomous reform measures by chaebol “would be best given the difficulty of passing reform legislation without a ruling party majority in the National Assembly and limits on the FTC‘s capacities.”

“But if we want to pressure [chaebol] into changes, the FTC will need to thoroughly investigate things like funneling at the big corporations,” Jun added.

Kim also said an investigation was under way recently on internal transactions at chaebol groups.

“In cases where companies are found to have violated the law, we will adopt thorough response measures by invoking our authority to investigate, regardless of the group’s scale,” he said.

“Just because we‘re focusing on the ’top ten‘ or ’top four‘ groups does not at all mean we’re going to look at only a portion of the investigation findings separately.”

By Kwack Jung-soo, business correspondent

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