Three presidential hopefuls of the ruling Democratic Party of Korea are pushing different coronavirus relief policies.
Prime Minister Chung Sye-kyun on Thursday instructed the Ministry of Economy and Finance to draft a bill to compensate small self-employed businesses for their losses caused by antivirus shutdowns.
The government needs to help those damaged by its measures, but prudence is warranted in legislating assistance. It has offered them relief money and other financial assistance through extra budgets if the occasion arises. It needs to review if it is necessary even to enact a law.
DP leader Lee Nak-yon is pushing for corporate participation in profit-sharing. He proposed companies that gained from pandemic shutdowns contribute part of their profits voluntarily to a fund for those that suffered losses. He emphasized the system in a video meeting with trade groups of platform businesses Friday. The ruling party regards platform and financial businesses as lockdown beneficiaries. Lee is said to be considering meeting company officials this week.
President Moon Jae-in, who has recently evaluated profit-sharing positively, said that voluntary participation is desirable, but companies cannot but feel tacit pressure to contribute to a fund for the economically vulnerable.
Gyeonggi Province Gov. Lee Jae-myung decided to give 100,000 won in disaster basic income to every resident in the province. It is questionable if it is reasonable to distribute 1.4 trillion won out of the province’s 28 trillion-won budget to all residents in a one-time payment, regardless of income and assets.
Chung pushes loss compensation, party leader Lee profit-sharing, and Gov. Lee disaster basic income as their respective signature relief programs. The problem is that they are pushing these policies with little regard to the fiscal situation, the efficiency of relief, and their impact on the private-sector economy.
Particularly for loss compensation, astronomical fiscal resources will be needed. A ruling party bill estimates losses to reach 24.7 trillion won ($23.2 billion) if one month of sales loss is compensated. The government budget for this year totals 558 trillion won.
Furthermore, it is practically impossible to estimate profits and losses attributable to pandemic shutdowns. Those excluded from compensation will likely file suits, causing conflicts and confusion. Corporate executives could face punishment for breach of trust if they donate profits to relief funds. Disaster payments by Gyeonggi Province will likely cause other financially strapped provinces to complain over relief inequity.
Nevertheless, the party decided Friday to seek to legislate on loss compensation, profit-sharing, and a social solidarity fund. The social solidarity fund is to be raised with donations by individuals and companies for small businesses impacted by the pandemic. The party aims at legislating the three bills next month.
Regarding Chung’s instruction to draft a loss compensation bill, the first vice minister of economy and finance reportedly said that it was hard to find a country that enacted such compensation. Chung is said to have been angered by the official’s remarks, criticizing him as part of the “resistance to reform.”
The vice minister said what he needed to say as a senior official of the ministry that should try to contain the national debt.
Loss compensation to numerous self-employed businesses will likely cause a heavy burden on state coffers. An appeal for voluntary participation in profit-sharing will likely dampen profit motives. It is questionable if a universal one-off payment will be effective as disaster relief.
Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki called loss compensation an untrodden path. He said that the ministry would draft a loss compensation bill because the prime minister had instructed it, but added that it did not have war chest of public finances to dip into.
It is hard to erase suspicions that the three presidential hopefuls are pushing different populist programs with an eye on Seoul and Busan mayoral by-elections in April.
More than a year remains until the presidential election in March. Concerns are mounting that once campaigns start in earnest, they will find more excuses to spend taxpayers’ money to win over the electorate.