This photo provided by the National Assembly press corps shows Democratic Party Chairman Rep. Lee Nak-yon talking to a business owner in Seoul on Jan. 14, 2021, while inspecting business establishments hit by the new coronavirus pandemic.
SEOUL, Jan. 18 (Korea Bizwire) — The ruling Democratic Party (DP) has set out to find ways to get lucrative companies to share some of their profits with small businesses vulnerable to losses amid the coronavirus pandemic, but it is facing vehement objection from the business community and opposition lawmakers.
Last week, a DP task force addressing the growing economic bipolarization from the pandemic began discussions on how to promote profit sharing between the supposed corporate winners and losers amid an economy weighed down by the pandemic.
The task force plans to research local and overseas cases of corporate profit sharing to map out its own profit-sharing plan, and move toward legislation next month to pass a related bill into law.
The so-called coronavirus profit-sharing scheme was first proposed by DP Chairman Rep. Lee Nak-yon earlier last week.
Lee suggested during a party meeting last Monday that the DP needs to “discuss a variety of ways to get (social) classes or business sectors that took huge profits due to the coronavirus to contribute part of their profits to society to help those who were hit hard.”
“Social and economic integration would be possible only if the (economic) polarization from the coronavirus pandemic is brought to an end,” the party chief added.
The discussions took place as tough social distancing requirements during the COVID-19 pandemic have threatened the survival of many business establishments, but it has also proven to be a boon to others.
The pandemic has propelled steep sales growth for operators of food delivery applications and other online platforms as well as makers of home appliances.
According to Hyundai Motor Securities, the combined transactions in the local market for food delivery apps were estimated to reach 11.6 trillion won (US$10.5 billion) in 2020, compared with 7 trillion won the previous year, as the pandemic drove up demand for eating at home.
The country’s two major internet platform operators — Naver and Kakao — are also widely predicted to post record-high sales figures for the fourth quarter of 2020.
More than seven out of every 10 small business owners, however, saw their sales plummet last year from a year earlier as social distancing took a crushing toll on sales of restaurants, cafes and others, according to a recent survey commissioned by the Korea Federation of Micro Enterprise.
A street in central Seoul is nearly empty on Dec. 28, 2020, amid South Korea’s strengthened social distancing campaign due to the resurgence of COVID-19 cases. (Yonhap)
The DP sees that the profit sharing models could help allay such earnings inequality wrought by the pandemic.
The models currently under review by the DP include an incentive plan under which the government gives tax or other benefits to lucrative platform operators, such as the No. 1 food delivery app operator Baemin, that offer commission fee discounts to small businesses operating on their platforms.
Another model under consideration is based on setting up a social fund to subsidize or invest in businesses tottering under the pandemic.
“If the current situation (of corporate inequality) is left alone, the world we would face after the COVID-19 pandemic might be even more unfortunate,” DP chief Lee said during a task force meeting Friday.
The main opposition People Power Party (PPP) and parts of the business community are, however, strongly denouncing the plan as a ploy to force companies to cough up profits.
“It is intended to confiscate profits by twisting the arms of economic entities … at a time when companies are bound hand and foot by a variety of regulations,” Rep. Joo Ho-young, the floor leader of the PPP, said last week.
In a statement on Monday, the Federation of Korean Industries (FKI), which represents the voice of conglomerates, argued that the coronavirus profit-sharing scheme could slow down corporate growth and violate the private property rights of shareholders.
“Forced retrieval of corporate profits would weigh down companies’ motivation for profit seeking and cut down economic vitality,” FKI said.
The business lobby group also claimed that the property rights of shareholders could be violated if profits from companies they invested in go to other firms rather than being paid as dividends.
As the debate on profit sharing continues, President Moon Jae-in weighed in on the issue. While endorsing the plan in principle, Moon said it should be solely based on companies’ voluntary decision as opposed to government enforcement.
“It will be very desirable to see more profitable companies helping affected entities in a voluntary movement and the government providing strong incentives to them,” Moon said in his New Year’s press conference Monday.
“But the prerequisite is that the government cannot institutionalize and enforce it,” he said, adding that voluntary participation by companies would be more desirable.
(Yonhap)
