Not long ago, when protesters crammed Seoul’s streets holding candles to demand the ouster of scandal-rocked President Park Geun-hye, a ruling party politician sneered: “Candles are just candles. Eventually, wind will blow them out.”
At the next rally, protesters brought electric lights.
Determined people power helped to bring down Park – ensnared in corruption revelations that in January made her the first president in South Korea’s democratic history to be removed from office. As the nation welcomes reform-minded Moon Jae-in as its new president, determination will be needed once again to ensure that South Korea – which has enjoyed a spectacular economic ascent since the 1960s – builds its economic future on a surer, stronger, more equitable footing.
This is undoubtedly a time of near unprecedented peril for the country. Park’s downfall was inextricably linked to the disgrace of Samsung’s “crown prince” leader Lee Jae-yong, who was arrested in February on suspicion of delivering a $37.5 million bribe to a confidante of Park. Lee’s corporation is so dominant that the economy is often dubbed the “Republic of Samsung”. The nation’s biggest chaebol – or family-run conglomerate – accounts for 20 per cent of GDP and 30 per cent of market capitalisation. As speculation mounts that the chiefs of Hyundai and Lotte – two other massive chaebol – will be next to face prosecution, the very foundations of Korea Inc. can be heard to be creaking.
Meanwhile, South Korea finds itself hemmed in by external threats: Pyongyang menaces it with nuclear destruction; Donald Trump threatens to tear up a trade pact; and China has slapped Seoul with trade sanctions over plans to host a US missile defence shield.
Yet all these dangers should be seen as an opportunity to finally tackle chronic problems of corruption and privilege that have prevented South Korea from achieving its true potential as a star Asian performer – and discouraged foreign investment. Byzantine corporate governance, and the cronyism it fosters, has led to an equity “Korea discount” – the tendency of chaebol shares to garner lower earnings multiples than counterparts in other countries. One way to unleash the investment potential of the chaebol is to break them up, allowing more nimble and transparent decision-making based on shareholder value rather than the “Game of Thrones” of corporate princelings.
Moon, a human rights lawyer and son of North Korean refugees, won a resounding victory this month on promises of just such an overhaul – forcing accountability from the family conglomerates and curtailing the powers of the president, often described as “imperial”. Concretely, reform of Korea Inc. would mean mandatory appointment of independent board members, allowing shareholders to file suits against corporate malfeasance and strengthening legal tools to crack down on cross-shareholdings. Reform hopes have spurred a rally in South Korea’s stock market, with the Kospi index surging to a record high ahead of Moon’s election.
South Korea has seen false dawns of reform in the past. Kim Dae-jung, a dissident hero who became president in 1998, pledged a “government of the people” – generating euphoria at home and abroad – yet his administration is widely seen as one of unfulfilled promises. Moon inspires none of the excitement that Kim basked in when he swept to power, and his thumping victory is largely a reflection of a lack of alternatives. The road ahead for the new president will be one of colossal challenges, both internal and external. Yet change is possible.
We should remember that the protests to oust Park regularly drew more than a million people to the streets of Seoul. The Korean people in the past year have shown a genius for creative, colourful, even joyous political engagement – with seniors walking hand-in-hand with teenagers as Korean rock bands electrified the crowds.
If the nation can continue marching, more to build a better future than dump a criminal past, change in South Korea will happen. With determination, South Korea’s people can keep on the light of reform.