elect Start Your Bulldozer

This is the 20th in a series of articles on suggestions to President-elect Lee Myung-bak. ― ED.

By Henry M. Seggerman

President of International Investment Advisers

Thirty years ago, labor government mismanagement and over-regulation had plunged the UK into an era of industrial disputes, strikes, increasing unemployment, and collapsing public services. This is when Margaret Thatcher, the ``Iron Lady,'' came into office and spearheaded radical reforms, which changed the course of history and turned the UK into Europe's economic powerhouse.

Lee Myung-bak comes into office in South Korea under similar circumstances. Ten years of liberal rule, with labor inflexibility, ``wealth redistribution'' schemes, and hyper-regulation, has slowed Korea's economic promise below 5 percent annual GDP growth, and given Korea a president with the lowest approval rating in its history. If Lee's ``747'' promise (7 percent annual GDP growth, $40,000 per capita income, and making Korea the world's 7th largest economy) becomes a reality for Korea, ``The Bulldozer'' may turn out to be as successful in Korea as the ``Iron Lady'' was in the UK. But Lee has some major bulldozing ahead of him:

Give Management Equal Leverage With Labor

Korea continues to suffer from the worst labor inflexibility in all Asia, and this is because labor enjoys the absolute leverage to strike virtually anytime, but management does not have the absolute leverage to lay them off, putting Korea at the mercy of Korea's militant labor unions.

Korea's Byzantine labor laws do not forbid layoffs per se; however, the procedure is so complex with various hurdles and approvals, you seldom see management acting with very much resolve in the face of labor militancy. If anything, the government gives workers special advantages, such as a guaranteed upgrade for part-time workers. Imagine a Korea instead with a truly co-equal labor-management balance of power. Before long, redundant jobs, inefficiency, and overcapacity would be a thing of the past, triggering solid economic growth.

Stamp Out Chaebol Corruption Once and for All

Korea has many profitable businesses. Korea's corporate profits should be paid to the shareholders, in the form of dividends, which boost domestic demand, and should also be used to expand successful enterprises ― intelligently ― creating new jobs and economic growth. Korea's corporate profits should not be stolen from shareholders and secretly transferred into slush funds used to bribe government officials.

OK, Mr. President, we all know you are ``business friendly'' ― but please make sure to keep the heat on Korea's unrepentant chaebol controlling shareholders, who continue their decades-old effort to pass control of public companies illegally, by paying bribes to government officials who report to you.

Please make sure these despicable corrupt officials go to jail for a long time, and are replaced by clean ones. Please make sure these chaebol are controlled not by corrupt founding families and their pampered offspring, but by the real owners of the companies, the shareholders. The vast corporate profits are there for one purpose only: to build up Korea's economy, not to destroy it with nepotism and graft.

End Wage Controls and Price Controls

Other than its gas, electric, and fixed-line local phone monopolies, Korea's numerous business sectors enjoy healthy competition amongst many dynamic companies. Why not let these experienced business leaders fight it out fair and square on a level playing field, and let the best man win? Why not stop telling them how much or how little to charge their customers and how much or how little to pay their workers, across the board? This applies to all of Korea's heavily-controlled businesses: auto insurance, TV ads, newspaper market share, wireless service, real estate, mortgages, construction, etc., etc. There is so much regulation in Korea, sometimes government ministries actually compete with one other to control industries.

Genuine business competition is sure to result in much, much better products and services for the average Korean consumer. A perfect example of harmful price controls is rice: why must that Korean consumer waste his or her hard-earned pay on rice selling for 400 percent of the market price, instead of buying competitively-priced products which boost economic growth? It's rice, not caviar. Deal with it.

Reverse FDI Flight From Korea

Foreign direct investment (FDI) into Korea has been falling since 1999. Meanwhile, FDI into China is growing exponentially. This is not only because most anything you can make in Korea, you can now make in China for half the cost, one-quarter the cost, one-tenth the cost. It's also because Korean bureaucrats have made it their mission to harass all foreigners with red tape, tax audits, and office raids. Lee's announced plan to ``slimline'' government ministries down from 18 to 13 is certainly a good start. Mr. President, please just make sure your slimlining of unnecessary government ministries also results in actual slimlining of the oppressive governmental regulations those government ministries promulgated during the prior administration.

Furthermore, why is it that a Korean company like MBK Partners is encouraged to flip an acquisition like Hanmi Capital for a tidy 300 percent gain in a few months' time, while a foreign company like Lone Star gets subjected to an endless Spanish Inquisition for doing the same thing? Whether Korean or foreign, a business is in business to make a profit, hopefully a big one. If you just let this happen, much-needed FDI will come pouring back into Korea soon. It's only capitalism.

Don't Waste Taxpayer Money on Foolishness

Only three years ago, your predecessor had a crazy plan to spend trillions in taxpayer money moving the nation's capital to Gongju. Thank God that brainless boondoggle evaporated. A few days ago, you insisted that your trillion-won canal project would only happen if funded 100 percent by private enterprise. Please make sure you really follow through on this promise. You ran a construction company for many years, so you know this means avoiding providing any construction companies involved with government margin guarantees of any sort.

So, Mr. President, to achieve your ``747'' promise, you have an enormous task at hand, requiring some serious bulldozing of a landscape strewn with rubble after ten years of liberal government. But given your past successes, we have great confidence that you will be successful in this your greatest endeavor, that you can help turn Korea around as Margaret Thatcher turned around the UK thirty years ago.