In a reprieve for Korea’s conglomerate-owning families, the government has decided not to ban circular intra-group shareholding by subsidiaries of big conglomerates and will even ease an investment cap whereby business groups with assets over W2 trillion (US$1=W937) cannot invest more than 25 percent of their net worth in affiliated and non-affiliated companies.

The government made the decision Tuesday at a Cabinet meeting chaired by President Roh Moo-hyun. The decision will be finalized in a meeting between the government and the ruling party on Wednesday. It takes the entire sting out of a proposal by the Fair Trade Commission aimed at disentangling the Byzantine ownership structure of the country’s so-called chaebol.

Only core companies with assets of W2 trillion or more of business groups worth W10 trillion will be affected by the investment cap, reducing the number of targets from 343 subsidiaries of 14 conglomerates to a mere 24 key affiliates of seven. Under the new proposal, the cap will also reportedly be raised from the current 25 percent of net assets to 30-40 percent.

But there could be trouble at Wednesday’s government-ruling party consultative meeting, since many Uri Party lawmakers want the investment cap to be removed completely.

FTC chief Kwon Oh-seung upset the finance and commerce ministries with the proposal to ban cross-ownership. Big business welcomed the government decision not to ban the cross-investment but complained the lifting of the investment cap still does not go far enough.

A Federation of Korean Industries spokesman said although the number of targets was reduced, key companies financially capable of investment are still affected by the limit. He urged the government to scrap the limit entirely “to boost corporate competitiveness.”

(englishnews@chosun.com )