South Korea will abolish regulations this year that curb business groups from making indiscriminate investments, the country's vice finance minister said Friday.
The so-called "equity investment ceiling," which has been in effect since 1987 and expires at the end of the year, bans 59 of the largest conglomerates with assets in excess of 2 trillion won (US$2.1 billion) from mutual investment and loan-guarantee limits.
The measures also ban the country's largest 14 business groups with assets exceeding 6 trillion won from purchasing stakes in their affiliates or other firms in excess of 25 percent of their net worth.
"Political parties have demanded that such corporate red tape should be scrapped in order to boost corporate spending," Vice Finance Minister Bahk Byong-won said during a radio interview.
"Our stance also is that the regulations should be abolished."
Bahk said the government will set up a task force to review the regulations and study ways of replacing or further easing them if possible.
The Fair Trade Commission, the country's corporate watchdog, also said earlier it needs to change the regulations, but stressed that the rules are needed to prevent the country's conglomerates from making indiscriminate investments that could weaken their core businesses and hinder fair competition in the market.
The business community has argued that the restrictions make it harder for them to enter new areas with high growth potential, claiming that the rules are unfair because they do not restrict foreign firms.
The official said there will be no supplementary budgets for the year as the economy is expected to slightly beat its growth potential rate of 5 percent.
The South Korean economy, Asia's fourth-largest, is expected to grow around 5 percent this year on the back of a recovery in private spending and resilient overseas demand. Last year, it expanded 4 percent.
Regarding the Bank of Korea's rate policy, the vice minister said the central bank will decide its key interest rate after taking into consideration broad economic conditions including inflation and liquidity in the financial system.
The central bank froze the rate at 4.25 percent earlier in the day after raising it by a quarter of one percentage point last month.
But the bank strongly signaled a rate hike would occur in coming months, citing increased inflationary pressure.
Seoul, July 7 (Yonhap News)
Seoul to scrap investment ceiling: vice finance minister |
