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SOUTH KOREA | MARCH 2, 1998 VOL. 151 NO. 8 |
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That sense of failure reverberates among Korea's increasingly desperate citizens. Kang Ho Sung, a general manager at Daewoo Electronics, was earning enough to own a car and a house and send his daughter to college in the U.S. Then Daewoo cut white collar salaries by 15% and increased working hours. His daughter returned to Korea prematurely, and now the family scrimps, rarely using the car to save on fuel. "We always had plenty of hope and confidence," says Kang. "Now there is the feeling that no matter what we do we cannot reverse this national crisis." Namkoong Hyun would agree. A salesman of Kia cars, he was well on his way to the middle-class dream: a house, plenty of meals out and tutoring for his two children. Then Kia became Korea's best-known business failure. In December, Namkoong lost his job. He is now divorced and living in a friend's basement. Long before this week's inauguration, Kim Dae Jung was scrambling to set things right. Two weeks ago, he forged what has been called a "Grand National Compromise" involving government, labor and big business in which all parties agreed to legalize mass layoffs by employers, in return for only the vaguest of rehiring guarantees. The government pledged to create a $3.2 billion unemployment fund. And the chaebol, whose heavy debts and overblown expansion plans are widely viewed as a major source of Korea's woes, have been ordered to clean up their balance sheets or face extinction. As incentive, the new legislation allows foreign investors to buy up to one-third of a listed company, whether management likes it or not. The chaebol represent one of the new President's biggest problems. Even as Kim warns them to shape up, some of the giant firms are resisting demands to publicize their corporate restructuring plans. They argue that they are indeed reforming but that a public announcement to that effect would invite chaos. "If a business conglomerate says we'll just duck it and wait for the lapse of time to go back to the old ways of managing, I'm sure they will perish," says Samsung group treasurer Kim Suk, adding that Korea's largest company has already targeted ways in which it can downsize. "What we are saying is we'll do it, please trust us." The chaebol may have gotten the message, but change will come hard. Two weeks ago, for example, at a glitzy cocktail bash in Seoul's luxurious Shilla Hotel, Samsung unveiled its new line of sedans--the electronics giant's first foray into the automobile business. Analysts slammed the company's plans to produce 80,000 cars this year in a market already plagued by overcapacity. Tacitly acknowledging such concerns, Samsung this month began talking with Ford Motor Co. about selling a stake in the company. As he threads through Korea's economic mess, Kim will have to juggle tough diplomatic problems. Although he has pledged that he will not be "soft" on North Korea, Pyongyang's peace initiative last week may force some early decisions on how to keep talks going between the two Koreas. In the meantime, a scuffle with Japan over fishing rights threatens to develop into a full-blown diplomatic tussle. Says outgoing Foreign Minister Yoo Chong Ha: "In one way or another, our relationship with Japan portends a lot of trouble in the future."
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