Next Step : Hyundai’s Founder Drives Establishment Crazy : * South Korean tycoon’s election splash upsets the political structure and threatens to break government control of business, a hallmark of the nation’s growth.


Chung Ju Yung, founder of the $51-billion-a-year Hyundai industrial conglomerate, managed to launch South Korea’s first supertanker even before he completed the shipyard in which it was assembled.

And the 76-year-old, self-educated son of a poor farmer is still a man in a hurry, as evidenced by his most recent project, so far similarly successful.

Two months ago Chung, who claims a personal fortune of nearly $4 billion, astonished a nation weary of old-time politicians and fed up with economic blunders by announcing his resignation as honorary Hyundai chairman in order to establish a new political party.

Within a month, he recruited 189 candidates to run for the National Assembly. Last week, 31 of them emerged victorious, giving the tycoon control of the third-largest force in South Korean politics. And now, Chung stands poised to make a run for the presidency.

Moreover, he has raised the lid on issues no one had previously dared to discuss.


Chung disclosed, for example, that he had given President Roh Tae Woo periodic political contributions ranging from $2.6 million to $13 million and that such payments have been standard operating practice for business leaders since the regime of the late President Park Chung Hee (1961-1979).

Even more surprising, Chung, who himself is reputed to have been the beneficiary of countless government favors over the years, has demanded an end to the cozy collaboration between business and government that has been a hallmark of South Korea’s rise from poverty in the 1960s to the brink of advanced-nation status.

In a word, he has told the government to get off the back of business.

Coming like a bolt from the blue, Chung’s challenges to the Establishment and his growing feud with both Roh and three rival chaebol (conglomerates) have the potential of revamping the political and economic structures of South Korea.

So stunned was the ruling Democratic Liberal Party that all bets are off as to whom it might nominate to succeed Roh, who will step down next February at the end of the single, five-year term permitted under the constitution. A presidential election is expected in December.

Before last week’s parliamentary elections, Kim Young Sam, who deserted the opposition and joined forces with Roh two years ago, had been expected to be the government party’s standard-bearer. Now, it’s not even clear that the party can survive in its present form the process of choosing a candidate.

Opposition leader Kim Dae Jung, who lost bids for the presidency in 1971 and 1987, is expected to be another candidate.

Voters turned to Chung’s party in part as a protest against what they saw as Roh’s blunders in economic policy. While the economy grew by 9% last year, the country suffered a $10-billion trade deficit and a 10% inflation rate.

But there were also signs during the campaign that the public is getting bored with the two Kims, who dominated the South Korean opposition for most of two decades. Even though he is part of the Establishment, Chung, by comparison, is the freshest political personality around. The Hyundai founder’s falling out with Roh began with the tycoon’s initially secret dismay over Roh’s economic policies. But when Roh sabotaged a scheme that Chung had worked out with leaders of Communist North Korea to develop property in his native Kangwan Province, dismay turned to anger. Chung started openly criticizing extravagant Roh projects, blaming them for fueling inflation.

Roh retaliated by ordering what Korean businessmen dread above all--a tax investigation. When it was completed last November, a $181-million penalty was imposed on Chung, some of his relatives, and Hyundai for the alleged illegal transfer of Hyundai shares, mainly to Chung’s six sons, to avoid inheritance taxes.

In January, Chung declared war on Roh by announcing his new Unification National Party. And since then, he has been on the attack.

Chung lashed out at the president for spending $60 million on a new Blue House official residence. He accused Roh of “throwing lavish parties every day” and leading “an extravagant and corrupt lifestyle in the Blue House.” That, he charged, is why South Korea is “riddled with crime.” Hyundai, which built the new Blue House, had to swallow nearly $30 million of the construction cost, he added.

Even more explosive were his charges that South Korean presidents regularly bleed the nation’s leading business leaders for political donations.

Inviting reporters for the first time into his surprisingly modest two-story, Western-style hillside house north of downtown Seoul, Chung declared that he had never been forced to “pay even a penny” to rulers until the late Park Chung Hee took over in a 1961 coup.

“Under Park, I usually paid twice a year--once at the autumn harvest festival and once at New Year’s. At first, the donations amounted to 500 million won ($649,000 at the present exchange rate.) Then, they increased to $2.6 million.

“Under (former President) Chun Doo Hwan, they went up to $4 million. Under Roh, the donations varied from $2.6 million to $4 million, depending on the occasion. But I sensed that (Roh) was not happy with the amount. So, I increased it to $6.5 million. The last such payment about two years ago was $13 million,” Chung said. He added that other chaebol leaders were forced to make similar payments.

“I hoped and understood that this money was to be used by the president for the needy. But I later learned that this was not the case,” Chung explained innocently.

He also condemned Roh’s handling of relations with North Korea, charging that dealings between north and south have returned “to the starting point.”

Roh’s Democratic Liberal Party accused Chung of “senseless slander.”

“The senile old man seems incapable of controlling his tongue,” said Kang Yong Shik, a member of the ruling party’s election headquarters.

Chung also called Kim Young Sam, the presidential hopeful, “one of the least impressive men I have ever met,” and accused opposition leader Kim Dae Jung of selling party nominations to National Assembly candidates for personal profit.

Three rival chaebol-- Samsung, Daewoo, and Sunkyong--also came in for abuse from Chung. Samsung, the largest conglomerate, paid its workers “unreasonably high salaries injurious to the national economy” to muzzle criticism of Samsung’s no-union policy, he charged.

And Daewoo and Sunkyong, he said, had received unfair favors from the government. He charged that Daewoo’s founder, Kim Woo Choong, had built his chaebol solely through government-sanctioned takeovers of other companies.

Critics were aghast at the hypocrisy they saw in many of Chung’s accusations. His claim that he thought payoffs to the Blue House would be used for the needy invited particular scorn. Many portrayed his plunge into politics as a brazen attempt to bludgeon the government into giving favorable treatment to Hyundai.

Hyundai’s labor-management relations, moreover, gave Chung’s calls for government to get off the back of business a hollow ring. Only last January, Hyundai, which suffers the worst labor relations of any of the chaebol, sent for government riot police to break up a strike at its auto plant in Ulsan.

Chung’s style of running Hyundai--with an iron-fisted authoritarianism that would have made any of the three former generals who have ruled South Korea blush--seemed distinctly out of place in a country that only five years ago was forced by street demonstrations to democratize.

Suh Sang Mok, an economist who is a ruling party member of the National Assembly, branded Hyundai’s entry into politics as “dangerous.” If big business dominates politics, South Korea’s armed forces, which twice have staged coups, might intervene once again, he suggested.

Chung and his relatives hold about 60% of the shares of the Hyundai Group, a concentration of family ownership exceeding that of any other chaebol, the assemblyman said. And a feud among the chaebol could seriously injure the economy, he added.

For Hyundai itself, the venture is risky, Suh added. The biggest borrower in South Korea, the conglomerate has taken out loans of about $11.7 billion against collateral of only $4 billion, he said.

Chung’s accusations and proposals, nonetheless, struck a responsive chord among the voters. A month before the balloting, his patched-together collection of professors, government and opposition castoffs, has-beens, and never-weres was expected to win no more than 4% of the seats in the Assembly. But thanks to Chung’s name, money, and help from the 170,000 Hyundai Group employees, his followers won 10% of the seats and 17% of the votes.

Political Science Prof. Cho Chang Hyon of Hanyang University predicted that Chung would attract even greater support as a presidential candidate than he was able to draw for his followers in the parliamentary elections.

Against a background of rampant speculation and soaring prices of real estate, a Chung pledge to provide housing units at half of the going prices in Seoul caught the imagination of voters. His track record in business lent credibility to claims that he, unlike the government, could restore a surplus to South Korea’s trade.

A clear reading of Chung’s political prospects won’t be available until he officially declares himself a candidate and the ruling party picks its standard-bearer. Chung said he would make up his mind in “several months.”

When he does, he will expose himself to a full-fledged attack, including widely whispered charges of philandering. But even before his fallout with Roh, analysts had predicted that the era of government-directed economic growth was rapidly approaching an end as South Korea’s economy expands beyond the ability of bureaucrats to control it.

“At a certain stage of social development, bureaucratic authoritarianism prevails,” wrote Kwon Man Hak, a fellow at the Sejong Institute. "(That) era in South Korea may have passed.”