[OUTLOOK]Focus now on trade agreementThe Korean people only now seem to remember the original price Lone Star Funds paid to buy the Korea Exchange Bank. If Lone Star Funds had paid tax as required by the Korean authorities, would the sale of the bank have come into the spotlight like this?
The controversy over the BIS capital adequacy ratio seems to have taken a wrong direction. The media and the authorities are focusing on the people who played major roles in negotiations for the sale of the bank at a low price. The trail of money transactions between those major figures revealed a possible conspiracy, not allowing a chance to look at the real reasons why the bank needed to be sold desperately. The combination of a sale at a low price and a conspiracy can agitate Koreans even more.
We need to calm down. In the storm of the financial crisis, the Korean economy was on edge. I remember the situation clearly. The total value of shares of Korean Air, one of the world's top five carriers, is only $100 million. What were the prices for the sales of Mando, one of the world's leading auto parts manufacturers, and Daewoo Motor, a healthy carmaker? There are rumors that General Motors is staying afloat thanks to GM Daewoo. The two Korean companies were sold without any reasons known to us. When this country was on the verge of bankruptcy, our last choice was a discount sale of Korean companies.
Did we have the luxury to look at what type of capital it was? When selling unhealthy companies, the price doesn’t matter. It was then that a road show that nobody had heard of was planned. To attract foreign capital, Korean experts went to the international market to sell foreign exchange stabilization bonds. The major figures in the negotiations are now hated most by Korean citizens. The policymaking group, the so called “Lee Hun-jai army division,” received big rewards from the Kim Dae-jung administration. Now, they could easily be labeled as the major players in a conspiracy.
It is no surprise that the Koreans feel bad to hear that Lone Star Funds earned 4.5 trillion won ($4.7 billion). But it could have earned the same amount of money if it had invested somewhere else.
So, why the Korea Exchange Bank? Is it because the Korean president talked about the bank as an example of a low-priced sale?
We don't know whether the Korea Exchange Bank would have been able to survive on its own or if the sale was the only way out. But politicians, financial experts and government officials must have considered all aspects and made their decision in order to avoid a second financial crisis.
Now we are entitled to ask if we have prepared a control tower, which controls the sales of Korean citizens’ assets. We should not put the people involved in the sale under questioning, as if investigating those who accumulated wealth by illegal means. Negotiations always have variables and the BIS ratio can also change drastically according to the calculation method and speculation on risky assets. If that was fabricated, the real problem is that we still allowed the fabrication even after the 1998 financial crisis. Is it because the financial control system was so shabby that we sold our assets to speculative funds like Lone Star? Have we not prepared for years so as to allow speculative funds to hit and run with such perfection? We should remember this administration suffered in the beginning from financial turmoil because of Hyundai's liquidity problem, SK Global's window dressing settlement, and peoples’ misuse of credit cards. Since then, has the control tower been watching the financial market and foreign speculative capital? Has the tower’s capacity developed?
These are the questions citizens want to ask and which the authorities should answer. This is also an important political task to improve the country's functions. “Who were the major figures?” Scolding those people is the same as cutting off one's nose to spite one's face. There is no point in asking how much money Lone Star earned from the sale because a private equity fund like Lone Star won't give its profit back.
Now there is one task into which the current government should put all its energy and efforts. That is to stop citizens’ negative reactions to foreign capital from spreading toward a proposed free trade agreement with the United States. The government should prepare systematically for the agreement so that in the future we do not repeat the past, asking about the original price and feeling bad about it.
* The writer is a professor of sociology at Seoul National University.
by Song Ho-keun