Backlash against S. Korea's strict anti-corruption law

Critics say the spending limits on meals and gifts could hurt economy

SEOUL • Just months before South Korea implements its strictest-ever law against corruption and bribery, a backlash is brewing among critics who argue that tough limits on accepting meals and gifts may weigh on the economy.

The anti-corruption law that takes effect in September aims to end the widespread practice of pampering public officials with meals and presents, which at times has led to lax supervision or illicit favours.

Calls for regulation increased after the Sewol ferry disaster in 2014, which exposed inappropriate connections between regulators and the shipping industry.

While there is little debate on the need to increase transparency and ensure South Korean companies embrace ethical business practices, some economists suggest there are downside risks in the detail of the law, which will affect a wide range of professions and industries.

Under the changes, government employees, teachers and journalists face fines if they are treated to meals, including drinks, worth more than 30,000 won (S$35) or receive gifts worth more than 50,000 won.

Supporters of the change, including Mr Han Jae Jin, a research fellow at the Hyundai Research Institute, say that it will make Korean business culture more sound and reduce lobbying costs for companies.

South Korea ranked 37th out of 168 countries in Transparency International's corruption perceptions index last year. Somalia and North Korea were considered the most corrupt while Denmark topped the transparency ratings. Asian neighbours Japan, Taiwan and Hong Kong were rated less corrupt than South Korea.

South Korea ranked 37th out of 168 countries in Transparency International's corruption perceptions index last year. Somalia and North Korea were considered the most corrupt while Denmark topped the transparency ratings. Asian neighbours Japan, Taiwan and Hong Kong were rated less corrupt than South Korea.

One area of concern raised by the Improper Solicitation and Graft Act is that it will affect not only lobbying but also the social tradition of exchanging gifts with business counterparts and acquaintances on national holidays. Typical gifts include Korean beef, fruits and seafood.  The Hyundai Research Institute estimates that the new regulation will apply to 9 per cent of workers in South Korea.

"The timing of the law isn't good for the economy as it comes when domestic demand is already weak," said economics professor Cho Dong Keun of Myongji University. "Exchanging gifts on Lunar New Year and Chuseok holidays has helped people in the agriculture and fisheries industries. The price limit also raises the question of how the law will reflect inflation going forward."

The National Agricultural Cooperative Federation has warned that the law will hurt farmers because more than half of fruit gift sets and 98 per cent of Korean beef gift sets are priced over 50,000 won. The Federation of Small and Medium-sized Enterprises said the price limit on meals should be lifted to 70,000 won to prevent contraction in the food industry.

South Korean President Park Geun Hye told local media last month that while the intent of the law was sound, she hoped the price limits could be set at a reasonable level so as not to hurt consumption.

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A version of this article appeared in the print edition of The Straits Times on May 28, 2016, with the headline 'Backlash against S. Korea's strict anti-corruption law'. Print Edition | Subscribe