[In depth interview]A friend in the Blue House

Cho Suck-rai

Cho Suck-rai, the chairman of the Federation of Korean Industries, the country’s biggest business lobby group, was rubbing black oil sludge off the rocks on Mohang beach in Taean County, South Chungcheong, when the JoongAng Ilbo spoke to him on the second day of the new year. He is 73 years old, but by the time of the interview he had been working for more than two hours on the beach.
The newspaper asked him about President-elect Lee Myung-bak’s promise to revitalize the business environment and what he hopes Lee will do. The president-elect came to the Yeouido headquarters of the federation in late December to meet with the leaders of the country’s top conglomerates, including Lee Kun-hee of the Samsung Group, Chung Mong-koo of the Hyundai-Kia Automotive Group and Cho, who is also the chairman of the Hyosung Group.
In the meeting Lee promised to create a business environment that would encourage companies to invest. The federation has repeatedly argued for easing regulations as the way to encourage investment. After Lee’s surprise visit, the federation, which saw its influence diminish under President Roh Moo-hyun, is again attracting attention.

Q.Why did you decide to work in Taean instead of holding an opening ceremony for the New Year?
A. This is the Federation of Korean Industries’ opening ceremony for this year. Our 200 staff members are helping to remove oil on Taean Beach as a New Year ceremony. Rather than exchanging meaningless New Year’s greetings, it is better to work here.

Do you think business regulations are excessive now?
All regulations that obstruct business activities should be adjusted. The reform of regulations should be completed this year.

What regulation needs to be reformed most urgently?
There are too many regulations that should be reformed urgently. Among them, there are too many regulations regarding the establishment of new companies and expansion of production facilities. For example, it is difficult for even a company that already operates golf courses to get permission to build more golf courses. Why is the government preventing investment?
There should be no obstruction of investment. It dampens companies’ will to invest. Regulations regarding start-ups are too numerous and too complicated.

How was the meeting between President-elect Lee and business group leaders?
It could not have been better. There has not been a business-friendly atmosphere in government policies in recent years. Now the atmosphere is changing. To create jobs, investment should be expanded.
President-elect Lee expressed agreement with the business world’s view that an environment for investment should be created.
The position of the Federation of Korean Industries seems to have strengthened since Lee visited the headquarters and met with business leaders there. What do you think?
I am not interested in whether our position is high or low. What is important is whether our federation can fulfill its role. Some say that the leaders of the four biggest conglomerates ― Samsung, Hyundai Motor, SK and LG ― are passive in participating in our association’s events, so our federation’s driving force has weakened.
But even though some business leaders are not participating in our meetings, it does not mean that they are not working with us.

Do you think the Lee Myung-bak administration’s seven percent growth target is achievable?
It is possible enough if productivity doubles. It is possible if we recover our lost competitiveness.
The investment environment is formed by both labor and management. In the world, only Korea is facing very tough labor-management relations.
I heard that 30,000 to 40,000 volunteer workers per day have come to Taean to help clean away the oil washed onto the beach. It is a miraculous phenomenon. With such energy, people can work together to recover the Korean economy.

What do you think about the controversy of pitting growth against distribution during the last 10 years?
There have been excessive distribution-oriented policies over the last 10 years. For example, in the Cato Corporation, which we at Hyosung Group invested in, the annual salary of an average worker is as high as 65 million won. However, the company is giving out huge lump-sum retirement grants. In addition, workers get special annual bonuses equal to 200 percent of their monthly salaries, even when the company’s business results are not good, because of the strong labor union. Who will want to do business with such labor unions in Korea? It is a sad reality that local manufacturers are fleeing to foreign countries.
As for Hyosung, its Chinese business is going well, despite the language and even though the Korean company does not have full knowledge of China’s legal system.
If we do well in Korea, why would we invest in foreign countries? If local productivity is improved through regulatory reform and better labor-management relations, local manufacturers will not relocate overseas.

What do you think about the controversy on ownership structure?
Why is corporate governance so important? What benefits does the reform of corporate governance give? If ownership is separated from management, does it mean an improvement in corporate governance?
The important thing is whether management is efficient. If the company owners seek only their own profits in management, they had better remain just shareholders. But not all business owners do that.

By Lee Sang-jai JoongAng Ilbo [symoon@joongang.co.kr]