COLUMN ONE : S. Korea’s Culture of Corruption : Deeply rooted traditions and needs of a booming economy combine to drive political bribery and make reform difficult. Ex-leader Roh faulted more for failing to share than for amassing wealth.

Jang Song Hyon is a master at swimming the treacherous seas of South Korean corruption. The business consultant knows that a $100 “transportation expense” to journalists will buy goodwill; a 10% “commission” to doctors will help sales of his firm’s pharmaceutical products.

He once paid a ministry official about $7,000 for a legal interpretation favorable to his U.S. client, although he generally counsels Americans to offer “scholarships” or gifts of office equipment instead to avoid violating U.S. laws against greasing individual palms.

But not giving money, he says, has not been a realistic option here--at least until recently.

“If you don’t give money,” Jang says, “competition is so keen you will lose your business.”

In a small and personal way, Jang reflects the larger drama now unfolding before a mesmerized South Korean audience: revelations of official corruption on a scale more staggering than anyone had previously imagined. Recent disclosures that former President Roh Tae Woo amassed a slush fund of $653 million, gathered partly by bribes and partly by “forced donations” from business tycoons and possibly others, have rocked the nation.

The spiraling scandal has led to Roh’s arrest--the first incarceration ever here of a former chief executive--and is threatening scores of other leading South Korean figures. And it has cast a harsh spotlight on the murky, collusive relations between the nation’s business and political elites.

But the scandal is also revealing complex social practices steeped in centuries of history and tradition, combined with modern political necessities and the imperatives of South Korea’s phenomenal economic growth. Despite significant gains made by President Kim Young Sam’s aggressive clean-government campaign, many here say the problem will take even greater changes in mind-set, mores and laws to thoroughly eradicate South Korea’s culture of corruption.

“Until now, we’ve tried to solve this problem by arresting some politicians or using a private moral approach, but that is not the fundamental solution,” said Cho Gab Je, editor of the Monthly Chosun, a magazine published by Korea’s largest newspaper, the Chosun Daily. “The system is a result of traditional Confucianism and a very shallow history of modern law enforcement. . . . The fundamental solution must come from reform of the political and electoral system.”

However much Roh’s avarice is being decried, the system of money for favors was first systematized more than three decades ago by the late President Park Chung Hee and continued by his eventual successor, Chun Doo Hwan. Even Roh’s enemies say the system may once have served the state as a “necessary evil” to help the impoverished nation allocate scarce resources, boost meager public salaries and build political stability needed for economic development.

Repaying Kindness

In its purest form, many here say, the practice of giving and receiving money also reflects Confucian expectations to repay kindnesses and to take care of underlings, family and friends. One reason the public seems harder on Roh’s transgressions than those of his predecessors is that Park used his ill-gotten gains to develop the state and Chun was generous--and properly paternalistic--in spreading his around.

Chun once passed out 50,000 envelopes of chonji , or monetary tokens of appreciation, to his wide circle of supporters. He astonished a retiring chief aide with a gift of $400,000 to open a law practice and, when he resigned, turned his slush fund over to Roh.

Roh, in contrast, is denounced mainly for letting the slush fund grow too large and for allegedly pocketing much of it for himself and his relatives--not because he amassed it in the first place.

“If you only look at the bad side of the incident, you don’t get the whole picture of Korean society,” said Ha Yong Chool, an international relations professor at Seoul National University. “What happened is the result of interaction between Korean traditional norms and modern industrial development.”

In its darker form, however, the practice is also a product of Korea’s authoritative state, where virtually unchecked rulers have demanded obedience and wielded their power ruthlessly. Many business people here say they were forced to give money not to gain benefits but to avoid official harassment, such as tax investigations and a potentially lethal squeeze on credit.

The most famous case involves the Kukje Group. Once Korea’s sixth-largest chaebol, or conglomerate, Kukje was virtually dismantled overnight when Chun cut off all lending in what corporate officials claim was retaliation for not making large enough political donations.

Hyundai Chairman Chung Ju Yung, founder of Korea’s largest conglomerate, testified in 1988 that he gave millions of dollars to Chun to “feel comfortable” and avoid trouble, and countless other business leaders here make the same claim.

“For all the money we give, we receive benefits only 10% of the time,” said one company president.

The Daewoo Group, Korea’s fourth-largest conglomerate, which was named in Roh’s arrest warrant for giving a $6.5-million bribe to win a submarine base construction contract, also claims it was forced to make a donation. Although the firm declined an interview, an unnamed official told a Korean newspaper that Roh threatened to give the project to a rival unless Daewoo coughed up the bucks.

(One former government official, however, said in an interview that the chaebols are also eager to give and that Roh was known to have turned money down in the beginning of his presidency, fueling antagonism among business leaders.)

Tax Deductions

The practice is so entrenched that the tax code allows deductions for “confidential funds” that need not be itemized--a loophole that could enable politicians to shield campaign contributions, which by law must be reported. And it is so far-reaching that opposition leaders admit they too are guilty.

Kim Dae Jung, Korea’s most prominent opposition leader who now runs the National Congress for New Politics, stunned his supporters by confessing that he secretly accepted $2.6 million from Roh’s slush fund for his 1992 presidential campaign. But he explained that, except for limited public financing, there was virtually no other legal way for him to raise money--and statistics back him up.

According to political contribution reports, corporations legally donated a total of $27.4 million as of October this year--entirely to the ruling Democratic Liberal Party. In the 1992 presidential election, the ruling party received 90% of $29.2 million in corporate donations, while Kim’s opposition party received just 6.6%.

Unlike in the United States, labor unions and other interest groups are not allowed to make political donations in Korea, and individual politicians often must rely on a small circle of family, friends and hometown acquaintances.

One top opposition party official, who requested anonymity, confessed that he spent three times more than the legal limit in his last election and that 80% of his contributions were “informal”--that is, unreported and illegal.

He said he received secret donations from four or five conglomerates that wanted to hedge their political bets but dared not anger the ruling party by openly contributing.

In a snapshot of the typical financial demands on South Korean politicians, the leader said he needed the secret funds to help offset an $18,000 monthly operating deficit for expenses not covered by his $1,300 monthly salary and $2,500 or so in legal contributions. The expenses include payments for his driver and political staff, running his chapter office, and the incessant demands to attend funerals, weddings and anniversaries with gifts of money.

Ever prepared, he whipped out a white envelope containing $25 and a note of condolence that he always keeps in his pocket--a sum that was legislated last year to relieve lawmakers from payments that used to reach $100.

“Being a congressman in this country is miserable,” he said with a laugh.

Reflecting History

Analysts say party slush funds were doled out to support local offices and individual politicians. Presidential slush funds were operated in roughly similar ways, except on a far grander scale, and reflect the history of Korea’s modern development itself.

Park Chung Hee, the stern and forbidding general who grabbed power in a 1961 coup d’etat, laid the foundation when he moved to transform South Korea from an impoverished farming land with a per-capita income of just over $100 into an industrial exporting power. But to build both the economy and a political party that could maintain stability, he needed money--which he collected from companies in what one longtime Western businessman here likened to “tithings to the church.”

Park nationalized the banks, took control of lending and is said to have meted out loans in exchange for commissions of 5% or 10%. He is also suspected of manipulating the stock market and profiting off the import of Japanese car parts.

Foreign firms were not exempt from Park’s demands--which he made half-openly, even providing receipts. In 1976, Gulf Oil fired its chairman for maintaining a $12-million slush fund from which the firm paid Park and his staff at least $233,000 directly; other kickbacks were funneled to Park through a Korean oil company in which Gulf had a stake.

“In Korea, our president is more powerful than a king, and we are used to obeying elders or high officials,” said Cho, the Monthly Chosun editor. “So it is natural for a president to have the authority to collect money.”

Even critics say Park used the proceeds largely to benefit the nation.

His targeted favors helped South Korea to establish its giant conglomerates, which are regarded as critical to the nation’s push into export markets, and to launch the nation into then-improbable industries of shipbuilding and steelmaking.

He also spent money to help raise the rural standard of living. Jang, the business consultant who was a graduate student at the time, recalls that Park visited highway construction crews with gifts of money or food to encourage them in their drive to build South Korea’s infrastructure.

When he was assassinated in 1979, about $1 million was reportedly found in his safe--a relatively modest sum that some people took to prove that Park was a true, if despotic, patriot.

“I myself was jailed for five years under Park, but after I became a businessman my notion of him changed drastically,” said Lee Myung Bak, a ruling party politician, former president of Hyundai Construction and onetime dissident. “Politically, I despised him. But economically, he did a lot for our country.”

Chun’s Influence

Chun Doo Hwan, the abrasive but bighearted general who was elected president in August, 1980, expanded the system. Like Park, he needed to buy political legitimacy and the loyalty of the military and business elites who supported his repressive regime. His demands for cash were usually for causes that, at least nominally, would benefit the state or party: sick children, flood victims, a “peace dam” to guard the people against North Korea, a research foundation.

He also is said to have gleaned money in otherwise legitimate government attempts to reorganize ailing industries. As Chun favored some firms to take over ailing ones, companies scrambled to donate to stay off the hit list, said Kim Sang Joon, who is leading efforts to restore his former firm, Kukje.

Along with Park, Chun also exploited the state’s heavy regulation to intimidate business. Establishing a factory requires about 300 licenses, and exporting a product more than 100. Firms much smaller than Kukje scrambled to donate to Chun’s pet project, the Ilhae research foundation, with one giving $66.5 million. But when Kukje failed to send a donation after receiving permission to open a country club, Chun ordered a cutoff in the firm’s credit.

“Don’t you think you should say thank you?” a Chun aide asked Kukje’s chairman, Kim said.

Unlike Park, Chun has been accused of pocketing at least some of the proceeds. A National Assembly hearing in 1988 on his misdeeds found that $36.5 million from one firm for the Ilhae foundation could not be accounted for.

Still, like a good feudal ruler, Chun took care of his troops and commanded loyalty from them. Even today his chief bodyguard refuses to disclose any of Chun’s back-room deals--unlike Roh’s guard, who has at least partially confessed and was arrested.

When Chun left office in disgrace in 1988, the Roh government forced him to turn over an undisclosed amount of his $20-million slush fund and to begin temple life to do penance.

“Chun was rude and violent, but he had a yakuza sense of honor,” one corporate president said, referring to the Japanese underworld. “He would never betray his group and was generous to his subordinates.”

Tied to Reforms

Few here have much good to say about Roh, the former general once lionized for calling direct presidential elections after three decades of military rule. Critics wonder why he needed so much money and how he used it--but the fund he accrued is closely tied to the explosion in democracy and liberalization that Roh’s government ushered in.

Sources say the slush fund’s exponential growth was not only a reflection of an economy that leaped from $2 billion in 1962 to $365 billion in 1994. The sheer number of public projects multiplied, as Roh began liberalizing the tightly controlled economy: six banks, 27 insurance companies, seven securities firms, 17 leasing companies, two nuclear power plants. Roh also granted licenses for 139 new golf courses and presided over much of a $25-billion arms buildup from 1987 to 1994 that spawned a national investigation into kickbacks and bribery; four officers were eventually arrested.

Although figures vary wildly, one Korean business executive said it was “common knowledge” that a golf course license under Roh cost $6.5 million. Banks were said to go for $1 million to $3 million. But project decisions were not made merely on the basis of money; merit, political connections and other factors also figured in, sources here say.

Labor Issues

Typically, the presidents would invite leading business tycoons to dinner or lunch at the presidential mansion, but payments were never directly discussed or exchanged. At the most extreme, Chun would sometimes compliment a chaebol leader for his donation in front of others, but Roh was more passive, one executive said.

The turbulent labor strife unleashed by democratic elections in 1987 also spurred conglomerates to willingly pour money into Roh’s coffers, said an official who spoke on condition of anonymity. A wave of strikes, violence and wage-hike demands rocked the nation, closing some production lines. And when opposition forces took 56% of the vote in the 1988 National Assembly elections and immediately proposed a law to allow political activity by labor unions, business became alarmed, the official said.

“The consensus was that the conservative forces, the backbone of society, may be endangered--and businessmen were not hesitant to contribute to preserve the conservative capitalist system,” the official said.

Ultimately, he said, business leaders collaborated with politicians to support a merger involving Roh’s party and two opposition forces into today’s ruling Democratic Liberal Party.

The official said business’s greatest expectation of the ruling party is to “stabilize the labor situation”--which current President Kim has continued to meet. Despite his civilian democratic credentials, Kim has not hesitated to quash labor uprisings, provoking a harsh report this month by Human Rights Watch.

Others say Kim’s high-profile crackdown on corruption may be more cynical than meets the eye. In a sensational 1993 interview published by the Monthly Chosun, former prosecutor Ham Seong Hee disclosed that he had been stopped from pursuing corruption investigations by higher officials in a banking scandal when they began “connecting to the core of the [Kim] government.”

Kim’s critics charge that he selectively chooses his corruption targets and has engineered the Roh slush fund probe to destroy opposition leader Kim Dae Jung and others to clear the way for his own “new-generation” successor.

But Kim has purged more than 3,000 officials for corruption and vowed not to take private business donations--a pledge many here seem to believe. His example has helped reduce corruption by more than half, estimates Jang, the consultant, whose business acquaintances say they no longer have to host lavish nightly feasts to get a contract. Jang’s own pharmaceutical association this year adopted a new business ethics code that replaces 10% official commissions and up to 50% illegal ones with a flat--and aboveboard--25%.

But reformers, such as Yoo Jae Hyun of the reformist Citizens’ Coalition for Economic Justice, say changes must be made to last beyond a single president’s term: full public campaign financing; a Cabinet system strong enough to dilute the president’s power; open primaries to break down the political kingmaker system, and stricter laws against money-laundering.

Others say that deregulation will be the quickest route to quashing corruption--especially since the new World Trade Organization will require South Korea to open its markets and adhere to international business standards.

Perhaps most difficult, analysts say, will be reconciling such modern reforms with traditional attitudes toward money and favors.

“Westerners only look at the corrupt aspects, but this kind of cohesiveness of Korean society helped contribute to our economic development,” said Ha, the professor. “Now we’ve reached a point where we need to redefine our social relations into a new pattern, which we have not yet found.”

Chi Jung Nam of The Times’ Seoul Bureau contributed to this report.