Tue, Feb 25, 2003 - Page 9 News List

Taking care of business key to Roh government

South Korea's government and businesses are on a collision course as president-elect Roh Moo-hyun has made it clear that he is determined to push for reform.

By Shim Jae Hoon

Riding herd over South Korea's SK Group, a sprawling energy and petrochemical giant with annual sales of 53 trillion won (US$44.5 billion) in 2001, is Son Kil-seung, a silvery-haired chief executive officer and its group chairman.

If running the SK, the country's third largest chaebol or family-based conglomerate, wasn't already a tough job, the 62-year-old professional manager is heading into even riskier zone of uncertainty now as he takes over the chairmanship of Korean Federation of Industries (FKI) beginning Feb. 5.

FKI, a Korean equivalent of Japan's powerful Keidanren organization of big-business club, will not only bring more responsibility; it puts him on a collision course with the incoming administration of president-elect Roh Moo-hyun.

It's a job he has never sought. A professional manager rather than chaebol-owner, he has taken the FKI chairmanship only after no chaebol owners agreed to hold the post, for fear of running diametrically against the new government determined to put South Korea's big business groups through a new round of corporate restructuring. Thus Son is only the third professional manager to hold the FKI chairmanship in its five-decade history.

The coming round of government-business confrontation is expected to be sharp and stormy. Roh vows to push through a new legislation to plug the loopholes in the inheritance and gift taxes so that second-generation chaebol owners will not inherit assets without paying due taxes.

His team of experts are demanding more transparency in the corporate sector that will make it difficult for the big business community to move assets without scrutiny by government officials.

In the equity market, the next administration hopes to institute the system of class-action lawsuits to bring more transparency and protection to bear over the bourse by allowing small investors to sue big listed companies for fraudulent accounting, insider-trading and false public disclosures.

On the bigger issue of chaebol control, the government's Fair Trade Commission will seek a continuous ban on cross-investment by one chaebol unit to another unit. Also, chaebol groups' financial subsidiaries will not be allowed to freely move funds to other units.

Thus a battle line is being drawn with FKI publicly opposing these steps as being anti-business in nature. While the chaebols line up against the government, the various civic organizations calling for reform are standing behind the Roh administration. The coming battle will therefore redraw the country's chaebol lineup and reshape the institutions governing Korea Inc.

Corporate restructuring and economic reform in general have been at the heart of South Korea's national agenda since the Asian financial crisis of 1998, which helped bring former president Kim Dae-jung to office.

Although he pledged to fundamentally overhaul the chaebol-dominated economic structure, Kim's reform weakened halfway under the various compromise. That has left other issues such as labor market flexibility, privatization of state-run enterprises and the corporate governance system largely left intact. Especially lagging has been the corporate governance system, which has perpetuated the private sector's imperial management style.

These are all part and parcel of the reform package necessitated by the country's distorted economic structure after four decades of industrialization under the military-backed authoritarian government.

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