01/26/98 THE BATTLE FOR KIM'S ECONOMIC SOUL (int'l edition)

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THE BATTLE FOR KIM'S ECONOMIC SOUL (int'l edition)
Advisers from the old guard may blunt economic reform
Over sashimi and noodles in a Seoul restaurant, former economics professor You Jong Keun wonders aloud how much say he will have in reforming South Korea's economy. You, 52, taught for more than a decade at New Jersey's Rutgers University, then returned to Korea to become a provincial governor and the newly appointed economic adviser to South Korean President-elect Kim Dae Jung. As the most junior member of Kim's 12-member economic crisis management team, he's the only one with a consistent market-oriented track record. Yet he's worried about being relegated to the status of interpreter on an upcoming trip to meet with investors in the U.S. ''My role needs to be clarified,'' he says to his dinner companions after an unsettling telephone call from a rival.
What's going on in the back rooms of Seoul these days isn't just about jockeying for personal power. As Kim Dae Jung prepares to take office on Feb. 25, a battle is shaping up for his economic soul. At stake is the course Kim will choose as he tries to steer the economy through its worst economic crisis in nearly two decades.
CACOPHONY. Yet as he begins taking stock of Korea's finances, Kim is finding himself tugged by a myriad of special interests: Korea's old guard wants to preserve as much government control and chaebol influence as possible, while labor leaders from Kim's populist past want his sympathy for workers who face unprecedented layoffs. And not least, the International Monetary Fund and foreign lenders want Kim to maintain his commitment to sweeping economic reforms as South Korea carries out austerity measures mandated by a nearly $60 billion bailout package.
Part of the reason for the competing clamor is that Kim assembled an odd collection of bedfellows to win the election in December. Most of them are anything but reformers: They're longtime members of Korea Inc., an Establishment that repeatedly locked up and even tried to assassinate Kim while he was Korea's leading human rights campaigner. His partner in the ruling coalition and expected Prime Minister is Kim Jong Pil, who was once a bitter enemy and is one of Korea's most conservative political figures. Kim Jong Pil played a pivotal role in helping Park Chung Hee stage a 1961 military coup, and he founded the brutal Korean Central Intelligence Agency, an organization that later kidnapped and tried to murder Kim Dae Jung. The Kim-Kim alliance is certain to lead to bickering.
One reason for potential conflicts is that both Kims got to choose three members of the crisis management team. And when it is disbanded on Feb. 25, they both will get to appoint their own cabinet ministers, too. If their choices for the economic team are an indication, there may be opposing sides in the cabinet as well. Kim Jong Pil's picks for the crisis committee included Kim Yong Hwan, who was a key economic adviser in the 1970s to autocratic leader Park Chung Hee--the implementer of many of the dirigiste economic policies leading to the current predicament. And his two other appointees served in senior positions under previous, disgraced Presidents Chun Doo Hwan and Roh Tae Woo.
''IMF-PLUS.'' Yet Kim Yong Hwan insists there is ''no difference in opinion'' among the members of his economic team. ''We are doing what is called IMF-plus, carrying out related, supplementary reforms that we need but which are not required by the IMF,'' he says. Such measures include allowing 100% foreign ownership of Korean listed companies by the end of 1998. The IMF had asked for 55%.
One member of the economic team who walks a middle line is Park Tae Joon. Park was a junior participant in the 1961 coup and is best known as founder of Pohang Iron & Steel Co. (POSCO), one of the world's largest and most profitable steelmakers. Politically, Park is allied with Kim Jong Pil, but the President-elect will need to call on his business experience and authority with the chaebol. While Park takes a tough line on labor, he's also urged the chaebol to slim down and shape up.
The entrenched forces of the chaebol have already shown resistance. They say Kim Dae Jung's proposals to force them to consolidate financial statements and eliminate cross-guarantees on loans by next year are unrealistic. Kim believes that forcing chaebol to be more transparent will end the dirty relations between government and business that have poisoned political and economic life. ''He scares the hell out of the chaebol,'' says POSCO Chairman Kim Mahn Je. ''He keeps telling them they are the main cause of the problem.''
Although Kim Dae Jung has run for President four times and been a major figure in Korean politics for more than 30 years, he remains a relatively untested leader. He ruled his political party with an iron fist for decades, but he'll now have to delegate so that he can govern effectively. At the same time, he will be trying to make sure his policymaking isn't dominated by the old guard. ''Kim Dae Jung has been a one-man show,'' says Kim Mahn Je. ''My worry is that he will be very good on announcements but very weak on implementation.'' That's why the men he chooses to bend his ear may end up with more sway over Kim than any presidential advisers in modern Korean history.
By Mark L. Clifford, with Moon Ihlwan in Seoul

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