South Korea’s Moon weighs anti-chaebol policy amid pandemic

Linda J. Dodson

SEOUL — The landslide victory by South Korea’s ruling party in the April 15 election rewards President Moon Jae-in for his handling of the coronavirus pandemic, but this support also creates a dilemma for the president as he tries to revitalize the economy.

Voters propelled the Democratic Party of Korea to a majority in parliament. The liberal party’s campaign promises included greater oversight of the conglomerates that dominate South Korea’s economy.

But as Moon’s administration battles the country’s economic troubles, this progressive approach risks inhibiting government support for these corporate giants, many of which are searching for cash amid the crisis spawned by COVID-19.

South Korea announced a public-private rescue package of 100 trillion won ($82.1 billion) on March 24 to aid companies endangered by the coronavirus, double the support granted in response to the global financial crisis of 2008.

The package covers a wide range of small-business owners and enterprises. But Eun Sung-soo, chairman of the Financial Services Commission, stressed that large companies should undertake “self-help efforts” before seeking government relief.

The FSC bases this stance on the assumption that big businesses have enough capital to survive. But analysts allege that this view stems from antipathy by the progressive administration toward the conglomerates.

“The government has to be passive on support for big businesses, because liberal activist groups are expected to oppose it,” a retired government official said.

But major South Korean companies are already having trouble raising cash, and the state-owned Korea Development Bank has become a sort of “field hospital” as it attempts to support them.

Doosan Heavy Industries and Construction received emergency loans totaling 1 trillion won from lenders including KDB and the Export-Import Bank of Korea in late March. Though Doosan has solicited voluntary retirements for a workforce cut of 2,600, the heavy industry company fears it will be pressured to sell group firms as a “self-help effort.”

SsangYong Motor also has filed for support under the rescue package. South Korea’s fourth-largest automaker faces a liquidity crunch because its Indian parent, Mahindra Group, has frozen a plan to invest 230 billion won.

The Korea Development Bank is responsible for rescuing and restructuring troubled companies. In February, it decided to extend emergency loans to six budget carriers.

But the bank cannot afford to meet the increasing demand for financial support on its own.

Economic indexes are flashing yellow warning lights. The number of workers on payrolls dropped by nearly 200,000 in March from a year earlier, the largest decline since May 2009. Exports, which underpin South Korea’s economy, incurred a 19% year-on-year fall in the first 10 days of April.

An exit poll of voters by television network MBC found that 54% called “economic revitalization” the top priority. But if corporate earnings weaken, unemployment likely will follow, harming the workers who could benefit most from the progressive government’s revitalization policies.

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