[OUTLOOK]Nobody to kick around?The biggest trouble I had when I went to New York 11 years ago as correspondent was the Hyundai Sonata I inherited from my predecessor. How was I supposed to cover the wilderness of Manhattan with a car that stopped anywhere it pleased? I still remember the trouble I went through trying to sell it. To think that the very same Sonata has now become one of the most popular cars in the United States, beating well-known Japanese car models such as the Toyota Camry and Honda’s Accord, is almost unbelievable. This is not just the victory of a product. This is a victory for our national pride.
Not many people will remember that at one time the Korean government tried to shut down Hyundai Automobiles. In 1980, the government concluded that the Korean automobile industry had no future. It decided to merge Hyundai, Daewoo and Kia into one company and sell it to GM. This conclusion came from the policy decision that our automobile industry should be restricted to assembling cars for carmakers from more advanced countries. Chung Ju-yung, the late founder of Hyundai, held out to the end, despite having signed a declaration that he would follow the orders of the commerce minister. “If we hand over management to foreigners, it will be the end of our car exports,” Mr. Chung argued. GM, which had leaned on the promise of the Korean government, returned home in anger at Hyundai’s obstinacy. Had the Korean government had its way at the time, there would be no car industry in Korea today.
The automobile industry is not the only case. We could have lost the entire semiconductor industry that enhanced Korea’s brand image to the level of a global leader. When Samsung started to increase its investments in the semiconductor industry in the 1980s, many people looked on that wearily. At the time, overinvestment and redundant investments were rampant, and there was a particular weariness about industries with big risks.
The government and even the economists voiced concern that Samsung would end up bankrupting all its existing businesses. Ultimately, the Finance Ministry forbade all bank loans to Samsung’s semiconductor arm. It was an unexpected blow to Samsung.
The government actually cut off the credit line when it should have increased its financial support. Lee Byung-chul, the late founder of Samsung, in the end overcame the government’s choke hold by mobilizing his entire fleet of companies. Had the regulations on internal transactions been as strict then as they are today, even that would have been impossible.
A Korean economy without semi-conductor and car industries would now be unimaginable. And yet, the government had once decided to get rid of these two sectors and took actual measures to do so. The industries could survive only because Chung Ju-yung and Lee Byung-chul opposed the government policy with all their might. The two dramatic success stories of entrepreneurial spirit were, on the other hand, two embarrassing cases in the Korean government’s industrial policy.
Looking back, there haven’t been many cases at all where government intervention in business has had the desired effect. There was once a time when the government led the economy by building an integrated steel mill in Pohang, providing export financing and promoting the heavy, chemical and construction industries, but this ended after former President Park Chung Hee’s death. Kim Dae-jung’s administration tried to negotiate “big deals” to restructure the industrial sector, only to make things worse.
Despite the entrepreneurs having been the heroes, the anti-corporate sentiment of Koreans is the worst in the world. While there is no denying that Korean companies have to blame themselves for much of this, the government has also lent a hand in creating this atmosphere. Anti-corporate sentiment has gotten worse since President Roh Moo-hyun’s administration came to power, and it looks like this hostility towards businesses will continue for a long time.
These are the times when the business community should change its way of thinking, instead of complaining of unfairness. For example, however hard the Federation of Korean Industries tries to explain difficulties Korean businesses encounter and improve their image, it will be of no use. If the federation steps forward, it gets less persuasive. Although it tried hard on issues such as the restrictions on investment ceiling of conglomerates and the Fair Trade Act, the federation seems to have failed to catch the ear of the government or the legislators.
It has often been accused of being the agent of big business corporations by civic groups or politicians. I can’t understand why the federation repeats the stupidity of wasting money without getting results, and then becomes an easy target whenever a new government comes into power. It might be a good idea for the business world to go for a drastic change of paradigm. Why not get rid of the federation? The federation could start to dismantle by unloading its excessive burdens and closing off its lobbying channels. It could hand over the bulk of its responsibilities to the Korean Chamber of Commerce or the Korea Employers’ Federation and turn itself into a reputable research foundation with its current budget. When the federation is gone, it might be that the people who will miss it the most are those who led the way in criticizing big businesses. After all, they would be losing their easiest and favorite punching bag. The government that delighted in tripping the federation up would then become disconsolate.
* The writer is the chief economic correspondent of the JoongAng Ilbo.
by Lee Chang-kyu