KFTC Cancels Regulation of Circulatory Shareholdings

The bill on the ceiling on equity investment will be slightly eased.

The government held a meeting and made a concession on the plan to modify the bill. Deputy Finance and Economy Minister Kwon Oh-kyu, Korea Fair Trade Commission (KFTC) Chairman Kwon Oh-seung, Minister of Commerce, Industry and Energy Jeong Se-kyun, and other officials attended this meeting.

The government decided not to include the regulation banning circulatory shareholdings, which the KFTC had promoted. Only those companies retaining equity of over two trillion won among affiliated companies of conglomerates with equity levels of at least 10 trillion won will be targeted in this new measure.

The cap on corporate investment will also be increased to some extent, from the existing 25 percent to 30-40 percent.

The government presented a draft of this plan to President Roh on Tuesday afternoon. The new measure will be announced on November 15 at the earliest.

The regulation, which bans circulatory shareholdings that the KFTC has strongly pushed for, was eliminated in the final draft due to the objection raised by the Ministry of Finance and Economy and the Ministry of Commerce, Industry and Energy. They say the regulation is against the principle of lessening burdens put on companies.

Under the framework of the new measure, which limits the investment of middle-sized companies, the number of companies that are legally bound to the equity investment will decrease to seven conglomerates, including 29 companies, from the existing 14 conglomerates with 343 companies. Taking some companies exempted from the regulation of investment into account, 24 companies will be under control by this regulation.

Lee Hyeon-seok, the senior executive of the Korea Chamber of Commerce and Industry, said, “Although the government’s restrictive policy of regulating middle-sized companies with enough financial power to invest is insufficient, at least the government is showing its will to revitalize the currently shrinking company investment situation.”

However, there is still a possibility of the plan being revised if it goes through a government-ruling party consultation, since there are various voices within the Uri Party calling for “complete abolition of the current measure” to “introduction of regulation banning circulatory shareholdings.”

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