[Press Release]

- November 15, 2017

- Written by Anti-Solicitation Institution Div.

“One year on, the Improper Solicitation and Graft Act has brought a positive social and economic impact but lowered sales of affected industries.”
 

The ACRC will lower the price limit on gift money at weddings and funerals to maintain its strong will of integrity, adjust the gift value limit to the minimum to protect farmers and fishermen, and further strengthen anti-corruption measures including prohibition of improper solicitation by public officials to companies.
 

The ACRC made a public announcement on the result of its comprehensive analysis on the Improper Solicitation and Graft Act’s socio-economic impact on December 12.

□ An analysis of socio-economic impacts of the Improper Solicitation and Graft Act (hereinafter the Act), which came into effect last year, showed that the anti-graft law has brought positive changes to Korean society and economy as a whole, including the public sector, business, and schools. However, some industries such as Korean beef and horticulture industries have been negatively affected, seeing a decrease in sales, which lead to loss of 902 billion won in the gross national production and an employment cut of 4,267 employments.

The Anti-Corruption and Civil Rights Commission (ACRC, Chairperson Pak Un Jong) made a public announcement on the result of its comprehensive analysis of the Act’s socio-economic impacts along with development measures on Dec. 12.

○ The ACRC had listened to opinions of various sectors through multiple ways including perception surveys of general public and public officials, open discussion forums, and meetings with affected industries to accurately analyze the Act’s social impact and remove its negative impact. A research institution looked at economic indicators of last year to analyze the law’s economic impact.

□ [Social impact] As for the law’s social impact, positive effects of the law have spread to the entire society including the public and private sector, drawing stronger public support to the Act.
 
○ The public sector has experienced a significant positive effect. Money gifts to teachers have almost disappeared. Monetary benefits from civilians to public officials have decreased. Improper requests related to public health service or train and flight ticket reservation have been significantly dropped. And most importantly, public officials’ integrity has greatly been enhanced.
   ※Eighty one percent of public officials said they had received fewer improper requests through personal connection (Korea Institute of Public Administration, Nov. 2017)

※According to 2017 Integrity Assessment, public officials have received financial benefits from civilians significantly lower than 2016(0.70%-> 0.46 %)

※Eighty three percent of school parents said money gifts to teachers have disappeared (Seoul office of Education, Sep. 2017)

○ Companies said that the Act has helped create a better environment for them to run the business. Since the law took effect, business entertainment expenses have been remarkably reduced. It is expected that companies will avoid unnecessary networking and instead will focus on improving productiveness, which will lead to enhancement of efficiency in the long term.
   ※Seventy four percent of entrepreneurs said environment has been better for them to operate the business (Korea Chamber of Commerce and Industry, Oct. 2017)

※Entertainment expenses of listed companies were reduced by 0.3 to 0.6 percentage point (KIPA, Nov. 2017)

○ People now purchase products of reasonable price and split the bill shared with others. After work, workers spend more time and money for themselves, instead of entertaining business-related persons. As such, social customs of gift-giving and entertainment have become rational.
※Sales figures and sales volume of Korean pork gift sets during the Chusok, Korean Thanksgiving holiday, rose by 177% and 292% respectively, compared to the Lunar New Year holiday (Korea Pork Committee)
 
※Seventy two point eight percent of public officials said splitting a bill has become a common practice (KIPA, Sept. 2017)

○ Thanks to such changes, a large number of public officials and the general public consider the Act effective in resolving corruption issues. The international community as well describes the anti-graft law as an important milestone in anti-corruption efforts, recognizing it as a significant advancement in anti-corruption legislation.
※78.9 % of the ordinary citizens and 91.8% of public officials said the law had been effective in resolving corruption issues (KIPA, Sept. 2017)

□ [Economic Impact] When it comes to the law’s economic impact, 71% of Korean people see that the law has had a positive impact on the Korean economy as a whole.

○ According to a study by Seoul National University, an enhanced national integrity level through the enforcement of the Act would help facilitate fair competition and attract more foreign investment, which will lead to economic growth and job creation in the long term.
※A 10 point increase in national integrity level would lead to a GDP growth of 8.578,5 trillion won and a creation of 2,700 jobs

○ However, analyses conducted by a research institution, the KIPA, and the relevant ministry, the Ministry of Agriculture, Food and Rural Affairs (MAFRA), showed that the Act has had a short-term negative impact, such as a decrease in sales of agriculture and livestock products.

The KIPA’s analysis showed that there was a decrease in production, sales, and prices of the Korean beef, flower, and restaurant industries, leading to a fall of 902 billion won in gross national production and an employment cut of 4,267 people.

The MAFRA’s study also found a decrease in sales of agricultural, livestock, and fisheries produce for holiday gifts and a drop in sales volumes and figures of Korean beef, flowers, apples, pears and fishery products.
 
□ [Adjusting the Act’s price ceilings on gift and money ] The ACRC, after comprehensively analyzing various opinions and study results and in consultations with the related ministry, decided to adjust the Act’s price ceilings on gifts and money to the minimum necessary level. Under the decision, the Commission will lower the ceiling on gift money at weddings and funerals, which is a frequent expenditure for the public, to emphasize the law’s spirit of enhancing integrity, while raising the gift ceiling only for agriculture, livestock and fisheries products, to protect farmers, livestock breeders and fishermen from the law’s bad effect.

○ The ceiling on food will remain at 30,000 won since the law’s negative impact on restaurants have been temporary, and a majority of the public sees the ceiling appropriate.

○ The current gift ceiling will remain the same at 50,000 won, except for agriculture, livestock, fisheries products (flowers included), whose price limit will be raised to 100,000 won. The Commission made such decision to reflect public opinion that the Act should take into consideration a sales decrease in the agriculture, livestock and fisheries industries. “Agriculture, livestock, fisheries products” refer to agriculture, livestock and fisheries products and processed products that are more than 50 percent composed of an agricultural, livestock and marine base.
※45.1 % of the general public and 43.2% of the public officials agreed with raising the gift price limit for agricultural, livestock, and fisheries products while 52.3 % of the general public and 55.4 % of the public officials disagreed (KIPA, Sept. 2017)

※Public opinion on the amendment bill of the law which raises price limits on foods, meals, and condolence and congratulatory money: 63.3 % of the public agreed and 27.5% disagreed (Dec 1, 2017, CBS Network)

○ Ceiling on money gifts at weddings and funerals will be lowered to 50,000 won from the current ceiling of 10,000 won, taking into consideration that public officials are required to have high level of integrity and that weddings and funerals are so frequent event that giving money gift is a financial burden for most people. However, the current 100,000 won limit will continue to be applied to big flower bouquets and wreaths at weddings and funerals.

□ [Supplementing the provisions regarding outside lectures, etc.] Along with the adjustment in price ceilings on gifts, the provisions of the Improper Solicitation and Graft Act that stand apart from the legislative purpose of the Act and reality will be overhauled. More specifically, with regards to reporting of outside lectures, etc., uncompensated outside lectures, etc. will be excluded from the scope of those subject to reporting. In addition, reporting procedures and reportable items will also be more simplified.

○ Moreover, an uniform ceiling will be set (at 1 million won per hour) on honoraria applicable to schools (i.e. national, public and private schools) and media companies (i.e. general media companies and those of public service-related organizations) in order to address differences in the ceilings thereon. Also, ceilings on honoraria applicable to public officials and heads and employees of public service-related organizations will no longer be differentiated according to rank and instead will be set by organization within the range of ceiling of 400,000 won.

□ [Strengthening Improper Solicitation and Graft Act] Meanwhile, the ACRC will push ahead with thorough measures in cooperation with relevant agencies to ensure that the amendments to the ceilings do not run counter to positive changes and trends brought about by the implementation of the Improper Solicitation and Graft Act.

○ The ACRC will make sure that public officials, etc. are aware that as seen in judicial precedents, notwithstanding the adjustment in price ceilings, they will not be allowed to receive any money or other valuables in case where there is direct duty-relevance, like in the case of license/permission, investigation, contract and evaluation, etc. In addition, the ACRC will continue to reinforce integrity training for public officials in a bid to spread a culture of integrity in public offices.

○ Furthermore, in respect of expedients of various kinds aimed at circumventing the Improper Solicitation and Graft Act, the standard for the interpretation thereof will be modified in a more stringent manner and relevant institutions will be also revamped. On top of that, the ACRC will share cases of expedients with relevant agencies to detect and punish any secrete acceptance of money or other valuables and will also pursue measures to facilitate whistle-blowing and protect corruption reporters so as to expose covert corrupt acts.

□ [Beefing up anti-corruption measures] The ACRC will also bolster essential provisions of the Improper Solicitation and Graft Act while pushing forward comprehensive anti-corruption measures so that anti-corruption reform can proliferate throughout the society as a whole.

○ Above all, provisions that prohibit improper solicitation by public officials to the private sector and that prevent conflicts of interest of public officials are to be newly inserted into the Code of Conduct for Public Officials within this year to be implemented for public officials first.

○ Next year, a provision that forbids public officials’ improper solicitation to the private sector will be incorporated into the Improper Solicitation and Graft Act as well, while efforts will be made to enact the Act on the Prevention of Conflict of Interest of Public Officials. The ACRC will also take strong measures against moral hazard of those falsely or excessively claiming government subsidies by expeditiously enacting the Act on the Prevention of False Claims of Public Funds, which has been pending at the National Assembly.  
 
□ Regarding concerns that the adjustment in the ceilings may encourage bribery to public officials, the chairperson of the ACRC Pak Un Jong said “even if the ceilings are adjusted, public officials will continue to be prohibited from receiving any food and gifts as now if there is direct duty-relatedness, like in the case of license/permission, investigation, contract, and evaluation, etc., and therefore, adjusting the ceilings is not a backward move and will not work against the initial purpose of the Improper Solicitation and Graft Act.”

○ The chairperson Pak also said “we should take this amendment as an opportunity to do away with self-devouring disputes and strife over the range of gift ceilings with all the people participating in the stable establishment of the Improper Solicitation and Graft Act in our society, and the ACRC will not cease to put efforts into the reinforcement of fundamental provisions of the Act through incorporating the new provisions that stipulate prohibiting public officials’ improper solicitation to the private sector and preventing conflict of interest of public officials, thereby improving the national integrity level.”