blame (unreal) wrote in omonatheydidnt,

Lee versus Lee: A phoney war in Seoul

They're at it again. The two most powerful men in South Korea are at daggers drawn. No, I mustn't exaggerate. But we are witnessing an unexpected and rather undignified hissy fit.

"In the left corner ..." That boxing metaphor won't do. Politically, both Lee Myung-bak and Lee Kun-hee are very much in the Right corner. But neither is boxing clever at the moment.

I don't have to tell you who they are, do I? Nor that these Lees are unrelated. Korea is almost as full of Lees as it is of Kims. Some of the Lees spell it differently, like South Korea's first president, Syngman Rhee. Yet both L and R mislead: the name is actually pronounced as Yi.

But I digress. As you know, Lee Myung-bak is South Korea's current Republic of Korea president. Three years gone, less than

two years left, and then he's history - and maybe toast. The system in Seoul allows just one presidential term, and can be vengeful thereafter. Lee's predecessor, Roh Moo-hyun, tragically took his own life in May 2009, hounded by accusations of bribery.

By contrast, Lee Kun-hee can afford - in every sense - longer-time horizons. You know who he is, too. He's the boss of Samsung, by far the biggest chaebol (conglomerate) in Korea.

That's not an elected post, but an inherited one. Samsung - it means three stars in Korean - was founded by his dad, Lee Byung-chull, in 1938. Lee Kun-hee was the third son. He in turn is busy arranging for his own son, Lee Jae-yong (aged 43) to inherit in due course.

No, this isn't North Korea, but a far richer kingdom. Samsung is the world's largest private conglomerate by revenue; in 2009 the group earned US$172.5 billion. Eat your heart out, Kim Jong-eun. What a contrast to the disaster zone his daddy is setting him up to take over.

So no term limits at Samsung, but a hereditary dynasty. Group flagship Samsung Electronics (SEC), which Lee Kun-hee has brilliantly built up into the global number 1, is a publicly quoted company. Yet nobody consulted the shareholders in March last year, when Lee returned as chairman of SEC. Why bother, when everyone knows who's really running the show?

Why had he been away, you ask? That's a bit embarrassing. In April 2008, Lee resigned as chairman of the Samsung group after being indicted for financial offences. In July that year he was convicted of tax evasion, given a three-year suspended jail term and fined US$109 million: loose change to a man whose personal wealth Forbes estimates at US$8.6 billion.

In most countries that would end your career. Not in Korea. Barely a year later, in December 2009, the other Lee pardoned him - on the excuse that his heft was needed to bring the 2018 Winter Olympic Games to South Korea. The International Olympic Committee (IOC), itself no stranger to ethical controversies, gave Lee Kun-hee a slap on the wrist and reinstated him as an IOC member; although he is banned from serving on IOC commissions for five years.

So you might expect Lee Kun-hee to be grateful. And the two Lees have much in common. Just three weeks apart in age (both men are 69), they share a chaebol background. Before switching to politics as mayor of Seoul, Lee Myung-bak made his mark in a 27-year career at Hyundai. In 1976, aged 35, he became Korea's youngest ever chief executive officer at Hyundai Construction.

True, back then Samsung and Hyundai were rivals, both battling to be biggest and best. But that is old history now. The Hyundai group fractured, leaving Samsung as undisputed number 1.

As president, Lee Myung-bak makes a lot of his business credentials. He is widely seen, not least by critics, as still a chaebol man at heart. So what prompted Lee Kun-hee to diss him?

Chairman Lee doesn't do interviews. His rare public comments tend to be brief and gnomic, if sometimes cutting. In 1995 he famously opined that South Korea suffers from second-rate business, third-rate government and fourth-rate politics. He hasn't said much since then.

Reporters try to doorstep him as best they can. Arriving on March 10 for a meeting of the Federation of Korean Industries (FKI), the chaebol lobby group, Lee was asked his views on current economic policy. "I am not satisfied," came the unexpected and momentous reply. He qualified this slightly, using a rather arrogant metaphor: "Yet I won't give a failing mark, since the economy has grown substantially compared with the preceding 10 years."

That set the fur flying. The president himself kept mum, but the Blue House (presidential palace) promptly laid into Lee for his "inappropriate" comments. A senior presidential aide noted that Lee Myung-bak had pursued pro-business policies ever since taking office. Too right he has.

On March 14, the Minister of Strategy and Finance echoed that, in parliament. Yoon Jeung-hyun called Lee Kun-hee's comments "truly embarrassing and disappointing", ill-befitting "the chief of a large business that benefited from the government's policy support".

Even MB (as he is known)'s detractors admit that under him South Korea, after the briefest of wobbles, made a much faster recovery from the 2008-9 crisis than most other developed countries. So the comments of KH (as he isn't known) appear churlish, to say the least.

What prompted them? His real target may have been less the president than a former prime minister. Chung Un-chan, an economist who now heads the Commission on Shared Growth for Large and Small Companies, an initiative by MB to promote fairness, which stirred a hornet's nest last month by suggesting that big firms share their profits with smaller ones.

Specifically, Chung said conglomerates should extend their profits to "not only shareholders and executives but also to their subcontractors". Shock, horror! The chaebol and right-wing press denounced the idea as anti-market and leftist. Chung is actually a moderate Keynesian.

Lee Kun-hee followed suit: "I grew up in an entrepreneurial family and I studied economics at school, but I have never heard of the word 'profit-sharing' and I simply don't understand what it is or what it means ... I just don't know if the system is from a socialist economy, a capitalist or communist economy." That sounds a tad disingenuous.

Chung described Lee's remarks as unfair and based on a misunderstanding, and offered to meet with him. Finance Minister Yoon stood up for Chung, saying that his plan aimed to promote fair competition by remedying large companies' abuse of market power.

Whether or not literally sharing profits is the way to go, gross inequality between large and small Korean companies is a real and longstanding problem. This is not an ideological point, but a structural one. The whales choke the minnows. While the chaebol flourish, a mass of small and medium enterprises struggle to get credit - or even to get paid, fairly or in good time. Few dare complain.

Three years ago, in a case widely seen as just the tip of the iceberg, Samsung Electronics was fined US$12.2 million by the Fair Trade Commission (FTC) for precisely such abuses. The FTC found that in five cases during 2003-05, SEC violated fair trading rules in dealing with subcontractors. Two Samsung executives were fined as well, for obstruction of justice.

The small fry got squeezed twice over. SEC not only pressed firms supplying mobile phone components to cut prices, but then delayed paying them. SEC's own profits last year reached US$14.6 billion: a record for the company and the country. Samsung should be ashamed to treat its suppliers so badly. This is the festering sore that Chung Un-chan is trying to address.

But back to the other Lee, MB. A further animus behind Lee KH's remark may have been an earlier spat between the president and the chaebol. They spent much of last summer sniping at each other, in a shadow-boxing display which was as undignified as it was unconvincing.

In July, President Lee worried aloud that economic growth was widening inequality, and said the chaebol "must do more to narrow the gap". A startled FKI - hey, isn't this guy one of us? - pretty much told him to get lost. FKI's chairman retorted that the government must first chart a course, adding that this administration "is unable to even warn the people of dangers facing the nation" - a barbed reference to the sinking of the warship Cheonan earlier that year.

Lee shot right back: "The FKI must not protect the interests of large conglomerates only, and must start thinking about their social responsibilities." And so it went drearily on.

If I sound jaded, it's not that the issues are unimportant. Indeed, they matter. But it was hard to root for either side. If President Lee means what he sometimes says, fine. But as most of his policies favor the chaebol and the rich, it was hard not to see this as populist posturing, calculated to woo voters ahead of a batch of key by-elections - less than two months after local government elections had gone badly for his ruling Grand National Party (GNP).

If so, it worked: the GNP did well in the by-elections. But is Lee MB genuinely committed to addressing structural inequalities, which means taming the very chaebol that formed him? The overall thrust of his policies says no. An occasional sound bite doesn't cut the mustard.

Meanwhile, Lee MB is temporarily away from the fray, visiting the United Arab Emirates. Monday saw him at the ground-breaking ceremony for a massive new project there. It's, um, for a nuclear power plant - in fact four of the beasts. There's timing for you.

Source: asia times
Tags: political news

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