The Corporate Vitality Enhancement Act will take effect in about a week. The law, which was legislated in February, is designed to revitalize ailing industries, such as shipbuilding and steelmaking, which have been suffering from a glut among global competitors.

Policymakers say that the law -- which is better known as the “one-shot” law -- would provide conglomerates with decent opportunities to streamline ailing business segments by merging units with similar functions.

The special law is drawing attention among overseas stock investors as to whether it will be an effective prescription for South Korea.

The act, which will lose effect on Aug. 13, 2019, exempts qualified companies from a complex and cumbersome web of regulations scattered across existing laws. And the legislation will not only simplify the required procedures but allow new forms of business combination.

Any company will be entitled to push for a merger with another company without approval from its shareholders, if the target company’s market capitalization is less than 20 percent of its own market value. It is also projected to spur corporate governance reform as it will ease regulations on holding companies. 

As tax benefits will also be offered to business groups pushing for the streamlining via “fast-track” M&As, it is undoubtedly a rare chance for conglomerates.

However, there could also be side effects, as it would involve the handling of financially distressed business units. Should policymakers be negligent in monitoring of their restructuring procedures, the law might only produce a number of debt-saddled companies that are abandoned in the auction market.

The government should not be lax in looking for shady intragroup shareholding during the process of normalizing the struggling firms. Some units may be used as a tool to strengthen conglomerates’ family ownership structures in a low-key manner.

For instance, as a side effect, it may motivate some unscrupulous entrepreneurs to abuse the new rules in transferring corporate wealth and control rights to their children.

Conglomerates should also accept the responsibility that comes the opportunity given by the Assembly. They need to make full-fledged efforts to merge sound units with ailing ones for synergy rather than simply seeking to sell their ailing units by any means.

Simultaneously, conglomerates should contemplate the fresh way to strengthen their fundamental business structures in the wake of the act’s implementation.

Both the government and businesses should be aware that any exploitation of the law could harm the overall economy and Korea’s sovereign credit rating.

The assessment board is intended to address these concerns. Experts from the public and private sectors will have to carefully scrutinize restructuring plans and reject those that are intended to abuse the eased rules.

The Park Geun-hye administration had desperately sought to get the legislation passed, asserting that it was essential to rejuvenating Korea’s ailing industries. Now that the act is about to be implemented, the economic team led by Finance Minister Yoo Il-ho should be able to bolster the competitiveness of Korea’s major industries and thereby revitalize the economy.