After many twists and turns, the National Assembly last week barely passed a controversial bill aimed at boosting corporate vigor.

Simply put, the special law with a three-year mandate will ease regulations stipulated in other economic-related laws and provide tax and financial incentives for corporate restructuring.

The political circle calls it the “One-Shot Act” in the apparent hope that it will help clear legal barriers in a single blow for companies looking to sell off, spin off or purchase businesses in crisis.

Under the law, the regulation on holding company-based ownership will be eased, the legal procedures for M&As will be simplified and small-scale spin-offs, stock swaps and mergers will be made easier.

Corporate restructuring became more important as our major industries’ global competitiveness has been weakening due to China’s cheaper products, Japan’s continued weak yen and the protracted global economy slowdown.

Unfortunately, the political circle wasted nearly seven months before enacting the special proposal, engaging in political wrangling ahead of April’s general election.

With the introduction of the law, analysts say, marginal companies or their parent conglomerates are expected to push for an early restructuring, spin-off or sell-off.

Market consensus is that the special law will likely spur mergers and acquisitions, and industry-wide realignment, particularly in oversupplied industries such as shipbuilding, steel and petrochemicals.

Government officials also seem to judge that corporate restructuring in heavy industry is badly needed, as it has been at the heart of Korean exports.

The nation’s shipbuilding industry, among other sectors, is suffering most, as its three main players – Hyundai Heavy Industries, Daewoo Shipbuilding and Marine Engineering, and Samsung Heavy Industries -- recorded a combined loss of about 8 trillion won last year. To make matters worse, the industry’s outlook for this year is not so bright, due to the protracted slowdown of the global economy, low oil prices and challenges from Chinese shipbuilders. It is against this backdrop that a sense of crisis is rising. A delay in restructuring could ruin the shipbuilding industry.

Alarming bells are also ringing in other sectors. POSCO, the nation’s largest steelmaker, posted a net loss last year for the first time since its establishment in 1968. Oil refiners are also suffering from oversupply and outlooks are that profitability will fall due to rising inventory-based losses.

As the legal ground to encourage corporate restructurings has been prepared, the government should swiftly arrange follow-up measures, including the selection of companies or businesses to be affected by the law so that it can take effect as soon as possible. 

Large companies in faltering industries, in particular, need to make the most of the law by accelerating the realignment of their major business portfolios in a preemptive and voluntary manner.

We should note that debt risks are particularly acute for large companies as they can deal a fatal blow to the economy if they collapse.

According to a report by the Korea Institute of Finance, among large companies, the shares of marginal firms sharply rose from 9.3 percent in 2009 to 14.8 percent in 2014, outpacing the increase rate of small and medium-sized companies.

The one-shot law is also expected to spur the setup of a holding company by some conglomerates like Samsung and Hyundai Motor as it eases relevant regulations.

As opposition parties pointed out, there are some concerns that chaebol may be the beneficiaries of the special law as they are seeking to restructure their money-losing business units and improve their ownership structures.

We cannot completely rule out the possibility that owner families of some big business groups may take advantage of the law by promoting mergers and acquisitions, spin-offs or sell-offs as a way to transfer their wealth to their children or increase their fortunes.

But the law provides a set of safeguards such as the government’s rights to disapprove a restructuring plan if its judged aim is management succession, and the imposition of fines if the purpose is proven later.

What matters for the success of the law to infuse vigor into businesses is the government’s efforts to minimize its involvement in the corporate restructuring process.

The Industry Ministry and financial authorities should limit their roles to only providing administrative and legal support to companies, not trying to mobilize their creditor banks to exercise influence on them.

I have high hopes that the law will help effectively restructure our nation’s faltering manufacturing industries to regain their competitive edge in global markets, as happened in Japan in 1999.

By Shin Yong-bae

Shin Yong-bae is the business editor of The Korea Herald. He can be reached at shinyb@heraldcorp.com">shinyb@heraldcorp.com. — Ed.