“Old Korea Hand” Mike Breen takes a look at the upcoming Korean presidential race in the Far Eastern Economic Review. It’s a goodie, so give it a read. The FEER requires a subscription, but with permission from the writer and the FEER, I’ll reprint the piece in its entirety below.
Korea Inc. Looks for a New CEO
December 2007by Michael Breen
When South Koreans go to the polls to elect a new president Dec. 19, a simple question will cut through the ideological and regional loyalties that dominated voter behavior in previous polls: Which man—all 12 candidates are men—will make the best CEO for Korea Inc? In other words, Koreans will want to know who is most likely to improve their lot. Yet most candidates have failed to grasp this.
The ruling camp hopeful, the United New Democratic Party’s Chung Dong-young, a former television news anchor and minister of unification, is fielding a poster of two children kissing his cheeks and trying to persuade people that they should care about constructive engagement with North Korea. He’s running neck and neck with a former prime minister and Supreme Court judge, Lee Hoi-chang, who entered the race late as an independent and is trying to convince voters that it’s all about being tough with North Korea. Neither Mr. Chung nor Lee Hoi-chang has half the support of the candidate for the main opposition Grand National Party, Lee Myung-bak.
Mr. Lee Myung-bak was the chief executive of the construction affiliate of the nation-building Hyundai Group and can read a balance sheet. Moon Kook-hyun—the other businessman in the contest—is running fourth. His Creative Korea Party, created after the last parliamentary election and therefore without seats, has come out of nowhere. Normally such a figure would be among the oddball candidates collectively picking up less than 1% of the votes.
But while Mr. Moon has no chance of winning, his business credentials give credibility. The former ceo of Yuhan-Kimberly—a joint venture between a Korean pharmaceutical and chemical group and United States-based Kimberly-Clark, the producer of Kleenex and Huggies—Mr. Moon has 7.9% of popular support according to a Nov. 25-27 survey by the daily JoongAng Ilbo published Nov. 29.
The same poll has Lee Myung-bak at 41.7%, still way ahead of his closest rivals, who are both around 15%, but down from 54.2% recorded a month earlier. That dip was caused partly by the arrival of the other Mr. Lee, who was the candidate for the Grand National Party in the previous two presidential elections, and also due to uncertainty over a scandal in which a former business partner is accusing Lee Myung-bak of fraud. It is also evidence, on the business front, Mr. Moon is the most qualified. His experience managing a consumer-goods joint venture is more relevant to the lives of modern Koreans than Lee Myung-bak’s tenure in the 1970s and 1980s at the helm of the Hyundai shock troops who perhaps more than any other workers gave Koreans their reputation for diligence and their “can-do” spirit.
But while Mr. Moon is a newcomer to politics, Lee Myung-bak is the candidate of an established party, has been a lawmaker and from 2002-06 was the highly popular mayor of Seoul. It was in this job that he brought his Hyundai experience to bear when he demolished an elevated expressway and ripped up a 5.8 kilometer stretch of road covering what was once a rancid stream running through the center of the capital and almost miraculously transformed it into something green. In doing so, he bulldozed the naysayers out of the way and transformed the city center. When the stream was opened in September 2005, hundreds of thousands of Seoul citizens flocked to see it. Yes, they knew its author had a big ego and that the project was his way of saying, “If I can do this here, think what I can do as president.” But what amazed them was that a political leader had accomplished an economic feat which was not designed to make the nation strong, but simply to make their lives more pleasant. Until then, it seemed, improving the standard of living was a by-product of economic growth. Now, the electorate feels it must be the objective. A recent survey by Cheil Communications, the country’s largest advertising agency, found a marked drop in interest in political and social issues, and more concern about feeling happy, getting rich and looking good.
In meeting this change, whoever is elected will face a number of issues over the next five-year presidential term.
North Korea remains a concern, but after almost 10 years of off-on engagement, South Koreans have become rather disinterested. Of greater concern to most Koreans is how the country can position itself in the face of a rising China. Government experts and business leaders have been talking about an economical sandwich between high-end Japan and low-end China for 15 years. Now the sandwich has become a vice-grip. As China gets better doing what Korea does—autos, shipbuilding, electronics—the vice is tightening. The fear is that Korea will be crushed.
Businesses have been responding by rushing offshore, and especially into China. But many in Korea still fail to grasp what is happening. In the country’s development phase, the purpose of companies such as Samsung, Hyundai, LG and Daewoo was nation-building. Now Korean companies, like the counterparts in many countries around the world, are driven by the need to increase shareholder wealth. Many outside business instinctively feel that the Samsungs and LGs still serve the nation. What they fail to appreciate is they are not moving into foreign markets to save the nation, but for corporate survival. Thus while Korean companies go abroad, giving jobs to foreigners and paying taxes to foreign governments, foreign companies coming in may still be viewed with suspicion by many Koreans because they are “only motivated by making profit.”
A few years ago, government experts decided that, to survive, Korea should become a regional logistics and research and development hub. The idea of being a regional financial center was suggested by foreign financial players and added to the strategy. Businesses and media fell into step with government thinking and “hub” became the fashionable word of the day.
But several years later, Korea is not a logistics hub. It is not an R&D center. Neither is it a regional financial center. Furthermore, it doesn’t look as if the country is even starting to become any one of these three. The explanation comes down to a nationalistic and defensive way of thinking that is so deeply ingrained that it is shared by the frontrunners and unlikely to change. That way of thinking has two basic ideas: One is government must take the lead in the economy and the second is that Korean firms must be competitive and even take a leading position in any hub that is centered in Korea.
The reason these ideas are hard to change is because until now they worked so well. Korea developed in 40 years from a “bullock-cart economy,” as one American official described it in the late 1940s, to advanced nation status under government leadership. The government decided on the industries to go into and pushed the conglomerates in the direction it wanted. Korea looked like a capitalist country, but in many ways, given such controls and ownership, it was centrally planned.
What the new government must learn to do is set a vision, create the right legal infrastructure—and then sit back and allow it to happen. In other words, let the market work. As the Hyundai man and wizard mayor of Seoul, Lee Myung-bak is hardly likely to take such a position. His approach is build-it-and-they-will-come, as typified by another of his projects as Seoul mayor, a development called the Seoul International Finance Center. In this vein, he has promised to build a canal the length of the country, from Busan to Seoul, saying it will reduce transportation costs. The issue of Korean businesses having to dominate explains why government has dragged its feet making the necessary regulatory changes for Korea to be a financial center. While outsiders assume the idea is for Korea to become a real financial hub like Singapore, the Korean bureaucrat, implementing policy and interpreting regulations, still believes his job is to make sure Korea has the advantage which means ensuring Korean companies are in a competitive position.
Thus, as Korean players like Shinhan Bank, KB, and Mirae Asset Management go from strength to strength, fear of foreign players will ease. The main reason that foreign private equity funds have been unfairly targeted in recent years by prosecutors, regulators, tax officials, lawmakers and media—in short, by the leadership of Korea Inc.—is simply because there were no Korean private equity funds until recent legal changes made them possible.
Another important area if Korea is to become a truly market-driven economy of advanced nation status concerns the rule of law. Respect for law is low because traditionally it was used by the powerful to disadvantage the weak. A 2002 World Bank Rule of Law index put Korea 8th from the bottom among OECD member states, below Hungary and above Italy. In the past, political power maintained a form of equilibrium. Not so long ago, when prosecutors descended on someone’s home, the victim would call a friend in the presidential Blue House before contacting his lawyer.
A historical, if unsung, achievement of the current president, Roh Moo-hyun, has been to limit presidential authority by removing executive controls over prosecutors. (However, he has failed to limit their powers of investigation, or curb their abusive techniques.) In what seems like a remarkable development in egalitarian Korea, perceived public opinion, as expressed through the media and by civic groups, has moved to some extent into the vacuum created by the departure of authoritarian power. Thus not only will prosecutors investigate cases, but also decision makers will decide, according to a perception of what “the people” want. What Koreans call the unwritten Law of Public Sentiment takes precedence over actual law. Foreign private equity funds walked into this buzz saw when the press reported that, as they were registered in tax havens, they were getting away without paying taxes.
This environment of vague national vision, whimsical regulators and weak law is conducive to corruption, tales of which fill the daily newspapers. In fact, there is such a merry-go-round of corruption that it is hard to imagine it ever stopping. Everyone criticizes conglomerates which come under fire for entertaining and giving gifts to regulators, politicians and journalists, when they know that, if they didn’t, their business would suffer. Again, none of the presidential candidates seem to have a grip on this question.
Education remains a perennial problem in Korea. Life for youngsters in Korea is a build up to a multiple-choice-type university-entrance examination which seems to only test how well a student has memorized reams of facts. By their last year of high school, most are sleeping four hours a night. The irony is that this wrecking of childhood years is all for a higher education in a system whose standards are, academically-speaking, shockingly low. Seoul National University is the only Korean institution in this year’s Times Higher Education Supplement World University Rankings 2007, coming in joint 51st place with the University of Texas, behind one Singaporean, three Japanese and three Chinese colleges. The other Korean universities are nowhere in the international league tables. The country spends more than any other OECD nation on extracurricular learning and hundreds of thousands of school kids, not just university students, are going overseas for a proper education.
The three leading candidates all agree that government should interfere less and allow schools more autonomy. Whether that means much remains to be seen. Education reform has been on the cards for years, but so far, governments have only tinkered at the edges.
Such problems combine to create a low level of trust in leaders and institutions. Each of the country’s four democratically elected presidents in the last 20 years has experienced a similar journey in terms of popularity through his single, constitutionally limited, five-year term. Immediately after the election, popularity has been high. Many who voted for losing candidates felt they made a mistake, as if the idea were to guess the winner, and switched their support to the new president. Then a scandal or two, followed by a failed policy or two, has ensured that by the last year, the president’s own party forces him to give up party membership to stop him from “interfering” in the choice a candidate.
The presidents have only had themselves to blame for this. Each has giddily surfed that initial wave of popularity and overpromised. What the new man needs to do is articulate a new vision of the presidency which identifies its limitations. He needs to be what the people need, which is a modern CEO.
Mr. Breen has worked in Seoul for 25 years as a journalist, writer and business consultant. He is the author of The Koreans and Kim Jong-il: North Korea’s Dear Leader.
Reprinted with permission of FEER
25 Comments
Wow. Mike hits one over the fence.
Thanks FEER for allowing the reprint. It is a great article and spans a lot more than the election. I saw Breen speak a couple of months ago and I remember digging a quote that went something like this “The national purpose for Americans seems to be happiness - if you’re not happy, stop what you’re doing and do something else. The national purpose for Korea has been for many years economic growth. But a lot of Koreans are starting to feel that it’s about time to find a new reason to exist.” This article expands that idea well.
And the paragraph that starts with “A historical…” is scary. Mob rule, and legal persecution swinging toward whatever minority group finds itself on a KBS expose. From Lone Star to English teachers, and after that…?
“A historical, if unsung, achievement of the current president, Roh Moo-hyun, has been to limit presidential authority by removing executive controls over prosecutors.”
Were legal reforms passed granting the prosecutor greater autonomy? Or did Roh just take a more hands off approach? Anyone recall the details?
As usual, Mr Breen offers some very keen insight. Whenever people, usually expats, in other countries around Asia ask me what it is like doing business in Korea, I frequently refer to his writings. I sometimes think it might be useful to simply walk around with a dossier of his articles.
Great article.
Yup — insightful and well-rounded view.
“By their last year of high school, most are sleeping four hours a night.”
Not really. Some of them might be able to do that for a couple of days during exam times, but everyday throughout the year? How many 17- year-olds can do that?
“The irony is that this wrecking of childhood years is all for a higher education in a system whose standards are, academically-speaking, shockingly low.”
I would agree that the education standards of universities in Korea are relatively low, but if it’s very important, how is America doing with the supposedly highest standards of education in the world? Are Americans feeling great with such standard?
#7: “Are Americans feeling great with such standard?”
Actually, yes, thank you, and so are a lot of Koreans who go to the U.S. for their education.
Ditto for me what Wedgie said. Thanks for asking.
@7
“supposedly” the highest standards?
There’s really no debate that the US’s university system is the best in the world.
And yes, we’re proud of it.
It’s good if many Americans feel that way. But do Americans feel confident for their future? I hope I’m wrong, but I get the impression that they don’t. With such good education system why American highschool kids don’t do so well then, in comparison to other OECD countries?
babarian, you seem to be confusing Mr. Breen’s criticism and the difference between American public schools and universities. Public schools in the US are rather poor, particularly in inner cities. Yet most of them allow a driven youth an opportunity to excell. Even those that don’t can get a higher education through state universities and junior colleges. If a student decides to turn it on and becomes motivated after high school, the sky is still the limit.
It is nearly impossible to say that here. Even if a student does get into a university, what are the standards? How are they motivated to learn when almost all of them graduate no matter what their effort or attendance? Would you say that they are inspired to create, imagine, invent or to simply allow someone to pour rote, old knowlege into their heads.
Maddlew, you don’t appear to have picked up my point which was, despite the highest education standards, America as a nation seems to be struggling rather than excelling, and American highschool children’s academic performance in general come at or near the bottom of the OECD ladder.
And I also said that Korea’s education standard is low.
Yet your point was specifically aimed in #7 at higher education, in which American Universities still do rather well. American standards for elementary through high school are poor. In fact, they are muddled and almost indiscernable.
My point is that in Korea, as Mr. Breen stated, many students are sacrificing childhood to be one of only a few to attend rather mediocre universities.
In the States you can be a mediocre student, have a childhood and learn what it’s like to play, create, interact outside of academic pergatory, then turn it on at the higher education level. A student with motivation can go from a Junior College and still end up with a graduate degree from almost any school he or she can dream of.
Can you say the same of a student here in Korea?
That has got to be one of the most ignorant statements I’ve read on this blog. Every single state in the US has learning standards for every core subject (language arts, math, science, and social studies) from kindergarten through 12th grade. Every state assesses student achievement in meeting these standards from 3rd grade through high school. The 2001 NCLB mandates minimum passing rates, currently in the high 70s and scheduled to reach 100% by 2014 (Good luck with that, but that’s a whole other subject!). The first thing that appears on teacher lesson plans under the grade level and date are the standards being taught or assessed in that lesson. Standards-based teaching didn’t exist when we went to school, but it now provides a framework of instruction for every district.
What is muddled is that we have fifty states and therefore fifty curricula and a dazzling variety of achievement tests. Each state curriculum and tests have their own language so to speak, their own key terms that students must know to understand the tests. For example, in the state of Virginia, our first through third graders do not know what angles are. What we call an angle, our primary learners describe as a “corner,” with a right angle being a “square corner.” Even with repeated teaching, many kids trip up on exams when they are asked to find the “square corner” in a triangle figure. Again, the problem here isn’t the standard or concept, but the terminology.
Last week, my ESL fourth graders learned how to use text headings to make a quick summary of an expository text. On Friday, the laziest student in the class was able to articulate than an expository text is a non-fiction text that gives us information and teaches us about something.
Muddled, almost indiscernible standards, my ass. It isn’t the standards that is holding back achievement. It’s the wide educational inequities among school districts across the country. I am fortunate enough to teach in a district and a state that invests in its teachers by providing oustanding professional development opportunities to learn research-based best practices. At my previous school, I had none.
If you’re curious, go to your home state’s department of education website and see the standards for yourself.
Sorry Sonagi, won’t happen again. You’re understandably sensitive on this subject.
What I meant was a certain uniformity from state to state. Try being a child who moves from Los Angeles to Seattle then Chicago and finally Dallas. For this child the “standard” is a moving target.
Apology accepted. Although I stated that we have fifty different state curricula, the standards are mostly the same skills and concepts expressed in different words, save for local themes like state history and geography, which comprises the fourth grade social studies curriculum in most states. The standards aren’t moving targets so much as the language of learning, or terminology.
It ain’t only the kids who have to cope with interstate moves. Getting licensed in a new state is a major hassle for teachers, and one that I experienced personally. I spent almost $400 on a battery of tests to prove to the ISBE that I could read, write, do arithmetic, and write a lesson plan, only to get a measly provisional license and a one-year grace period to pay for and earn 10 credits in course deficiencies or no standard license. Since I already possessed a standard Virginia license, I said fuk that noise, packed my Elantra to the roof with my worldly possessions and drove 700 miles across the country, my heart singing as the endless monocultures of soybean and cornfields morphed into the forested, rounded hills of the Appalachias east of Columbus.
Yes, I’ve got a sister who is nearly ready to quit teaching for those very reasons.
By the way, I have a niece who is losing a year of her life because language of terminology is making her previously acquired units untransferrable. (Different mother.)
This is what I hear from acquaintances that are teaching in school systems in the States. The teachers must jump through hoops and pay a good bit of money just for certification, which is mostly bureaucracy incarnate. If America really wants to encourage good people to enter teaching, will this red tape hurt more than it will help.
American education will destroy itself chasing the illusory “benefit” of higher performance on standardized tests — i.e., creating a mass of students drilled on rote memorization of “skills” that will be tested. Every single treatment of this topic that I read in Western media cites South Korea with fawning approval, reporting that Korean kids score X points on some test or another while American kids only get Y, while disregarding the extraordinary lengths Korean parents will go to in order to get their kids the heck away from their miraculous education system.
For the life of me, I don’t know why Americans would seek to emulate this system.
Whoo! Reading 15, I think I felt my hair blowing back as I was sitting at my desk. FAAN-TASTIC
But Carr’s right.
Sorry for jumping around. I gotta be brief, and I mean Carr’s right in theory at least, because I have no experience with the US education system.
Consider this: Say a bunch of new-industrialist post-war number crunchers start doing customer satisfaction survey of Ford owners, asking them 20 different questions about how happy they are with some component of their Ford on a scale of 1 to 5? And over several years, these number just kept getting better and better, and they felt good?
But reality rolled along year by year, and Ford was getting beat. And eventually somebody figured out they should be asking “Would you buy another Ford?”, and they should be asking non-Ford owners “Would you EVER buy a Ford?”
Wouldn’t that just make you go “Hm.”
“For the life of me, I don’t know why Americans would seek to emulate this system.”
Me neither. It bites.
So, as I was saying: in any system with lots of standards and metrics - and people - the people will find ways to game the system to deliver the desired metrics (read Freakonomics, great book). Just like the many NE Asians with 800 TOEIC scores who can’t speak any English.
The unfortunate thing with school systems is that the public demands equality. Every child throughout the country must, as a democratic right, have exactly the same quality of education as every other child. We invent metrics to show voters that equality is being acheived. It’s a lie. Such equality is a natural impossibility. Only in the most basic commodities of water and electricity have some countries come even close to universal standards. And so politicians fight against nature to give voters what they want, and will keep failing for 1000 years, or until education essentially becomes privatized.
Horrors! Privatized education? Won’t that mean that some kids will get a worse education than others? Yes. But that is SO already true, and we all know it.