Restriction on Equity Investment to Be Abolished after 3 Years

The Ministry of Finance and Economy decided to partly ease the restriction on equity investment, which are applied to the large companies, temporarily and to abolish the system completely after three years.

Deputy Prime Minister Jin Nyum said yesterday on a radio talk show, ``The government will operate the restriction on equity investment for the next three years.``

In relation to this, an official of the Ministry of Finance and Economy, said, ``This means that the government will allow the investment that is more than 25 percent, by easing the current system in which the large companies can invest the maximum 25 percent of the net property to their affiliated companies, while restraining the decision making power of the large companies regarding the excess. After three years, the government will abolish the system.`` This official added, ``The Ministry in fact made an agreement with the Fair Trade Commission regarding the restriction on equity investment, which is the core of the chebol restriction.``

``The government would consider expanding the companies to which prohibition of mutual investment and loan guarantee is applied, which is currently applied to the 30 biggest business groups,`` added Deputy Prime Minister. Although the Ministry of Finance and Economy thinks that it is desirable to subject all the business companies to the prohibition, it is realistically impossible. Considering the decreasing number of the large companies, the Ministry is preparing for a plan that either keeps the current 30 biggest business groups or includes 60 biggest groups, which are subject to the debt rate restriction.

However, regarding the criteria for the large business group, the Ministry of Finance and Economy insists on 5-10 trillion won based on asset, while the Fair Trade Commission claims 3 trillion won. They have not made a full consensus yet. If 3 trillion won is set up for criteria, 26 companies will be designated as the biggest business group, while 17 companies will be designated based on 5 trillion won criteria.

Deputy Prime Minister Jin said that ``I don`t consider the third supplementary budget necessary since it cannot be carried out within this year and it does not have any effect. I don`t consider lowering the rates of corporate tax at this moment.``

hcs@donga.com