▲ Huh Chang-soo in a press conference. Provided by Yonhap News.
The Federation of Korean Industries (FKI) has been acquiring heated attention about its dissolution. When the public found out about the FKI’s role as the middle-man in the bribery between major local conglomerates and Choi Soon-sil, it was placed in a notorious spotlight. “Even the foreign investment firms I have met recently have lost interest in Korea,” said Professor Kim Sang-Jo (Hansung University, Department of Sociology) in his opinion column in The Kyunghyang Shinmun . As the new year began, the organization announced that it would refocus on the basics as a means to regain trust from the Korean society. This, however, would be extremely difficult to do, as the possibility of its dismantlement remains up in the air.
FKI was established in 1961 by thriving industries in the manufacturing, trading, and finance sectors. It was created with the mission to become a frontrunner in the development of Korea as a healthy free market economy. The organization has played a key role in the country’s fast economic growth after the 1990 Asian financial crisis. Since then, the group invested in social welfare activities by establishing services such as the Korea Long-term Credit Bank, the Federation of Korean Medical Insurance address this issue, one step it has taken was reducing their membership fees and decreasing its budget for this year. While skeptics continue to point out that other remaining organizations are expected to leave one by one, Lotte Group has decided to not withdraw, unless the FKI’s influence and power in the Korean Economy will be further debilitated.
The future of FKI seems more vague than ever before. Four of its most powerful members have stepped out, the public is outraged by the accusations it has been facing over the months, and increasingly more members are likely to leave. While Huh has been keeping silent about his opinion on the long-term action that the organization will take to rebuild what has been lost, he mentioned that it will contemplate on its mistakes made in the past years.
However, despite the struggle that the organization is trying to cope with, its successful rebuilding seems rather difficult to achieve. First of all, as the FKI is an organization that functions as a lobby group, how the public perceives it is very crucial. While the group had once been viewed as prestigious and relevant, Korean society will not be so easily forgiving, knowing that its member companies have donated a vast amount of money to Choi Soon-sil’s projects for their personal gains.
A few months ago, the frontrunner of the Democratic Party, Sohn Hak-Gyu, opined that, “The Federation of Korean Industries cannot further deceive our nation, and I suggest it to dismantle right away.” As reflected in this example, the FKI-issue has reached to the political level where renowned politicians are criticizing the group for its alleged wrongdoings. Consequently, the organization’s disrepute would keep its lobbying power at a low percentile even in the new government regime, eliminating its significance and influence.
Second of all, the bigger question depends on whether or not FKI will be able to function with its new budget. The companies—Samsung, LG, Posco, and Hyundai—have been responsible for approximately 70 percent of the organization’s funds. Given that they are not members of FKI anymore, coupled with the organization’s recent decision to decrease membership fees, the organization will be expected to cut down on spending significantly, which is not as easy as it claims. This means that FKI will have to suspend old and new projects, and will have to focus on its regrowth.
▲ Façade of the FKI headquarters. Provided by Donga.com.
A Korean Economy Without the FKI
It seems almost impossible to imagine a Korean economy without the FKI as it has existed for many decades. While the dissolution of the organization means that conglomerates will lose a once powerful lobby platform, its existence would not provide additional benefits. Hence, the dissolution could do these companies a favor by pushing for another organization—that would be built from scratch, free from old mistakes—which would help them reposition themselves in the Korean economy.
The World Finance Stability report released on August 29, 2016 implies the urgency of distancing the Korean economy from bad seeds such as the FKI. South Korea, over the recent years, has decreased to a disappointing ranking for corporate governance, which is lower than that of China, Malaysia, and even the Philippines. From the twenty investigated governments included in the report, it has ranked the last in minority share-holder protection and 16th in complying with accounting standards, a glaring proof of corruption within private corporations. South Korea, therefore, has no room for the FKI, which has housed some of the most corrupt companies, anymore.
Despite being in a state of denial, the Korean economy is ready for a new start without the FKI. The Choi Soon-sil scandal has brought attention to the idea that the government, other influential conglomerates, and its member organizations, must all renew as the country is detoxing. Hence, no matter how much the FKI would persists on remaining, it would only be a matter of time before the organization would sink in reality.