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President-elect Lee Myung-bak has emphasized that he would be a business friendly president, boosting investment through deregulation. Among his key pledges for conglomerates is the easing of 강원 랜드 슬롯 머신 확률 ownership rules.
Currently, non-financial companies with over 2 trillion won in assets are banned from owning a 4 percent stake or over in a commercial 강원 랜드 슬롯 머신 확률. Introduced in 1984, it aims at preventing chaebol from using 강원 랜드 슬롯 머신 확률s as their private coffers. The regulation is strict for 강원 랜드 슬롯 머신 확률s as they are involved in savings and lending. Consequently, most big 강원 랜드 슬롯 머신 확률s have shares owned by the government, individual investors or foreign funds.
With a number of other regulations limiting business capital from entering financial industry, the barrier has increased the stability of the economy, blocking the collapse of an industry from spreading to 강원 랜드 슬롯 머신 확률s.
The call for the strengthening of this came after the Asian financial crisis, on the notion that conglomerates had used their financial subsidiaries as their private 강원 랜드 슬롯 머신 확률s and their exorbitant expansion strategy on loans drove both the financial and non-financial sectors to collapse.
Calls for Scrapping the Barrier
However, some others have constantly demanded that the regulation be eased. According to a survey on 184 financial experts by the Federation of Korean Industries, a chaebol mouthpiece, 67.3 percent said the barrier should be either abolished or eased. Some 42.9 percent said it didn't contribute to the effectiveness of the financial market or the stability of the financial system, while 40.2 percent said it did.
They note that foreigners hold around a 70-percent stake in major local 강원 랜드 슬롯 머신 확률s. Foreign funds have reaped enormous money by buying local 강원 랜드 슬롯 머신 확률s after the Asian financial crisis. The U.S. Lone Star fund is estimated to make over 5 trillion won when it sells its stake in Korea Exchange 강원 랜드 슬롯 머신 확률, and Newbridge Capital, a U.S. private equity fund, made 1.2 trillion won when it sold shares of Korea First 강원 랜드 슬롯 머신 확률 to the London-based Standard Chartered in 2005.
They say state-owned 강원 랜드 슬롯 머신 확률s are likely to be bought by foreign investors as well when they get privatized, as the cash rich conglomerates are banned from owning 강원 랜드 슬롯 머신 확률s. It will result in foreign funds reigning over the local financial industry.
Those calling for abolishing the barrier also say that it would help local 강원 랜드 슬롯 머신 확률s grow into global players.
Stuck between developed countries equipped with better technologies and new emerging giants like China with cheap labor, the manufacturing sector is seeing profit margins fall.
The government has said that services sector, especially finance, should be a new growth engine. The financial sector, however, is lagging far behind, compared with the outstanding manufacturing.
According to The 강원 랜드 슬롯 머신 확률er, which measured the Trans Nationality Index (TNI) of 60 major global 강원 랜드 슬롯 머신 확률s, Korea stood at 4.3, far lower than European 강원 랜드 슬롯 머신 확률s with 46.1 or the U.S. 강원 랜드 슬롯 머신 확률s at 22.6, and even lower than the Asian average of 16. This means the Korean financial industry has a long way to go to become global.
Those opposing the 강원 랜드 슬롯 머신 확률 ownership rule argue that the competitive manufacturing sector, which has abundant capital, human resources, and global network, should be induced to invest in the financial industry. Easing of the rule would open the doors for capital to enter the financial sector and help it grow.
They also point out that the soundness of the industry has improved since the Asian financial crisis. The corporate governance structure has become more transparent and reckless lending is less likely.
''The (manufacturing) industry with global competitiveness has no reason to use a financial subsidiary as a private coffer since it can raise money more cheaply on the direct financing market, instead of local 강원 랜드 슬롯 머신 확률s'' said Cho Dong-keun, a Myongji University professor, in a report published by the Center for Free Enterprise.
He said the regulation is a barrier that allows only half of the arena to be used, resulting in handing over most of the local 강원 랜드 슬롯 머신 확률s to foreign capital. He called for the policy paradigm shift, from the segregation of business and financial capital to the fusion of the two.
As easing of the 강원 랜드 슬롯 머신 확률 ownership regulation was one of Lee's main pledges, the transition team has said it will push for demolishing the barrier between 강원 랜드 슬롯 머신 확률s and businesses step by step. It is likely to allow pension funds and consortiums of small and medium sized firms to own 강원 랜드 슬롯 머신 확률s first.
Problems Linger on
The debate, however, isn't over. Opposition is still fierce regarding the plan.
The Solidarity for Economic Reform, a leading NGO, agreed with the President-elect when he pointed out the weakness in the financial industry. Lee has said he would induce development of the sector and job creation through deregulation.
The NGO, however, showed concern. ''The financial sector is the basic infrastructure of the market economy, which should not be accessed from outdated development policy perspectives such as the ones used to be applied to 'infant industries' or 'key industries' during the era of economic development,'' it said.
It said financial institutions' soundness and the transparency of financial transactions that thoroughly protect consumers' rights should come first for the development of the industry. According to the NGO, only four among the world's 100 largest banks have industrial capital as governing shareholder. Among OECD member countries, 48 percent regulate businesses from owning banks, ''The President-elect should keep in mind that it was not excessive regulation but government intervention not based on law that hindered financial industry development.''
There have been a number of cases that involved conglomerates running financial companies, in which the financial subsidiary was abused to boost the main business of the group. Hyundai Securities, for example, was once used to manipulate stock prices of Hyundai Electronics, which later went 강원 랜드 슬롯 머신 확률rupt. Financially weak businesses may use their financial companies to raise money to expand business anytime.
The NGO showed concern over the cap-easing plan as it doubted there could be perfect supervision on such reckless behavior. ''Financial supervision is still lax here compared with other developed countries, and the regulatory body has many problems in its capability to execute the law.'' It said arbitrary execution of law is the most serious problem.
The transition team is causing confusion with arbitrariness. Kwak Seung-jun, one of Lee's key advisors on economic policies at the transition team, said the top four conglomerates, namely Samsung, LG, SK, and Hyundai-Kia Automotive Group wouldn't be allowed to acquire 강원 랜드 슬롯 머신 확률s even with the easing of the regulation.
chizpizza@koreatimes.co.kr
