South Korea’s controversial anti-corruption law, dubbed as the Kim Young-ran law after the former head of the anti-corruption commission who first proposed, is expected to result in a loss of 11.6 trillion won ($9.9 billion) annually, largely impacting the local economy that is already suffering from depressed consumer spending.

The Seoul government earlier this year announced to enforce the Improper Solicitation and Graft Act on September 28. Under the new law, public servants, journalists, and teachers will be fined if they are treated with a meal costing more than 30,000 won. A gift cannot cost more than 50,000 won, and cash token from guests to weddings and funerals cannot exceed 100,000 won.

According to a report released by Korea Economic Research Institute (KERI) on Sunday, the local industries such as restaurant, golf, and retails will be directly hit once the anti-corruption law comes into effect. It said the total annual loss from implementing the new anti-graft act is expected reach 11.6 trillion won, with 8.5 trillion won in the restaurant sector, 1.1 trillion won in golf-related business, and 1.97 trillion won in the retail industry.

The research institute also presented a data with adjusted limits on expenses related to gifts. It said if the limit on the meal cost, which currently is 30,000 won, is raised to 50,000 won, the negative impact on the restaurant would fall to 4.7 trillion won. The loss would further shrink to 1.5 trillion won and 660 billion won if the limit is adjusted upward to 70,000 won and 100,000 won, respectively.

The retail industry would also suffer a lesser blow if the current limit of 50,000 won per gift is increased - 70,000 won with expected loss of 1.4 trillion won, and 100,000 won limit with 970 billion won loss.

The golf-related industry, however, is predicted to result in a loss of 1.1 trillion every year regardless of the current 100,000 won limit because a round of golfing already cost around 300,000 won per person.

“The actual loss may become larger as indirect impact due to suppressed consumption was excluded in the study,” said KERI.

By Chung Ui-hyun

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]