Limits on cross-investment between subsidiaries of the same conglomerate are something unavoidable in improving the ownership structures of jaebeols. Tycoons still exercise imperial control over the jaebeols, through investments between their subsidiaries, even when they own minority shares. Reforming this abnormal ownership disconnect should have a higher priority than removing the investment caps. Big business claims the limits should be abolished for being an obstacle to more active investment, but that argument is not very convincing. Those regulations already have 11 different exception and exclusion clauses, the result being that more than 50 percent of all cross-investment is covered by those clauses.

The same goes for gradually lowering the currently 30 percent ratio on voting rights on shares from conglomerate-owned financial and insurance subsidiaries. That, in turn, is something absolutely necessary in maintaining the principle of separation between industrial capital and financial capital. It is also unethical for a jaebeol to take a financial institution of its ownership and use customers' money to expand control of subsidiaries. We do see that this system is causing difficulties for some conglomerates trying to defend their managerial control, and so the government needs to consider formulating rational measures to improve how the activity is regulated.

There is also room for controversy in the idea about re-instating the power to trace financial accounts illegal internal dealings. The FTC says it wants that authority to be reintroduced so it can investigate inside deals more efficiently, but this is something that needs more prudent consideration. Instead of bringing that authority back again, it would be more desirable to adopt more advanced methods of enforcing the related legislation.

Jaebeol reform is not about pinning them down. They can actually be a catalyst for cultivating the growth potential of the Korean economy. We hope the consuming debate over jaebeol policy will end quickly, and that both government and big business will work on ways to revive the economy.

The Hankyoreh, 4 May 2004.

[Translations by Seoul Selection. (PMS)]