SEOUL — South Korea’s powerful chaebol conglomerates are facing the prospect they feared most in Wednesday’s general election: President Moon Jae-in’s Democratic Party looks set for a comfortable win thanks largely to the government’s skillful handling of the coronavirus outbreak.
The DP leads the opposition United Future Party by large margins in most opinion polls, raising the possibility that it could become the single largest party in the 300-seat National Assembly — or even score an outright majority. That would give the president’s party the ability to amend the Commercial Law to limit the influence of owner-families and introduce harsher punishments for economic crimes, such as embezzlement and breach of trust.
Moon took office in 2017 with promises of reining in all-powerful conglomerates like Samsung and Hyundai Motor, which serve as pillars of the South Korean economy, though he has so far struggled to deliver on those promises. The president is limited to one five-year term, and the outcome of the general election is seen as an early indicator of who might emerge as Moon’s successor in 2022.
A win for his party would also likely embolden the president to pursue bold financial expansionary policies.
“A DP win would help Moon avoid becoming a lame duck, thus supporting his efforts to maintain robust government spending and expand social safety net programs, and advance, albeit slowly, corporate sector reforms,” said Scott Seaman, Asia director at Eurasia Group. “A win would also increase the chances, on the margins, that another progressive would succeed Moon when his single, five-year term ends in spring 2022.”
With the number of new COVID-19 cases totaling just 25 on Monday, the government is heading into the polls in a strong position. Last month, the National Assembly passed the government’s 11.7 trillion won ($9.6 billion) supplementary budget to improve epidemic control measures and support small business. The finance ministry plans to submit a second supplementary budget of 7 trillion won this month to provide emergency subsidies to 70% of households.
Efforts to tackle the conoravirus have proven more popular than some of past economic measures under the Moon administration, such as the introduction of a law in 2018 limiting the number of working hours per week to 52 from 68 for companies of a certain size. The law drew complaints and concerns from the business world.
As for reforming the chaebol, the DP currently needs the cooperation of the UFP to amend the Commercial Law. Executives at the country’s biggest conglomerates are nervous about what an outright majority for the party would mean for their own future.
“In fact, we are worried that the governing party may push for implementing [stronger] fair trade regulations and pressuring companies to improve corporate governance,” said a senior manager at a family conglomerate who asked to be identified only as Park. “However, we also expect that the governing party may not push for it right now due to the coronavirus epidemic.”
While the chaebol are wary of a DP win, however, they are not necessarily embracing the opposition, either.
The UFP has promised to cut the corporate tax rate for companies with net income of 300 billion won or more to 20% from 25%. The party also said that it will cut inheritance tax, which is currently as much as 50%, to the average level of OECD countries.
But the UFP has its own baggage to contend with: the party’s predecessor was the Saenuri Party, led by disgraced former President Park Geun-hye. Park was convicted of using her position to pressure major companies into paying billons won to establish foundations run by Park’s longtime friend, Choi Soon-sil.
That scandal eventually led to Park’s impeachment and the imprisonment of her, Choi and a number of corporate leaders, including Samsung Electronics Vice Chairman Lee Jae-yong and Lotte Chairman Shin Dong-bin. Both Lee and Shin were released from the prison later.
“The opposition party was not business-friendly in the past,” said a spokesman of a chaebol, asking not to be named. “We also worry that a UFP win would cause uncertainties, as it would likely oppose Moon’s policies.”