20 - Mar - 2017
Insight with Jinseo CHO

Jinseo Cho is a veteran journalist at Dong-a Ilbo, a major Korean daily newspaper. He currently serves as the editorial director of the Korean edition of Harvard Business Review and writes for Donga Business Review. DARAMJI met up with him to get the latest insight on Korean politics and business.

DARAMJI – How does it feel to be on receiving end of questions for a change?

CHO – It’s not that uncommon, actually. I get asked all sorts of questions all the time –  all the better reason to be prepared!

 

That’s probably because you’re unlike most journalists. You produce and appear on regular podcasts, give talks and do all kinds of projects. Why?

I guess I’m lucky to be with a company which allows its journalists to expose themselves to what we call a new media environment. The idea is to let them experience the change – and it’s changing fast! – and figure out how to cope with it all. And it’s been great to have been involved with all those projects – podcast being one of them.

So the President Park has gone home – what now? What is and was the problem? How will the political landscape in Korea change?

Prior to entering her office, Ms. Park had been a great leader for her own party (the then Saenuri Party), widely popular with the public; indeed, that personal popularity was what earned her the nickname ‘Queen of Elections’ for leading her party to a series of major electoral successes.

But the leadership of a political party is and should be fundamentally different to that of a government. The Korean public’s mistake was to vote for the president’s office someone who was simply ill-prepared to do the job. Ms. Park was more of a celebrity figure than a professional politician with the skills of statecraft.

It’s taken four years, but Korea has finally come to sobering realization. It’s all a part of a learning curve which we call democratization. Whoever becomes the next president, even if one of Ms. Park’s political successors (however unlikely that is), the style of governance will have to be very different.

Park’s ousting has also had the effect of splitting her party, the former Saenuri Party which for many years led Korea with successive consecutive administrations, into two; those who supported Ms. Park’s impeachment left the party to form a new conservative party while those who stood by Ms. Park remained and changed the party’s name. This obviously splits the conservative votes, but at least provides an electoral choice for those conservative voters who wants to have nothing to do with Park and her faction anymore.

Of course, it is much more likely that the presidential election on 9th Mya will be won by one of the candidates from the leftist opposition.

Also hit by the scandal was the Korean conglomerate Samsung whose de facto leader has been arrested. Samsung’s also disbanded its future strategy office which used to oversee all Samsung’s  subsidiaries. How will this affect Samsung?

Well, the markets see it all as a positive change for Samsung, which is reflected in the rising share prices. Many have criticized that for too long the interests of Samsung as a global corporation have been compromised to serve those of the Lee family. The hope is that the changes will improve Samsung’s corporate governance structure and make it more transparent. Even if Jaeyong Lee is found not guilty and released, the changes set in motion will likely continue.

Having said that, this spells a crisis for Samsung subsidiaries other than Samsung Electronics. Until now, they have been able to share the fruits of the success of Electronics as the flagship subsidiary of Samsung group. Now they’ll need to manage on their own.

And there’s also a note of reservation, if not resentment, in Korea about what is perceived to be the ‘Western’ governance structure. Not all Koreans welcome the American style shareholder capitalism. Many would rather see a company run by the members of the founder’s family, even if that involves some shady dealings, than it being exploited, in their view, by foreign investors for short-term returns. So Jaeyong Lee will resume his leadership of Samsung, albeit a different and changing one, when he’s back out of jail.

 

What about other conglomerates? It seems like many of them are struggling too – and what does that mean for the Korean economy which is led and shaped by those giant conglomerates?

Apart from those embroiled in the political scandal, Korea’s trouble with China over THAAD seems to affect a number of Korean conglomerates. Lotte in particular, for providing the site for THADD radar, is facing threats of boycott in China.

But the move away from the China market has been widely observed among Korean conglomerates, from before the current THAAD issue. Shinsegye, another major retailer, is another major company that has also been moving out of China. There are many more like them, and they’re all heading to Southeast Asia; that’s both in sales and in production. Much of production has already moved to Vietnam, and the Indonesia market is particularly hot. All of this predates the recent tension with China.

Besides, I think that Korean conglomerates have much going for them. LG, for one, is a global leader in battery cell; Samsung Electronics continues in strength. The problem is that the wealth these big firms create is not evenly distributed across the country. Also, as shipbuilding and shipping industries decline, we may see Korean rust belts in the southeastern regions of Korea, such as Changwon.

 

So how’s the prospect for the Korean economy? Where and how will it find new growth engines?

The Korean economy has yet to tap its full growth potential. There are still too many red tapes; the next president, whoever it might be, would do well to improve on this point. We should watch the internet/game industry – Korea is the fourth largest game market in the world and at the same time a global producer. Medical and bio industries are also promising; ever since the 1990s, all the bright kids in Korea went to medical school. Something’s bound to come out of that.

You’ve already mentioned the THAAD issue. None of the sanctions seems to have worked on North Korea. What do you make of the developments around the Korean peninsula? Can Trump work with China? And how will the new U.S.-China relationship affect Korea? 

The crux of the Korean peninsula affairs is North Korea’s nuclear programme. The THAAD controvery is only a part of it.

I guess there can be two possible scenarios. First, North Korea could suspend its nuclear programme and get rewards from the U.S. But what can Washington offer? Peace treaty and diplomatic relations – that’s pretty much it. We’ve seen time and again that North Korea is indifferent to money. Can North Korea become the second Cuba? The history of animosity has gone on for too long. Considering domestic political situations both in North Korea and in the States, a surprise handshake is unlikely.

Then the second scenario is an armed conflict of some description. Washington’s ‘strategic patience’ really has come to an end, it seems. When North Korea becomes capable of hitting the continuous United States with nuclear weapons, the White House will need to take a military action. This will spell a huge loss to South Korea; over 20 million South Korean citizens live within an hour from the DMZ. But the United States will have to do what it takes. What alarms me how insensitive Koreans are to this war risk – perhaps they are too used to it.

Now, one crucial factor will be whether the next president in Seoul can improve relations with Kim Jong-un. That’ll involve re-opening Gaesong Industrial Complex and Geunmgangsan tour programme. But I doubt any such progress in inter-Korean relations will go as far as North Korea freezing its nuclear programme. In my view, unless Trump somehow gets into bromance with Kim Jong-un – if you can imagine him being invited to an NBA match – some form of armed conflict will be inevitable.


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