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South Korean graft law targets wine-and-dine culture

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Entertaining at restaurants and other venues is an important part of doing business in South Korea.   © Reuters

SEOUL -- Tough new South Korean rules governing presents to public servants aim to crack down on corruption and change gift-giving and entertaining practices long criticized as excessive. But many worry that reforms, if too radical, could lead to social turmoil and dampen consumer spending.

The Improper Solicitation and Graft Act, dubbed the "Kim Young-ran law" after the former judge who drew up the bill, will take effect Sept. 28. The cabinet finalized the details of the system Tuesday.

Casting a wide net

The law applies to an estimated 4 million people including not only civil servants, but also journalists and private-school teachers -- as well as their spouses.

The measures can be broadly divided into two categories. The first bans requests to public employees to engage in improper conduct related to their duties, even if no money changes hands. The law lists 14 examples, including interfering with personnel decisions or investigations. The aim is to keep people from using their social position or connections to pull strings.

The other measures strictly limit monetary and other gifts. Though current law forbids the direct exchange of money for favors, proving intent can be difficult. The new law covers all payments regardless of intention. If a public servant is found to have accepted a monetary gift exceeding 1 million won ($904), both the giver and the recipient face a jail term of up to three years or a maximum fine of 30 million won.

Though both steps are sure to spur substantial change in South Korean society, the gift restriction has drawn particular interest, since it deals directly with the country's business entertainment culture. The new law permits public employees to receive meals worth up to 30,000 won, gifts valued at up to 50,000 won and congratulatory or condolence payments of up to 100,000 won. These figures are far below what South Koreans typically shell out for entertaining.

For example, gifts customarily are given to acquaintances and business connections during the Chuseok holiday, which is coming up next week. Fruit baskets and sets of canned goods around 70,000 won to 80,000 won are popular choices, a source at Lotte Department Store's flagship location said. But Chuseok gifts to public employees will be subject to the new law once it takes effect.

At private gatherings, one person -- often the oldest -- typically foots the bill. But this could run afoul of the law if any public servants are present.

The Anti-Corruption and Civil Rights Commission published a handbook Tuesday with guidelines for employees in various fields. It notes that receiving a 30,000-won meal followed by a 6,000-won coffee will be illegal.

Not cut and dried

Some ambiguity remains. It's unclear whether buying a 50,000-won meal for a former classmate working at a city government office would be illegal. Even if benefits exceed 30,000 won, they would be acceptable if they are less than 1 million won and bear no relation to the receiver's duties. The determination of whether an individual gift is work-related will depend on how the law is implemented.

"We've been told to just sit on our hands for now," a top official at a conglomerate said.

Foreigners will need to abide by the law as well. "If the rules become clearer, of course I'll follow them, but the vagueness about what the law covers worries me," complained a senior official at a South Korean arm of a Japanese company.

The business community is concerned about a potential hit to consumer spending. The Federation of Korean Industries estimates losses of 8.5 trillion won for the restaurant industry alone and 11.6 trillion won across South Korean society.

The law's coverage of private-school employees and members of the media has drawn an outcry from those affected. Many filed petitions questioning the constitutionality of the legislation, arguing that it threatens freedom of speech and independence in education. The Constitutional Court upheld the law in July.

South Korea has seen too many cases to count involving excessive and potentially inappropriate entertaining. The chief editorial writer at the Chosun Ilbo newspaper was forced to step down recently after a ruling party lawmaker said he traveled to Europe on the dime of Daewoo Shipbuilding & Marine Engineering, which now faces an investigation alleging accounting discrepancies. The country is trying to figure out how to reconcile the goal of stamping out corruption with an entertaining culture that serves as an important social lubricant.

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