South Korea’s New Anti-Corruption Law Could Have Economic Ramifications

May 27, 2016South Koreaby EW News Desk Team

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The South Korean government will implement a new law known as the Improper Solicitation and Graft Act in September, which bans pricey gift exchanges during business transactions, according to Bloomberg.

Critics contend that the law will affect an economy already suffering from low consumption and lackluster GDP growth. Under the mandate, officials cannot receive meals over 30,000 won and gifts over 50,000 won, but journalists and teachers would be subject to the same rules.

Opponents argue that South Korea retains a culture of corruption, but the government is attempting to crackdown on criminal activity through indictments and anti-graft laws. South Korea ranks high in terms of corruption, and many South Koreans hold little faith in their institutions and public officials.

Powerful firms are often caught in scandals, but face few repercussions. While these companies play a heavy role in economic advancement, corruption and dirty dealing hurts the economy in the long run. Authorities lose revenue from tax evasion and other underhanded dealings, while tarnishing South Korea’s image in the eyes of the world community.

Furthermore, such illicit activity has real-world consequences that could lead to lost lives. For instance, the sinking of a ferry that killed over 300 people in 2014 stemmed from corruption, negligence, and loose regulations, notes BBC.

The men involved in the disaster were arrested and jailed, but the incident traumatized the nation while solidifying the public’s distrust of authority. The government recognizes this, which is why they are banking on the new anti-corruption law, but the measure is not without its flaws.

Citizens could inadvertently violate the law when exchanging gifts during holidays or social occasions. The details could change before the law takes effect, but supporters argue that the new measure would clean up South Korea’s business culture, while reducing the amount of lobbying within government.

The restrictions will also impact certain industries such as beef, fishing, and agriculture, however. The fishing industry alone expects a 1.1-trillion-won decline in sales, as delicacy gifts would fall out of favor. Another problem is that the law doesn’t take inflation into account, which does not bode well for an economy with a history of inflationary spikes.

South Korean President Park Geun Hye assured the public that prices would be adjusted accordingly. While the president acknowledges the inherent risks in passing such a law, she has launched an all-out crusade against corruption in wake of numerous high-profile scandals plaguing the government.

Analysts believe the new law will affect 9.0% of the workforce, and it is considered the harshest anti-corruption law in the country’s history.

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