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Many biz groups withdraw or suspend investment due to uncertainty: source

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(Globalpost/GlobalPost)

SEOUL, June 23 (Yonhap) -- Many major business groups in South Korea have withdrawn or suspended their investment plans for this year as uncertainties are mounting over the policy directions of the government, an industry source said Sunday.

This comes in spite of the government's call for more spending by companies to help boost job creation and kick-start the prolonged slumping economic growth.

"A majority of large conglomerates have pulled back or suspended their investment plans for this year due to uncertain domestic market conditions surrounding the government regulations on economic democratization," said a high-ranking official at one of the country's business lobby groups.

Economic democratization, a key campaign pledge of President Park Geun-hye, calls for reining in the economic power of family-owned conglomerates and sharing wealth with smaller firms.

The government is pushing for diverse bills aimed at regulating unfair business practices of large conglomerates.

The corporate sector has been voicing concerns that excessive regulations could hinder their ordinary business activity. Apparently heeding the call, the government recently seems to be easing its push for what some see as corporate bashing.

The official did not unveil detailed information on companies that have suspended or withdrawn investment plans but noted that heads of major conglomerates are now feeling "helpless" in the face of what he calls a "tsunami" of economic democratization-related regulations.

"Business leaders are complaining a lot about the current circumstances where expanding business is regarded as immoral no matter how great such investment plans might be," he said.

Other business officials also echoed the view, adding that some of the envisioned economic democracy rules are anticipated to weigh down on local companies' competitiveness and investment.

"South Korean firms have limited means to defend their management rights, unlike those in advanced countries," said Bae Sang-kun, a senior official at Federation of Korean Industries. "A restriction on cross-shareholding will dent local firms' business sentiment."

Cross-shareholding refers to a tactic frequently used by conglomerates or chaebol that enables a handful of the owner's family members to control the entire business group with small stakes through circular shareholding methods.

Another industry watcher added that the government's excessive rules to protect small companies from unfair practices by large firms may limit the growth of middle-sized firms, and only allow foreign firms to expand their foothold in the local market.

Large companies in South Korea have been under fire for domineering over their smaller suppliers and distributors, prompting the new government to map out measures to root out unfair business practices.

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http://www.globalpost.com/dispatch/news/yonhap-news-agency/130623/many-biz-groups-withdraw-or-suspend-investment-due-uncerta-0