Published : Oct. 24, 2016 - 08:36
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THE INVESTOR] A club for the richest and the most powerful South Korean capitalists is facing a make-or-break crisis, as its dubious links with politics have apparently failed to benefit its member conglomerates but rather harmed them, experts said.
The purpose of the Federation of Korean Industries’ existence has been put to a question in recent weeks over its suspected role in a high-profile scandal involving a close confidante of the president and alleged influence-peddling. On Saturday, FKI’s officials were summoned by prosecutors for probes over whether the business lobby group coerced its member conglomerates to donate a combined 80 billion won in funds to Mir Foundation and K-Sports Foundation. The foundations are suspected to have been run by a confident of President Park Geun-hye.
The FKI’s close connection with Cheong Wa Dae dates back to its foundation in 1961 when then-President Park Chung-hee, the father of the current President Park, reportedly ordered late Lee Byung-chull, the founder of Samsung, to make a group of businesses to help the government push industrial policies.
Playing a critical role in industrializing the war-torn country, FKI’s influence was based on cozy relations with politicians peaked between the late 1970s and mid-1980s when late Hyundai founder Chung Ju-yung served as the group’s chairman. Being in cahoots with the government led to a handful of corruption scandals throughout its 55 years of operation.
In 1988, the FKI was accused of raising illicit funds for a foundation run by then President Chun Doo-hwan. In 1995, an opposition lawmaker revealed that the FKI raised slush funds from major conglomerates for the then President Roh Tae-woo.
The status of the FKI began to deteriorate from the 1990s under Kim Young-sam administration as people grew skeptical about conglomerates-led economic growth.
Some member companies left the FKI in the wake of corporate restructuring of five chaebols in 1998, followed by top heads of conglomerates turning down the proposals to chair the FKI.
Now, FKI Vice Chairman Lee Seung-cheol, who was probed by prosecutors a few months ago for the FKI’s illicit funds to right-wing groups such as the Korean Parent Association, is virtually managing the FKI because FKI chairmanship is a part-time job. Chiefs of major conglomerates often skip meetings with the FKI.
Critics are now saying it is high time for a disbandment or to radically reform the FKI.
“The FKI should have become a group that represent not only a few chaebol but the entire businesses’ interest, and it should have corrected its status as a self-regulatory body for its member companies. But it failed all,” said Kim Sang-jo, chairman of the civic group Solidarity for Economic Reform and a professor of economics at Hansung University in Seoul, in a recent column.
“For a starter, Vice Chairman Lee Seung-cheol should resign immediately.”
FKI’s financial health is also in a bad state, compared to the Korea Chamber of Commerce and Industry, one of the five business groups in Korea.
According to industrial data, the FKI’s debt reached 349 billion won as of the end of 2015 on its 360 billion won asset, while the KCCI had 27.6 billion won debt out of 172 billion won asset.
Kim suggested the KCCI absorb the FKI to become an economic think tank to better serve the business community.
Kim Young-geun, professor at the Global Institute for Japanese Studies of Korea University, suggested the FKI radically reform, just like Japan Business Federation Keidanren did in 2002.
Founded in 1947 to push for government-led economic policies in war-torn Japan, Keidanren was later pressured to break away from cronyism. In 2002, the Japanese group was transformed into Nippon Keidanren, a new entity by merging with Federation of Employers’ Association that enhanced public services such as policy research and social corporate responsibility activities.
By Kim Yoon-mi/ The Korea Herald (
yoonmi@heraldcorp.com)