They seek him here, they seek him there

ON the notice board in the labour union office of Daewoo Motor just outside Seoul a tattered “wanted” poster offers a $500 reward for the capture of the missing chairman of the company Kim Woo-choong.

Outside, riot police battle with striking Daewoo workers trying to prevent them breaking into the plant to join colleagues who have gone to the mattresses staging a sit-in. The strike is the last attempt to try to prevent further layoffs at the company, which has seen nearly 7,000 workers sacked in a year — as their employer slid towards the title of the world’s biggest ever bankruptcy with debts put at US$80 billion.

This would not be an auspicious time for their old boss to show up. Kim Woo-Choong is no ordinary fugitive. The 64 year-old, who once sold newspapers on the street corners of the city, parlayed a tiny textile company with five employees into a global electronics, automotive and ship building “chaebol” with 100,000 employees. It seems he cut a few corners along the way. Prosecutors have charged Daewoo with accounting fraud including inflating assets and profits at subsidiaries to the tune of 49 trillion won (US$39 billion) to facilitate borrowing. Roughly half that sum was allegedly illegally secured by an offshore nest of entities called the British Finance Centre used as the hub for questionable financial activities.

Kim has reportedly been seen in the South of France, Germany, Morocco and the Sudan. Wherever he is, the chain-smoking author of a book called Every Street Is Paved With Gold, would stick out like a sore thumb. It is doubtful if anyone wants to see him back any time soon, with the possible exception of executives at the State-owned Korean Development Bank, Daewoo’s biggest creditor.

There is a suspicion that a chunk of the missing funds might have wound up in the pockets of politicians via lobbying and kickbacks. That would be par for the course. Kim was convicted of bribery twice in the early 1990s, once for payments made to disgraced former president Roh Tae-woo, and once for bribing a former trade minister in return for contracts to build nuclear power plants. On both occasions the sentences were suspended to allow Kim to pursue Daewoo’s interests on three continents.

The Daewoo debacle is symptomatic of all that is wrong with Korea. In 1988, Kim-Dae-jung was elected president of a country on the brink of defaulting on its sovereign debt. Korea proved to be a star pupil of the IMF, throwing open its doors to foreign investment, rescuing stricken banks and patching up the economy. Ordinary Koreans endured hardship, and in some cases handed their gold jewellery over to the government to support the cause. It appeared to work. Growth staged a remarkable recovery from minus 5.8 per cent in 1998 to 10.8 per cent in 1999 and a near repeat performance last year, despite the effect of the oil price on Asia’s biggest importer of energy. Foreign investment to the tune of US$15 billion flowed into the country and the stock market boomed. But little or nothing was done to rein in the corrupt and powerful chaebols. In common with a number of countries around the region, reform was put on the backburner while exports soared.

A deal that might have seen General Motors throw Daewoo a lifeline foundered when the US company sighted just one corner of the balance sheet.

Investors collectively realised that Korea was talking the talk, but not walking the walk. Share prices fell 50 per cent in Seoul last year and the currency skidded.

The response from the authorities was to throw more money at the problem, on top of the US$100 million sunk in to tide over hapless financial and trading companies. Interest rates have been cut to 5 per cent and the Korean Development Bank is buying up US$20 billion worth of corporate debt as it matures.

The stock market rallied 20 per cent in the first few weeks of the year, but it is retreating fast as new problems emerge. As one of the world’s leading exporters of computer chips and electronic goods, Korea’s exports are built on pillars of silicon. Industrial production is tumbling and GDP is forecast to halve to 5 per cent this year.

Korea is an important trade partner for Australia, particularly for agricultural products, principally beef. If you will pardon the metaphor, the country is running out of windows of opportunity to set its house in order.

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