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Economy

Moon's party seeks to force Korean tech giants to share profits

DP chairman launches task force to divert funds into consumer pockets

 South Korean President Moon Jae-in speaks at the presidential Blue House in Seoul on Dec. 21.   © EPA/Yonhap/Jiji

SEOUL-- South Korea's ruling Democratic Party has launched a task force aimed at putting the country's tech sector under pressure to share profit in a bid to reduce pandemic-induced economic inequalities.

The Post-corona Inequality Relief task force, suggested by party chairman Lee Nak-yon, hopes to divert the high sales and stock prices of tech companies into the pockets of consumers. The country lost the most jobs in two decades in December and the unemployment rate shot up to a ten-year high.

"The profit-sharing is a complementary way not to neglect the most unequal depression in history and to make the Republic of Korea prosper together with the form of solidarity and cooperation," Lee said at a party meeting.

Since taking office in 2017, President Moon Jae-in has pushed an economic strategy of "income-led growth" that is intended to boost the spending power of lower-income households. His left-leaning policies such as sharply boosting the minimum wage and using government funds to create jobs have had mixed success.

The announcement of this latest scheme in that vein comes ahead of mayoral elections in the major cities of Seoul and Busan in April. Both the ruling party and the opposition People Power Party are keen to win these polls as they may have a direct impact on the presidential poll in March next year.

But political analysts say this move may hinder the DP in the by-elections as voters may see it as a form of socialism.

"South Koreans are negative to socialist policies," said Park Sung-min, a senior political analyst and head of Min Consulting. "Considering they were critical to the government's policy to increase public housing, I think they may take the profit-sharing scheme in the same way."

Lee, one of the favorites to succeed Moon Jae-in in the 2022 presidential election, said that profit-sharing should be voluntary. He said, for example, platform companies could share profits with mom-and-pop store owners by cutting fees.

Lee did not name any specific companies, but domestic media reported that Woowa Brothers, the country's largest food delivery app operator, will be targeted first. Kakao and Naver, which offer mobile payment services for the app, can also be pressured to share profits, according to the Hankook Ilbo and Hankyoreh newspapers.

Woowa declined to comment on the issue, but a source familiar with the company's policy said that the food delivery app operator gave more than 80 billion won ($73 million) to restaurant owners last year.

"Politicians believe that Woowa made a lot of money, but in fact the company posted net loss last year. I don't know if it has any profits to share," said the source, who asked not to be named.

The profit-sharing idea faces a strong backlash from internet companies, opposition parties, and even from the prime minister -- a member of Moon's Democrats -- who say it is too radical to be made into a regulation.

Prime Minister Chung Sye-kyun said on a radio show that profit-sharing can cause conflict if it pushed by regulations. He said cooperation between big and small companies is good, but pointed out that public support should come first.

"It does not make sense," said Kim Jae-hwan, a director at the Korea Internet Corporations Association, whose members include internet, game and e-commerce companies such as Naver and Kakao. "We had no support when we developed technology and attracted users. Now they want us to share profits. We cannot accept this."

The main opposition People Power Party also opposed the plan, saying it is like "killing the goose that laid the golden egg."

"The profit-sharing is nothing but imposing corporate tax with no legal basis," Choi Hyung-doo, a spokesman for the party, said in a statement.

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