Gradual Reform
It is expected that chaebol reform by the Korea Fair Trade Commission (KFTC) will focus on the prevention of the abuse of economic power by conglomerate owners instead of taking the form of chaebol bashing. KFTC chairman nominee Kim Sang-jo recently said that he will set a foundation for the growth of small and medium-sized enterprises (SMEs) by means of the gradual reform and he is in favor of split-off and spin-off led by the government so that conglomerates’ monopoly can be tackled.
“These days, a large number of suppliers are depending on their transactions with a handful of large corporations and this has resulted in a situation in which appropriate prices are not guaranteed,” he mentioned at his confirmation hearing on June 2, continuing, “The abuse of dominant positions and unfair practices during business transactions that occur in close relation to so many ordinary people’s living will be blocked by means of strict law enforcement.”
According to the nominee, the most fundamental cause for those unfair practices is the abuse of economic power by owners of conglomerates. “Unfair internal transactions, business favors between subsidiaries and illegal business ownership transfers have continued to occur, negatively affecting small firms’ conditions and the growth potential of the South Korean economy as a whole,” he went on to say.
The nominee’s top-priority goals for chaebol reform include law enforcement concentrating on the five largest business groups in South Korea and the establishment of a new business group investigation bureau. This bureau is expected to take the form of economic analysis functions being added to the former bureau that did the same job, that is, ex-officio investigation of illegal internal transactions within large corporations.