Seoul: President Lee Jae Myung has pledged to reform South Korea's regulatory environment, aiming to dismantle what he describes as a "cobweb of regulations" that hinders corporate innovation and growth. Despite these assurances, his administration has enacted legislation perceived as unfavorable by businesses, raising concerns about the effectiveness of his reform promises.
According to Yonhap News Agency, the amendment to the Trade Union and Labor Relations Adjustment Act, commonly known as the "Yellow Envelope" law, has been particularly contentious. This law limits companies' rights to seek compensation for losses due to "illegal" strikes and permits subcontractor labor unions to negotiate collectively with main contractors. Despite strong opposition from businesses, who argued that the law might force them to consider relocating abroad, the ruling party pushed the bill through, and President Lee signed it into law.
On the same day, the government unveiled a set of labor safety measures designed to impose strict sanctions on companies for industrial accidents, irrespective of fault. Companies could face fines of up to 5 percent of their operating profit if three or more workers die in workplace accidents within a year. Furthermore, construction companies risk losing their licenses if required to suspend work three times in three years due to fatal accidents. Critics argue that these fines, which are based on a percentage of operating profit rather than fixed sums, could be overly burdensome, especially for mid-size or small enterprises struggling to survive amid the recent economic downturn.
In addition to these measures, bills proposed by the Democratic Party of Korea have raised further concerns among businesses. A revision to the Commercial Act, passed in July, expanded directors' fiduciary duty from their companies to shareholders, prompting fears of increased shareholder litigation. The party has also proposed another amendment to extend fiduciary duty to company workers, further alarming the business community.
South Korea's economic growth is stagnating, with Taiwan expected to surpass it in per capita GDP for the first time in 22 years. Observers point to rigid regulations, such as the 52-hour workweek, as significant factors in diminishing competitiveness. Although President Lee's administration has committed to reducing unnecessary regulations, the proliferation of new ones suggests a complex dynamic driven by the ruling party's alignment with labor interests. Unless this approach changes, experts warn that the government's promises for regulatory reform may remain unfulfilled.