September 22, 2016 12:00 pm JST

A new graft law takes aim at South Korea's wine-and-dine culture

KENTARO OGURA, Nikkei staff writer

SEOUL South Korea's tough new law on wining and dining and public servants is aimed at curbing corruption, but there are concerns it could dampen consumer spending and even spark social turmoil in a country where gift-giving and entertaining function as important social lubricants.

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 in mid-September.

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 category strictly limits 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 ($893), both the giver and the recipient face a jail term of up to three years or a maximum fine of 30 million won.

Both sets of measures are sure to spur substantial change in South Korean society, but 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 and other social obligations.

For example, gifts customarily are given to acquaintances and business connections during the Chuseok holiday in late September. Fruit baskets and sets of canned goods priced at 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 on Sept. 13 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.

Some ambiguity remains. It is unclear, for example, whether buying a 50,000 won meal for a former classmate working at a city government office would be illegal. And while gifts valued up to 1 million won are permissible if they bear no relation to the receiver's duties, 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.

CHILLING EFFECT? 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 the South Korean arm of a Japanese company.

The business community is also 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 numerous cases 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 over alleged accounting discrepancies. Reconciling the government's goal of stamping out corruption with the country's entrenched entertaining culture will be no easy task.

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