Why South Korea bounces back from every crisis

  • Business
  • Saturday, 03 Dec 2016

Under pressure: South Korea president Park Guen-hye has another 15 months to serve out her five-year term but is facing the possibility of being impeached. – AFP

SOUTH Korea is simply amazing. It was lagging behind Malaysia in many ways – from sports to the economy. On top of that, it had to constantly deal with a nagging security threat from North Korea.

However, the country has always overcome adversaries to emerge stronger because of one practice that it holds steady – accountability. It always hears the voice of protest and adapts to ways that are acceptable.

Everybody is held accountable – from the president to the monetary regulators, business owners and even sports administrators.

Malaysia used to beat South Korea in football and badminton in the 1980s. Today, we are unable to stand up to even South Korea’s second liners and it is a force to be reckoned with on the global stage by being a regular face in the World Cup.

Everybody knows the prowess of the South Korean badminton team, especially the doubles pairs. Malaysia even hired a South Korean to sharpen the skills of the badminton players. That is the level of accountability in sports administrators.

On a more high-profile scale, South Korea’s leadership is in turmoil today. The president, Park Guen-hye, has another 15 months to serve out her five-year term, but is facing the possibility of being impeached.

This is after prosecutors named her as a criminal “conspirator” on allegations surrounding her long-time friend Choi Soon-sil. Choi is said to have meddled in state affairs from influencing the budget to seeking funds from large South Korean companies.

Park has offered to step down as a sign of being “accountable” under a schedule to be agreed by lawmakers to prevent any vacuum in the leadership. But the people and the opposition have gone to the streets to demand an impeachment.

Being accountable and listening to the voice of protest is even more evident in Samsung Electronics, probably South Korea’s best-known brand after car manufacturers Hyundai and Kia.

Samsung is reeling from the failure of its launch of the Galaxy Note 7 smartphone due to technical hitches that caused some of the mobile phone sets to catch fire.

The incident caused the group to take a US$5bil hit in October, and worse still at stake is a good deal of goodwill from investors who had bought into the company with the view that Samsung was the cheaper and equally compatible alternative to the i-Phone.

There is no doubt that Samsung’s handphones will continue to remain in vogue because of its relatively cheaper pricing and technology.

However, the founders, the Lee family, have decided to listen to reasons from investors on why the company’s structure needs to change and holding too much cash is not good.

It has US$60bil cash and the management announced that they would pay out US$3.5bil to ease the anxiety of investors.

Apart from a payout, Samsung has also announced that it would undertake a review on coming up with a “right” corporate structure to improve governance within the group.

Splitting the holding company from operations is to improve the corporate governance structure of the company that fetches a market capitalisation of more than US$200bil.

The Lee family that controls Samsung know that come March next year, shareholders will question them. So, they have reacted to appease shareholders.

This culture of being reactive and accountable has seeped through all levels of South Korea’s social and economic strata. It suffered from the 1998 Asian financial crisis when the Korean won depreciated by more than 65% against the US dollar.

The large conglomerates called “chaebols” had to be restructured and evolved to accept the new market demands. The cosy relationship between the companies and the Government still continues, but the private sector is more careful.

Even in the latest incident involving President Park, the conglomerates have come out to cooperate on investigations into Choi.

The willingness of the “chaebols” to adapt to changes following the 1998 crisis has vaulted many companies to world beaters. Apart from Samsung, South Korea is also well-known for its Hyundai and Kia models.

Hyundai started in 1967 and is the fourth-largest producer of automobiles in the world. Its associate company, Kia Motors, is also amongst the top producers of cars in the world.

South Korea’s automobile industry was ravaged in the aftermath of the 1997/98 Asian financial crisis. But today, they have two world beaters in the industry.

Malaysia’s Proton started some 15 years after Hyundai but appears to be on its way towards occupying a page in the history books of the country if the Government stops giving it assistance.

South Korea also has to deal with an offshore market for the Korean won, just like Malaysia.

However, the central bank allows certain banks to also participate in the offshore won market to reduce the exchange rate between the US dollar and the won in the offshore and onshore markets.

This has fended off speculators.

The way South Koreans react to setbacks and adversaries is amazing.

They also come back stronger because they cut their losses, regroup and come back with a strategy that beats the market at their own game.

There is also a high level of accountability and willingness to adapt to the current market demands, factors that have made it an economic powerhouse in Asia.

It’s not only the wonderful Korean soap operas that have captivated audiences in other Asian countries, but South Koreans’ amazing comeback from each crisis is also something to be emulated.

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