Bureaucrats Stand Firm Against Efforts to Reform S. Korean Economy

President Roh Tae Woo has begun the process of dispersing power and decentralizing decision making, but the bureaucracy of South Korea has proven more resistant to change than expected.

Some analysts had predicted that settlement of trade disputes and other issues would become more difficult as the Seoul government began to answer the more cumbersome demands of democracy. Roh has declared that the nation has become too pluralized, its economy too large, to permit all decisions to be made at the top.

American negotiators such as Peter Allgeier, assistant U.S. trade representative, have reported that South Korean bureaucrats are “much more cognizant that they are going to have to explain what they are doing to the National Assembly.” They have become “very, very cautious” in responding to American trade demands, he says.

Park Jun Kyu, a senior ruling party assemblyman, however, said bureaucrats, far from suffering a decline in power, “are enjoying their best days.”

And, in the past four months, sitting atop what has been described as “a system of state centralization so comprehensive that it may have been unique in the non-Communist world,” Roh has:

- Overturned with a single speech a 40-year-old policy of hostility toward Communist North Korea and legalized with a single announcement trade with the North that had been punishable by penalties as severe as death.

- Slashed taxes on imported American cigarettes to settle U.S. demands for free access to the Korean market against a solid wall of domestic Korean opposition.

- Resolved at the government level a dispute about distribution of American movies that, likewise, had aroused condemnation of the U.S. position.

- Lifted a ban on imports of beef in the face of demonstrations by farmers that had won wide popular support.

“In South Korea, now as before, the law is what the president says it is,” commented one longtime resident analyst.

Dilemma for Roh

Roh’s acts constitute an anomaly and underscore a dilemma that the reform-minded president faces in his pledge to bring full democracy to South Korea.

Kim Woo Choong, founder and chairman of Daewoo Group, the nation’s fourth-largest conglomerate, said in an interview that Roh, like his authoritarian predecessor, Chun Doo Hwan, retains the power to dictate prosperity or collapse for any South Korean corporation. The difference, he added, is that “Roh isn’t using that power.”

Bureaucratic power, however, remains largely untouched. Technocrats who once marched to centralized orders are beginning to quarrel among themselves because Roh, the longtime resident analyst said, is trying to get government agencies to make their own decisions without “bringing everything to the Blue House (the presidential residence).”

“Nobody is challenging their ranks. Except at the top, there are no political appointments anymore,” Park said. “And if they can get through two months of (the regular) National Assembly session, they can do what they want for the other 10 months of the year.”

Roh was able to override domestic public opinion to resolve or ease trade disputes with the United States because he was not forced to ask the National Assembly for revisions of laws. Most Korean laws, a Western diplomat said, are written so broadly that a change in bureaucratic implementation can legalize today what was forbidden yesterday.

Rice Issue Unresolved

The impact on policy issues of the three opposition political parties, which together won a majority of the seats in the National Assembly last April, has been surprisingly negligible.

Consumed by investigations of Chun’s alleged corruption and abuse of power, the opposition has threatened to make its voice heard on only one policy dispute with the bureaucracy. Roh’s government decided to raise the subsidized price that it pays farmers for rice by 14%. But, as a result of opposition demands for an increase of 20% or more, the issue has yet to be resolved. Assembly approval is required.

Acknowledging that the party lacks majority support--Roh won the presidency by a 37% plurality last December--Park said the ruling group intends to carry out its own “revolutionary policy for the have-nots” in South Korea “to win support from the poor, not just the businessmen.”

“We will redistribute wealth, but, unlike the opposition, we will do it without ruining the economy,” he declared.

The trouble, Park said, is that even though the wealth-distribution idea is likely to win support from the opposition, bureaucrats in the Economic Planning Board are fighting it. “They claim it will increase inflation and put money in non-productive activities,” he complained.

Bureaucrats report that they now must spend far more time preparing reports and data for the National Assembly. But the biggest change in their approach to the politicians, said Huh Kyung Man, the chairman of the National Assembly’s Trade and Industry Committee from Kim Dae Jung’s opposition party, is a new level of politeness.

So far, even South Korea’s largest and richest vested interest groups--the chaebol, or conglomerates--have failed to flex their muscles against the bureaucracy.

Pressed to Go Public

Slowly, pressure is being applied to the conglomerates to divest themselves of family control and issue stocks to reduce their reliance upon banks, thus freeing up bank money for smaller enterprises.

The Finance Ministry, for example, reported that it had forced the nation’s banks to restrict loans to the top 30 conglomerates to 18.7% of total bank lendings, down from 25.3% at the end of 1986. The top five groups got 10.9% of the total, down from 15.3%, the ministry said.

Partly as a result of the squeeze, by July, the number of firms listed on the Seoul Stock Exchange had risen to 440 from 355 at the end of 1986.

The biggest blow to bureaucratic dominance and centralized control could come next year. That is when Roh has promised to permit elections of local officials and assemblies after a 28-year hiatus. Opposition parties, however, want local elections to be held on a far broader scale than Roh has accepted so far.

Since 1961, all governors, mayors and even township chiefs have been appointed by the president. Not a single elected assembly has existed in states, cities, towns or villages.

In a book on U.S.-South Korea relations about to be published by the University of California, David I. Steinberg, a consultant and former U.S. Agency for International Development official, noted that South Korea has been run by “a system of state centralization so comprehensive that it may have been unique in the non-Communist world.”

The upshot is that Roh is having trouble trying to devise the means for carrying out promises to liberalize financial controls, allow private enterprise to make its own economic decisions and disperse political power.

“Excessive government intervention in private resource allocation,” Kee Woo Sik, president of Lucky Economic Research Institute, wrote in the same book, has left in its wake a host of troubled corporations and an unsophisticated banking system, both unable to operate without government guidance and guarantees.

As a result, Steinberg predicted, “the process of (the bureaucracy’s) withdrawal from economic management is likely to be slow and uneven.”