SEOUL, Jan. 31 (Yonhap) -- It has become a trend among both ruling and opposition politicians to publicly criticize family-owned conglomerates in South Korea as a way to tap into voter discontent with economic disparity ahead of April's parliamentary elections.
The current atmosphere contrasts with four years prior, when President Lee Myung-bak took office with business-friendly pledges, including tax breaks and eased regulations on big firms. The construction CEO-turned-president said that their success would trickle down to the rest of the economy with increased investments and job creation.
President Lee Myung-bak (Yonhap)
Recent economic indicators, however, show the gap between the rich and poor has only widened under his government, making it one of the widest wage gaps among 34 member countries of the Organization for Economic Cooperation and Development.
Analysts see attacks by politicians on the industrial conglomerates, locally called chaebol, as an attempt to woo the broader public by showing an image of protecting the socially underprivileged.
"Under the political slogan of the Occupy Movement, politicians are trying to attack the top 1 percent with the vague expectation that strong regulations on big firms would help smaller firms," said Han Jeong-hee, a professor of Daegu University, referring to an international protest movement that started in the United States last year.
The nation's export-driven economy pulled itself out of the 2008 global financial crisis largely unscathed. During the recession, leading business groups including Samsung, Hyundai and LG, generated healthy profits for their owners and expanded their international reach.
For that, many South Koreans give much of the credit to the chaebol.
Rich businessmen, however, have come under fire for stifling mom-and-pop stores and traditional markets by expanding their businesses into industries beyond their core businesses.
While the founders of the nation's leading business groups struggled to rebuild the economy after the 1950-53 Korean War by manufacturing cars, ships and electronic goods, their grandchildren were accused of having more interests in importing luxury items and selling daily necessities and bread.
"It is inappropriate that the second and third generation of chaebol families have arbitrarily entered into such industries as bakery and coffee shops," said Min Kyung-kook, an economics professor of Kangwon National University. "It is shameful behavior on their part in comparison to the founders, who created businesses out of nothing under tough circumstances."
With rising discontent, President Lee called on big businesses to play a greater role in helping smaller firms grow and in addressing social polarization, though he also warned that too much pressure on chaebol could stifle investment and hiring.
Riding the trend, the ruling Grand National Party is proposing stronger regulations on the big firms amid growing concerns that they have disadvantaged smaller firms with unfair business practices.
In a move to shed its image as a party for the rich, the conservative party, which has traditionally favored smaller government, has unveiled a revised platform that stressed social welfare, economic justice and job creation.
Rep. Park Geun-hye, the leading presidential hopeful in the ruling camp, also vowed to strengthen regulations on unfair practices by the chaebol to reduce the side effects of eased regulations on big business investment.
Park cited an old law, scrapped in 2009 under the business-friendly Lee Myung-bak administration, which barred big firms from investing in their affiliates or other companies in excess of 40 percent of their net worth. The so-called investment ceiling system was designed to prevent circular intra-group shareholding by a handful of people.
While the ruling party is considering stronger business restrictions, opposition lawmakers are taking a more populist approach in the tax code.
The main opposition Democratic United Party (DUP) has called for the revival of the investment ceiling system and floated the idea of taxing dividends of large conglomerates that are earned from equity investments in their affiliates.
The proposed tax targets conglomerates from dominating wealth and helping head off reckless expansion by increasing their tax burdens.
Rep. Lee Yong-sup, the DUP's chief policy maker, said the party will push to increase tax on "top 1 percent rich and the conglomerates" to expand social welfare programs for ordinary people.
The government and business circles are anxiously watching moves by politicians, wary of the fact that a tighter rein on conglomerates could dampen their hiring and investment practices ahead of April vote and the presidential race in December.
On Monday, Finance Minister Bahk Jae-wan said the opposition's proposal of a new tax on the family-owned conglomerates is a heavy regulation that exceeds even global standards, saying too many regulations on businesses could hamper corporate activity and eventually hurt the national economy.
"Corporate bashing by political parties could be understood as a reaction to the polarization underway in the world but we still should stay away from excessive denouncing of those who have money and power," Bahk said.
Finance Minister Bahk Jae-wan (Yonhap)
Business circles voiced concerns over calls from political circles for tighter reins on conglomerates, stressing prompting brisk business activity is key to strengthening the country's economy.
"Should businesses be given too great a tax burden, it will make it difficult to invigorate business activity," said CJ Group Chairman Sohn Kyung-shik, who also heads the business lobby Korean Chamber of Commerce and Industry.