‘Let Lone Star leave Korea’

_ An opportunity to demonstrate Korea is a country ruled by the law _

By Kim Jae-kyoung

Only a few Koreans were aware of Lone Star Funds until the U.S. buyout fund took over Korea Exchange Bank (KEB) in August 2003. Now the name has become a household word as Lone Star has frequently made headlines as its every move to exit from the country has attracted keen attention among Koreans.

A noted international lawyer said that the most urgent task for the Korean government to boost foreign investment is to let Lone Star sell KEB and leave the country as soon as possible.

“A lot of foreign companies and investors have been frightened by the Lone Star case and that has had an impact on foreign investment coming into Korea,” Jeffrey Jones, a lawyer and former Chairman of the American Chamber of Commerce in Korea, said in an interview with The Korea Times. He noted that the Lone Star case has become symbolic of negative public opinion toward the Texas-based fund and every foreign investor, strategic or financial.

According to Jones, to immediately improve the foreign investment environment, the first and easiest thing the government could do is let KEB be sold. The second thing is to continue deregulation. Deregulation in Jones' words does not just mean the elimination of regulations or relieving of restrictions. "Much of the need for deregulation stems from the need for greater transparency and eliminating uncertainties and ambiguities,” he said.

The third thing Jones feels may be helpful to improve the investment environment is to see greater efforts to educate on the critical importance of profit to sustain the viability of companies, ensure competitiveness and create greater employment opportunities. “If foreign investors make significant profits here, they face social and public criticism. We need to overcome this anti-profit sentiment,” he said

Lone Star, the U.S. buyout fund, is the largest shareholder of Korea Exchange Bank (KEB). The fund has agreed to sell its controlling 51.02 percent stake in KEB to Hana Financial Group, the nation’s fourth largest banking group. The deal is now awaiting approval from the financial regulator.

However, Lone Star’s exit plan hit a snag after the Supreme Court early last month overturned the High Court’s not-guilty ruling for the former Korean national heading up the private equity fund’s Seoul office. He was accused of issuing a false disclosure to manipulate the stock price of the KEB credit card unit so it could be merged with the bank at a lower price. The lower court will review its verdict.

A delay of one or two months could be bearable to both Hana and Lone Star, but a longer delay may kill the deal. Under the current agreement Hana will have to pay 32.9 billion won in monthly compensation for a delay extending to April. From May, either side can unilaterally cancel the deal.

This is not the first time the fund has attempted to sell KEB. In 2006, Lone Star signed a contract with Kookmin Bank. In 2007, it inked a deal with HSBC. But every time, the KEB sale has folded as the government has held off approving the deal in the face of growing anti-foreign capital sentiment.

The veteran lawyer pointed out that Lone Star case is the perfect showcase for the Korean government to demonstrate that Korea is now a country ruled by the law and rationality.

“I don’t believe the government has any negative feelings toward foreign private equity funds. There clearly is very negative public opinion toward Lone Star. It is this strong negative public opinion that is making it very difficult for the government to act,” he said.

But he was optimistic that the FSC would approve Hana as the buyer because the only decision the regulator can make at this juncture is either approve Hana as a qualified buyer or order the fund to sell its shares. Either way, KEB gets sold and Lone Star leaves Korea.

As for taxation issues, he said that it is not complex and that domestic Korean tax law and the double tax treaties to which Korea is a party to controls the situation. “Ultimately, the NTS will simply follow the law and Lone Star has always said it will comply with Korean law as it deals with taxation of the KEB profits. The hype surrounding Lone Star has made it difficult for any public official to make quiet and appropriate decisions, but ultimately the NTS and the Korean courts will decide how Korean law and the treaties will be applied to Lone Star’s profits,” he said.

KORUS FTA

Jones, who is known as a Korean with blue eyes due to his special affection toward Korea, said that Korean consumers will be the biggest beneficiary of the free trade agreement (FTA) between Korea and the United States. “I feel relieved that they finally signed a deal. I believe that it will have a positive impact on Korea. In particular, Korean consumers will take advantage of it as the deal will pull down prices. I think consumers will soon feel the effects,” he said.

“For many Korean firms, both large and small, the export market is bigger than the domestic market. In this regard, signing FTAs with more countries mean bigger benefit for them.”

The veteran lawyer, who formerly served as an outside director at POSCO and Doosan, said that there are growing calls for reform on Korean firms’ governance structure, but the real problem lies in people who manage the system, not the system itself.

“I don’t see any particular problem with the corporate governance structure of Korean companies. The primary area for improvement is to increase transparency in management. A good system works well only when people know the rules and then follow the rules,” he said.

Key issues to address

Jones, who has lived in Korea for over three decades, recommended three key tasks for Korea to emerge as a real global force in the global community.

“First, adopt an appropriate labor policy that will balance labor market flexibility and protection of workers’ rights and maximize the requisite safety net. If you ask foreign businessmen, 95 percent of the respondents cite labor-management relations as the biggest difficulty in doing business here,” he said.

“Secondly, undertake an effort to eliminate criminal liability for unintentional violations of economic related rules and regulations across the broad spectrum of Korean laws,” he added, noting that the Korean criminal laws are extensive, more so that in most other countries, and this increases the risk of doing business in Korea.

“Finally, the tourism in Korea is still in its infancy and it has not been viewed as an industry in Korea. Changing the view towards tourism and seeing it as an industry that needs to be developed with appropriate policies to improve investment in the tourism industry infrastructure can result in the creation of destination resorts, mega entertainment zones and similar facilities to attract 25 million Chinese and Japanese tourists annually and result in hundreds of thousands of jobs for Korea’s youth similar to that which Singapore as recently adopted.”

He stresses that maintaining a balance between the West and the East is key to emerging as a winner in the post-crisis world.

“Maintaining Korea’s global competitiveness in education, the economy, culture, sports and diplomacy all will help create a stronger relationship with China and neighboring countries, but Korea should not write off the West,” he said.

“The U.S. will remain a superpower and its economy will bounce back, but it is clear that this power and influence will be shared with China and India.”

‘론스타 빨리 내보내야’

_ 외국투자 촉진 위해서는 국민정서법 극복이 관건_

2003년 8월 외환은행을 인수하기 전까지만 해도 론스타 펀드를 아는 한국 사람은 극소수에 불과했다. 하지만 지금 론스타는 대한민국 사람 대부분이 알고 있는 유명한 이름이 되었다 외한은행을 팔고 나가려고 할 때 마다 언론의 1면을 자주 장식했기 때문인다.

(최근 외환은행 매각 지연에 대해) 국제변호사인 제프리 존스는 한국 정부가 이미지 개선을 통해 외국인 투자를 촉진하기 위한 가장 급선무는 론스타로 하여금 최대한 빨리 외환은행을 매각하고 한국을 떠나도록 하는 것이라 강조한다.

“많은 외국기업이나 투자자들은 론스타 케이스에 겁을 먹고 있습니다. 그것이 한국에 투자하려는 외국 자본에 영향을 미치고 있습니다,” 한국 최대 법률회사에서 국제 변호사로 근무하고 있는 존스 회장은 최근 BusinessFocus와의 인터뷰에서 이같이 말했다.

그는 론스타 케이스는 한국의 일반 대중이 론스타와 외국 투자자에게 갖는 부정적인 견해를 보여주는 상징적인 사건이라고 역설한다.

한때 암참코리아를 이끌었던 존스 변호사에 따르면 외국인 투자 환경 개선을 위해 가장 먼저, 가장 쉽게 할 수 있는 조치는 외환은행을 팔리도록 길을 열어 주는 것이다. 그 다음으로 할 일은 규제완화이다. 존스 변호사는 여기서 규제완화란 단지 규제를 없애는 것을 의미하지 않는다고 말한다. 규제의 불확실성이나 모호성을 없애는 것도 훌륭한 규제완화라는 의미이다.

세번째로 외국인 자본의 정당한 이익에 대한 부정적인 시각을 극복해야 한다고 말한다. “외국인 투자자가 한국에서 막대한 수익을 올리면 종종 사회적 대중적 비판에 직면하게 되는데 우리는 이러한 반외자 정서, 소위 국민 정서법을 극복해야 합니다.

한국에 대한 각별한 관심과 애정으로 “파란눈의 한국인” 이란 별명까지 얻게 된 존스 변호사는 론스타 케이스가 한국이 법과 이성이 최우선시 되는 나라라는 것을 보여줄 완변한 기회라고 주장한다.

“저는 한국 정부가 외국 자본에 대해 부정적인 시각을 갖고 있다고 생각하지 않습니다. 다만 론스타에 대해 부정적인 국민정서는 분명히 존재합니다. 이러한 국민정서가 정부로 하여금 정부가 행동하기 어렵게 만들고 있습니다.” 하지만 존스 변호사는 금융위원회가 외환은행의 하나금융 매각에 대해 낙관적이다. 그는 지금 시점에서 할 수 있는 유일한 결정은 외환은행 딜을 승인하거나 론스타에게 보유주식을 팔라고 명하는 것 뿐 이라고 말한다. 두 경우 모두 외환은행의 주인은 바뀌게 되고 론스타는 한국을 떠나게 된다.

한-미 FTA 관해서 그는 한국에 특히 한국 소비자들에 긍정적인 영향을 미칠 거라고 말한다. “한-미 FTA로 우리 소비자 물가가 많이 내려갈 겁니다. 다시말해 서민정책에 가장 큰 효과가 있을 것입니다. 소비자들에게는 당장에 눈에 띌만한 효과가 있을거에요.”

“기업의 경우 중소기업 포함해서 한국기업들 거의 다 수출시장이 국내시장보다 큽니다. 그런 현실 보면 한-미, 한-칠레, 한-중국 FTA 많을수록 우리 기업들에 더 유리합니다.”

한국 기업, 특히 금융기관 지부구조의 문제점에 대한 질문에 대해서 그는 문제는 시스템을 운영하는 사람에 있다고 강조한다. “현재 시스템 자체에 특별하게 개선해야 할 사항이 없다고 봅니다. 다만 아직까지 우리가 해야 할 만큼 투명하지가 않다. 투명성이 확대 되야 합니다. 금융기관, 대기업 미국모델 벤치마킹한 것은 잘 했는데 운영에 있어서 투명하지 않습니다. 투명성 확보가 관건입니다.” 그는 얼마 전까지 두산과 포스코 사외이사를 역임했다.