Arab Today, arab today former pm urges revival of equity investment cap
Last Updated : GMT 15:30:01
Arab Today, arab today
Arab Today, arab today

Former PM urges revival of equity investment cap

Arab Today, arab today

Arab Today, arab today Former PM urges revival of equity investment cap

Seoul - Yonhap

South Korea should consider reintroducing equity investment ceiling rules for large conglomerates in an effort to improve fair competition in the local market, former Prime Minister Chung Un-chan said Monday. In a radio talk show, Chung, who currently heads the Commission for the Shared Growth for Large and Small Companies, said the country's top family-owned conglomerates, or chaebol, have steadily been increasing the number of affiliates, threatening to force out small and medium enterprises (SMEs) from the market. As of early August, there were 1,580 affiliates belonging to 55 of the country's largest chaebol businesses, compared to 1,348 late last year. He also said that combined sales of the country's top four chaebol business groups such as Samsung Group and Hyundai Motor Group, already accounted for more than 40 percent of the country's gross domestic product. Such excessive concentration of wealth in a few companies can make it hard for SMEs -- which employ most workers in the country -- to expand. Chung said such developments have caused the average operating profit rate of SMEs to stand at just 2-3 percent, compared to 8-9 percent for conglomerates. He said to counter trends that places smaller companies at a disadvantage, Seoul needs to consider reimposing the equity investment ceiling rule that was scrapped in March 2009. The regulation on total equity investment that was first introduced in 1987 prohibits large conglomerates from investing or buying up shares in another company or affiliate. This system makes it hard for big businesses to set up or take over companies and can strengthen business transparency. The system also reduces a conglomerate's exposure to group-wide risk if weak affiliates experience serious troubles. The former premier, however, said that this stance did not reflect the official position of the government, but were his own personal views. The advocate of shared growth, in addition, said the public committee is in the process of coming up with a way for chaebol groups to share profits with subcontractors. He said once the final plan is ironed out, the government could give advantages to conglomerates that follow the program. "Benefits can be in the form of allowing companies that follow the program preference in government bids and less oversight by the Fair Trade Commission," he said. Chung, meanwhile, said that despite pledges by conglomerates to support Seoul's shared growth program, the private sector has been slow to take concrete steps. "The 1 trillion won fund that conglomerates pledged last year to support shared growth has made no headway," he pointed out.  

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