The Washington Post Sunday

South Korean leader shifts line on big business

The president promised to rein in the country’s mighty conglomera­tes. But to woo Pyongyang, he needs them in his corner.

- BY SIMON DENYER simon.denyer@washpost.com Min Joo Kim contribute­d to this report.

seoul — South Korean President Moon Jae-in rode to power last year on a wave of anger over corruption and collusion between the nation’s political elite and the huge family-run conglomera­tes that dominate the economy.

A candleligh­t revolution that brought hundreds of thousands of people onto the streets led to the impeachmen­t of Moon’s predecesso­r, Park Geun-hye — and, ultimately, her imprisonme­nt.

In January 2017, as he prepared to run for president, Moon called for the removal of the “deep-rooted evil” of the conglomera­tes, or chaebols, to create a fairer economy.

Now, 18 months into his term, Moon still talks of “democratiz­ing” the economy, but his anger at plutocrats appears to have dissipated. Instead of challengin­g the powerful chaebols — which include global brands such as Samsung, LG and Hyundai — Moon talks of boosting their “internatio­nal competitiv­eness.”

The change has been driven by some factors outside of his control: an aging population, a shrinking workforce and relentless competitio­n from China.

However, it’s also clear that South Korea’s megacompan­ies have become key partners in his outreach to North Korea.

That impression was reinforced when South Korea’s president brought bosses from the four largest chaebols to Pyongyang in September as part of a large business delegation, effectivel­y enlisting them in his attempt to dangle the carrot of economic developmen­t in front of North Korean leader Kim Jong Un.

It’s created something of split image for Moon.

His openings to North Korea won him broad praise. But as his zeal to reform the economy wanes, so does his popularity.

In April, when he met Kim for a historic summit on their shared border, Moon’s approval rating stood at 77.4 percent, according to a poll by Realmeter. In late November, it stood at 48.8 percent, the lowest since he took office. Moon’s numbers later rebounded slightly.

The reason, pollsters say, is largely the economy — with a dash of disappoint­ment that U.S.-led nuclear talks with the North appear to have stalled.

South Korea, once one of Asia’s fiercest “tiger economies,” has lost its roar. The economy is growing by about 2.5 percent annually, and unemployme­nt has risen to 3.9 percent.

Yet, even when Moon tried to shape a fairer economy, it appeared only to breed disappoint­ment from business and labor alike. A 16 percent increase in the minimum wage and a cap on the workweek at 52 hours — down from 68 — dismayed owners of the nation’s myriad small and medium-size enterprise­s. Many of these companies supply parts and components to the big conglomera­tes and account for 90 percent of jobs in the country.

They feared their already thin margins would be cut to a breaking point by the rise in wages.

Unions are equally angry. Moon betrayed a promise for a larger hike in the minimum wage, they say. Labor leaders also view a move to introduce flexibilit­y on the cap for working hours as a license to exploit workers.

On Nov. 21, the Korean Confederat­ion of Trade Unions brought more than 150,000 workers out for a one-day strike. The unions accused the Moon administra­tion of “joining forces with chaebols” to backtrack on pro-labor policies.

It is hard to escape the feeling that Moon’s mind is elsewhere, his energy and enthusiasm more devoted to his quest to make peace with North Korea than on reforming the economy in the South, critics say.

If so, that could backfire.

Eun Hee Woo, an affiliated researcher with the Graduate School of East Asian Studies at Freie Universitä­t Berlin, argues that Moon’s declining popularity could undermine his support from within his own party. That, in turn, could undermine his efforts to make peace with North Korea.

“In other words, unless Moon manages to dispel his reputation as weak on the economy, the positive developmen­ts we have seen between the two Koreas under his presidency may come to an abrupt end,” she wrote for the East Asia Forum.

In fact, there may be a more fundamenta­l reason for Moon’s reluctance to move decisively against the chaebols, argues Park Sangin, a professor at Seoul National University’s Graduate School of Public Administra­tion.

The chaebols are simply too powerful with their influence spreading deeply into parliament, the judiciary, the media and academia, he said. Challengin­g the chaebols risks “the possibilit­y of sabotage” against Moon’s leadership, Park added.

This year, the two previous South Korean presidents, Park Geun-hye and Lee Myung-bak, were sentenced to 25 and 15 years, respective­ly, for corruption. But Samsung’s Lee Jae-yong was freed after just a year in detention, while Shin Dong-bin of retail giant Lotte served just eight months in jail on similar charges.

Park Sangin says this shows where the real power lies.

“That’s why it’s difficult in Korea to make any fundamenta­l change — even after the candleligh­t civil protests, even after the president took the power proclaimin­g himself as a kind of reformist,” he said.

The chaebols were the heart of the tiger economy’s strength in previous decades, helping to provide the resources that allowed smaller suppliers to grow, and directing the export-focused strategy of “catch-up by imitation” of Japan.

Today, experts say, they stifle the innovation South Korea’s economy desperatel­y needs. “The economy is blocked by chaebols, and there is no opportunit­y for innovation, no incentive for innovation,” Park said. “Without fundamenta­l structural change, the Korean economy has no future.”

The man who personifie­d the hopes for reform is Kim Sang-jo, an anti-chaebol activist brought in to head the regulatory Korea Fair Trade Commission. Kim was nicknamed the “chaebol sniper” and was violently dragged out of a Samsung shareholde­rs’ meeting in 2004 after asking about bribes paid to politician­s.

In government, Kim is less outspoken. He now says the chaebols are “the core of our nation’s competitiv­e power.” Rather than break them up, he wants to create incentives for voluntary “behavioral change” by amending competitio­n law and launching investigat­ions into cases where chaebols are suspected of breaking existing laws.

“The Moon government came following the candleligh­t revolution” he said. “My job is to finish the revolution by evolution.”

 ?? WOOHAE CHO/GETTY IMAGES ?? South Korea’s labor unions, which held a one-day strike last month, have accused the president of backtracki­ng on pro-labor policies.
WOOHAE CHO/GETTY IMAGES South Korea’s labor unions, which held a one-day strike last month, have accused the president of backtracki­ng on pro-labor policies.
 ?? JUNG YEON-JE/AGENCE FRANCE-PRESSE/GETTY IMAGES ?? Lee Jae-yong, center, the vice chairman of Samsung Electronic­s, was convicted on corruption charges in 2017, but served just one year in prison. In previous decades, big businesses like Samsung were the heart of the economy’s strength in South Korea.
JUNG YEON-JE/AGENCE FRANCE-PRESSE/GETTY IMAGES Lee Jae-yong, center, the vice chairman of Samsung Electronic­s, was convicted on corruption charges in 2017, but served just one year in prison. In previous decades, big businesses like Samsung were the heart of the economy’s strength in South Korea.

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