Alaco

01.12.2016 | South Korea shaken by leadership scandal

President Park has offered to resign over sensational graft allegations, but will the affair lead to more concerted efforts to curb corruption among the country’s business and political elites?

Dubbed the ‘Korean disease’, endemic political corruption has blighted South Korea for decades, overshadowing its extraordinary economic success.  Although scandals have implicated presidents and some of the largest companies, the state’s seemingly lax attitude to graft has meant that transgressors have largely escaped punishment.  Nevertheless, there are signs that the culture of impunity is finally being challenged by growing public demands for greater transparency.

Over the last month, tens of thousands of demonstrators have called for the resignation of President Park Geun-hye.  These have been some of the biggest protests since the country embraced democracy in the late 1980s.  Prosecutors are investigating whether President Park colluded with her confidante Choi Soon-sil to pressure some of the country’s leading companies to donate huge sums of money to foundations controlled by Choi, who is also alleged to have influenced government policy.  A long-time friend of the President, Choi was arrested early last month on charges of fraud, coercion and abuse of power.  In addition, senior executives at the country’s largest conglomerates have been questioned in connection with the scandal.  President Park’s approval ratings have plunged to just 4 per cent, and this week she offered to resign. 

The case, which has paralysed the country, highlights the unhealthily close relationship between the country’s political and business elites that has been the source of numerous scandals over the years.  Back in 2012 Park’ predecessor, Lee Myung-bak, was forced to issue a public apology after his elder brother was arrested for allegedly accepting a $500,000 bribe from bankers in return for political influence.  The President before him, Roh Moo-hyun, committed suicide in 2009 amid allegations that he had received $6 million in bribes.  Business leaders have also been caught up in scandals.  Eight years ago, the chairman of Samsung, Lee Kun-hee, was convicted of tax evasion, although he was subsequently pardoned by the government, eager to keep the company on side.

The origin of the corruption malaise can be traced back to the early years of the South Korean state.  Park’s father, the authoritarian President Park Chung-hee, sought to rapidly industrialise the then impoverished nation by steering economic development.  Key to his strategy was the provision of incentives, such as government loans and foreign economic aid, to select family-owned businesses.  Known as chaebol, these companies soon grew into large conglomerates that came to dominate the economy.  They hired staff through kinship networks, which engendered strong allegiances, in many ways reflecting the bonds of loyalty that run through Korean society.  The combination of government patronage and chaebol nepotism created an environment in which corruption thrived.    

While many chaebol grew into highly successful export-driven business, their operations have remained opaque.  There is little public access to information about their activities – corporate records and court filings and are not available – while a lack of protection for whistle-blowers has discouraged insiders from exposing corruption.  Even when evidence of wrongdoing has come to light, some journalists have been reluctant to ask too many questions for fear of libel lawsuits and chaebol withdrawing advertising from their papers. And once cases have come to court, judges have often delivered lenient sentences.

Nonetheless, the tide is turning.  Although historically the chaebol have driven South Korea‘s economic development, in recent years growth has slowed, prompting South Koreans to demand higher ethical standards from their politicians and business leaders.  Young people, seeing their future prospects dwindle, have become particularly vociferous.

The government is taking some steps to reform the chaebol – many of which are still controlled by their founding families – and curb corruption.  There are moves to decentralise the companies’ management, encourage the hiring of professional managers, and strengthen accounting regulations to restrict the companies’ ability to hide debts and losses.  The parliament recently passed a law capping the value of gifts public servants can receive and adopted legislation encouraging whistle-blowers by offering them rewards.  The changing climate seems to have emboldened journalists and prosecutors, resulting in more cases of corruption being exposed.

The unprecedented outpouring of public rage over the country’s latest scandal may provide impetus for further anti-corruption reforms.  Indeed, opposition parties are already calling for the creation of an independent agency to investigate graft among senior civil servants.  Whether there is the political will within the ruling party to introduce such changes remains to be seen, but with South Korea’s economy flagging, public calls for a clean-up of politics and business are bound to get louder.