At what point does a business gift become a bribe? That’s among the questions South Korean lawmakers sought to address in drafting tough anti-graft legislation that comes into force Wednesday. The law takes aim at the practice of pampering public officials in return for illicit favors. Critics say the rules are too strict and risk applying the brakes to a stuttering economy.
1. What pushed South Korea into tackling corruption?
Public anger boiled over when the cozy ties between regulators and the shipping industry emerged in the wake of the 2014 Sewol ferry disaster that killed about 300 people. This year alone, the country has seen a dozen high-profile corruption cases, including the arrest of a senior national prosecutor on charges of accepting bribes such as a luxury sedan. A top executive at Lotte Group was found dead just hours before he was due to be questioned in connection with an investigation into alleged corruption at the conglomerate.
2. So how bad is the country’s corruption problem?
In Asia, South Korea is rated the fifth-cleanest in terms of perceived public sector corruption by Transparency International (behind Singapore, Hong Kong, Japan and Taiwan). Globally, it’s No. 37 in rankings headed by Denmark. Still, about 60 percent of South Koreans said in a 2015 survey that they thought Korean society was corrupt.
3. How exactly will the law work?
Civil servants, teachers and media company employees face fines if they are treated to meals worth more than 30,000 won ($27) or they receive gifts valued above 50,000 won. That compares with gift limits for civil servants of above $20 in the U.S. and 25 pounds ($32) to 30 pounds in the U.K., says South Korea’s anti-graft commission. The law affects about 2.2 million people, or 9 percent of those in jobs, according to Hyundai Research Institute. Crucially for prosecutors, a conviction can be secured without proof of a direct link between a gift and a favor.
4. Why is the law causing so much angst?
It strikes at the heart of South Korea’s business culture, including the tradition of exchanging gifts on national holidays and so-called "jeopdae" that focus on entertaining business colleagues, government officials and journalists. Even the agricultural ministry has called for the price limits to be raised, because they would hit products including popular Korean beef gift sets. Others fret over the ambiguous wording that targets gifts and meals from people “related with work.” The bottom line is that people wanting to play it safe should pay for their own meal -- a custom that is considered rare and even unmannerly when doing business in Korea.
5. What are companies doing to get employees to conform?
Most large Korean companies have prepared information sessions for workers. The Korea Chamber of Commerce is holding seminars. And retailers and restaurants are expanding their offerings of low-cost gifts and meal sets.
6. Will the economy take a hit?
The Korea Economic Research Institute says industries such as golf, restaurants and retailers may lose about 11.6 trillion won ($10.6 billion) a year. On the other hand, Hyundai Research Institute, which provided the research for the anti-corruption commission, sees demand for gifts falling less than 1 percent and predicts a positive impact as companies spend less on entertaining.
7. Is this the end of the matter?
Not likely. The Prime Minister’s office has recommended a review at the end of 2018.
The Reference Shelf
- QuickTake on corruption
- Bloomberg story on the backlash against the new law.
- Transparency International rankings.