[Outlook]Eat and runEven non-gambling Koreans are familiar with the expression to “eat and run.” It’s a term known to have come from wagering activities such as the popular local card game Go Stop. A person takes the money they have won and runs away, leaving the other players to complain.
Koreans often believe that companies, foreign firms in particular, just eat and run. However, believing such a thing is the same as confessing, “I’m an ignorant person who has no idea about capitalism or the traits of companies.”
It is in the nature of companies to take. Their businesses may vary but their goal is the same ― to make profits. For companies, how to make something to “eat” and when to run are the most important decisions they face. A company leaves at the time a business produces its maximum profit and then searches for another promising venture.
In his first official press conference after he won the election, President-elect Lee Myung-bak said that he would establish a special committee to attract foreign investment. But even 100 committees of this kind won’t make foreigners invest in Korea, unless they are allowed to eat and run. They will not go to a country and invest there if they cannot leave whenever they wish.
Our society is attempting to stop companies from eating and running. The prime example of a foreign company that made a huge amount of profits in Korea is U.S.-based private equity fund Lone Star. It has done so well that some even want to see it punished.
It sounds perfectly simple, but the very basis of capitalism is the acknowledgement of private property. People are allowed to sell their property when they choose. Lone Star now owns Korea Exchange Bank. But it is having a hard time because it is not allowed to sell it.
Lone Star bought KEB in 2003. The Korean government was desperate to sell the unhealthy bank at that time. Domestic companies were not allowed to buy it even if they wanted to because of the law that separates financial and industrial capital. So the government begged foreign companies to buy KEB.
Last year, Lone Star decided to sell KEB. Some bidders showed interest and Kookmin Bank was eventually lined up as a buyer. People did the math and realized that Lone Star would earn 4.2 trillion won ($4.5 billion) from the sale, nearly triple its original investment.
Then people began to feel jealous about the deal. Negative public opinion was widespread and people were unhappy about the idea that a U.S. company would take such a huge amount of money and run.
The Board of Audit and Inspection and the prosecutors’ office attempted to find irregularities in Lone Star’s business practices. Suspicion arose that there were illegal acts in the process of handing KEB over to the American firm. Some claimed that the credit rating for KEB was lowered on purpose to sell it to Lone Star as soon as possible. A lawsuit was filed and the trial started early this year.
The deal with Kookmin Bank fell through. After searching for a new buyer, Lone Star signed a new deal in September with HSBC, which is trying to expand its business in Korea.
The two parties set a deadline of next April to complete the deal. But looking at the court procedures, there is a possibility that this deal will also fall apart.
Because of the case, Lone Star is not allowed to handle its properties and assets at its will. The Korean government stubbornly says that it will not approve Lone Star’s sale of KEB until the trial is over.
A year has passed since the trial began. It took an entire year to question 11 out of some 40 witnesses that prosecutors brought in. The judge said recently that it will take an additional two years to finish the trial if things continue at this rate. If the trial is prolonged like this nobody knows when Lone Star will be able to sell KEB.
Foreigners sarcastically say that if a company wants to invest in Korea it should be prepared for the risk of being sued. Correcting this stigma is a task for the Lee Myung-bak administration, as he promised to revitalize foreign investment.
*The writer is the international news editor of the JoongAng Ilbo.
by Shim Shang-bok