Government role in corporate debt restructuring

First published in The Korea Herald. The hot topic in Korean corporate circles today is undoubtedly the moves by the government and state-run policy banks to bail out the ailing shipbuilding and shipping companies. Given the importance of these sectors in Korea and their prolonged financial distress, it is understandable that the government has pushed the panic button. The process of bailing them out has been set in motion with some sort of consensus reached between the Finance Ministry and Bank of Korea. BOK Gov. Lee Ju-yeol has cautioned against the central bank mobilizing its power to print money in the ongoing corporate restructuring. He was echoing the sentiments of critics, who have raised worries over the government’s possible misuse of the money-issuing authority. The current...

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Amending retail price maintenance rules

First published in The Korea Herald. The Korea Fair Trade Commission is all set to take a decision on amending the “Guidelines for Review of Resale Price Maintenance” as the public comment period has just concluded. Resale price maintenance, or RPM, is a system in which the manufacturing firm determines and enforces the price at which distributors resell its products. Hence, it is also known as vertical price-fixing, price protection, or the practice of imposed prices. Until now, RPM has been deemed illegal in Korea, and companies that are caught engaging in this practice are fined heavily by the antitrust agency because it is considered anticompetitive. The proposed amendments will allow RPM under certain conditions, more specifically if it “enhances consumer welfare.” It will still be...

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Effectiveness of warnings on cigarette packs

First published in The Korea Herald. As expected, South Korean tobacco-makers and retailers have expressed their opposition to the Health Ministry’s new antismoking policies, which require all firms to fix health warning illustrations on their cigarette products. However, the ministry is not being swayed by their arguments and has refused to stand down. The new measures, which will be implemented later this year, require health warnings consisting of text and images to be printed on the top 50 percent of the front panels of all cigarette packets. In addition, retailers have to display the front panel bearing the warning graphics to customers. The graphics have to show tobacco’s harmful effects as well as health conditions that may be triggered by heavy smoking, including heart disease,...

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Tackle illegal political funding for sustainable growth

First published in The Korea Herald. With the general election in Korea just a couple months away, a recent report by the Organization for Economic Cooperation and Development appears to be timely. The report, “Financing Democracy,” takes a comparative approach to examining how the funding of political parties and election campaigns has evolved, and how regulations across OECD member and partner countries have been established. From an economic standpoint, this is important because it shows how the politician-business nexus can hamper economic growth. As long as it continues to exist, vested interests will rule supreme, rather than national interests. In particular, the report assesses the risks of policy capture through the funding of political parties and electoral campaigns, identifies...

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