Korea needs National Entrepreneurs Day; The number of business tycoons who are in jail is unprecedented in Korea’s history. These tycoons did not understand how our society has changed. The public has shown little sympathy for their crimes

2013-10-10 16:47

Korea needs National Entrepreneurs Day

By Lee Chang-sup
With business leaders facing jail time and the nation’s economy struggling, Korea needs a way to spark entrepreneurial spirit once again. A National Entrepreneurs Day could be exactly what the nation needs to encourage entrepreneurs to bring new moneymaking ideas to the market. The current business climate is not welcoming to new entrepreneurs.  A record number of high-profile bankruptcies haven taken place since the financial crisis in 1997. Big names like Woongjin, STX and Tongyang face either a bank-led workout or a court receivership. Almost all construction and shipping companies are in trouble. Bankruptcy is so common among small businesses that it rarely makes the news anymore. The Bank of Korea says the rate of dishonored bill — a check or similar financial instruments whose payment has been refused — rose from 0.08 percent in July to 0.14 percent in August.The number of business tycoons who are in jail is unprecedented in Korea’s history. Koo Cha-won, chairman of the LIG Group and his son were sentenced to three to eight years for issuing fraudulent bonds. Lee Ho-jin, former chairman of the Taekwang Group, and his mother were sentenced to four and four-and-half years for misappropriating corporate funds, respectively. Lee’s sentence was suspended so that he can receive liver cancer transplant. SK Group Chairman Chey Tae-won and his brother Jae-won are behind bars for allegedly stealing $43 million from SK companies to cover bad investments. Hanhwa Group Chairman Kim Seoung-youn faces jail time after he is released from the hospital, and Hyosung Group Chairman Cho Suk-rae is under investigation for alleged tax evasion
These tycoons did not understand how our society has changed. The public has shown little sympathy for their crimes. The Park Geun-hye administration has adopted a zero-tolerance policy against any corporate crimes. In the past, corporate tycoons were jailed and later pardoned for their contribution to the economy and for giving them opportunity to revive the economy. This vicious cycle of jailing and pardoning has spawned cynicism that there is one law for the rich and another for the poor.
Despite their crimes, few doubt these enterprises will continue to run, just without a leader at the helm. Key decisions will be put on hold until owners are out of jail. Korea’s economic growth will be dented as these large corporations make fewer contributions to society.
An unprecedented number of tycoons and CEOs are scheduled to appear at committee hearings organized by the National Assembly in an effort to audit state affairs. More than 40 CEOs from the Tongyang Group, Samsung Electronics, Hyundai Glovis, CU, AmorePacific, LG UPlus, Hyundai, Daewoo, Daelim and GS are all scheduled to appear.
KT Chairman Lee Suk-chae, POSCO Chairman Chung Joon-yang, Lotte Group Chairman Shin Dong-bin, Shinsegae owner Chung Yong-jin, Korea International Trade Association Chairman Han Duck-soo and Korea Federation of Small and Medium Business Chairman Kim Ki-mun were also asked to testify at a National Assembly committee.
A spokesman for the Korea Employers Federation (KEF) worries that a series of hearings on corporate leaders will fan anti-corporate sentiment, damage corporate credibility and divert CEOs’ attentions from their business. The KEF spokesman went on to say the National Assembly should not be a kangaroo’s court where principles of law and justice are disregarded or perverted.
Lawmakers say they want to know their alleged wrongdoings from business leaders. Lawmakers claim these business leaders broke laws on the democratization of the economy, industrial disasters, labor affairs and fair trading. The opposition Democratic Party vows to dig corruption involving the Four Major Rivers Restoration Project.
A business executive says Korea’s economy is now in what he calls an SOS situation: “The economy is slowing. The population is aging, and the economy is sandwiched between Japan and China.”
Statistics support the executive’s statement. In the past 10 years to 2012, the Korean economy underperformed in the world economy. Korea’s annual average growth rate was 3.61 percent, lower than the world’s average of 3.83 percent. It took only four to five years for Japan, Sweden and Germany to raise per-capita income from $20,000 to $30,000. Korea’s per-capita income stood at $23,311 last year, surpassing the $20,000 mark five years ago, according to the Bank of Korea and Statistics Korea.
Korea’s population is aging at an unprecedented speed. The number of senior citizens aged 65 and over is expected to hit 14 percent in 2018. By 2026, that number will grow to 20 percent. Aging population drags the economy because of decline in workers and rise in welfare benefit.
Plus, Korean companies are still struggling to catch up with Japanese companies technologically, while Chinese companies are fast catching up with Korean companies.
Korea badly needs to encourage entrepreneurship to boost its economy. Politicians should stop using the National Assembly committee hearings to promote their own agendas, and business leaders must stop breaking laws to boost profits. When such a social pact is made, the government can celebrate its new beginning with National Entrepreneurs Day. This declaration will encourage the entrepreneurial spirit and pump life into Korea’s struggling economy.
Lee Chang-sup is the executive managing director of The Korea Times. Contact him at editorial@koreatimes.co.kr.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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