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(EDITORIAL from The Korea Herald on Oct. 10)

All News 07:06 October 10, 2016

Raison d'etre
Scandal puts Federation of Korean Industries at a crossroads

The Federation of Korean Industries has been thrown into its deepest crisis since its establishment in 1961. The growing calls for its disbandment -- from outside and inside -- testify to the depth of the crisis facing the corporate lobby.

The crisis was prompted by the scandal surrounding two nonprofit organizations that opposition members claim were established by and for people close to President Park Geun-hye.

Park and her aides deny their involvement in the Mir and K-Sports foundations, but it turns out that the FKI collected nearly 80 billion won (US$72 million) from conglomerates like Samsung, Hyundai Motor, LG and SK on behalf of the foundations.

The scandal followed a recent controversy in which the federation was criticized for providing funds for a right-wing parent group which is well known for its pro-government activities.

These convinced critics that the federation is more geared toward activities supporting the government than fulfilling its mission to represent the business community vis-a-vis the government or the National Assembly.

The harshest criticism points out that, as appears to be the case with the Mir and K-Sports foundations, the FKI often acts as a conduit for corporate donations destined to government projects.

The tradition of big businesses, including the family-controlled chaebol that maintained collusive ties with the government in power -- providing funds for such projects has been long in place since authoritarian governments.

Of course, some of the corporate donations have little to do with politics. For instance, each conglomerate donates money for the underprivileged in the year-end charity season and for other philanthropic causes, and they also offer relief funds to victims of natural disasters or tragic incidents like the sinking of the Sewol ferry.

But the problem is that conglomerates are often "mobilized" to subsidize government projects, especially those cherished by the president, and the FKI acts as a funnel for such funds.

During the successive liberal administrations of Kim Dae-jung and Roh Moo-hyun, the FKI raised about 4.5 trillion won ($4.57 billion) from its member enterprises that went to North Korea in the forms of rice, fertilizer and other aid.

During the Lee Myung-bak administration, development of microfinancing was one of the president's pet projects, and the FKI collected about 1 trillion won to help kick-start the program.

The FKI has also played the role of leading financier for President Park's signature programs, including a public fund designed to help unemployed youths and the "creative economy and innovation centers" set up in 18 metropolitan cities and provinces across the country. The FKI funds raised for the two projects are estimated to reach 144 billion won.

The FKI, being a lobby for big enterprises, is inherently conservative, although it always worked closely with any government in power.

So it is hardly surprising that the severest criticism come from liberal opposition members, including leaders of the Minjoo Party of Korea, the People's Party and the Justice Party.

Moon Jae-in, Minjoo's leading potential presidential candidate, accused the FKI of "foul play," saying it served as the channel for corporate funding of government projects.

Kim Sung-shik, chief policymaker for the People's Party, went on to say that the FKI's roles other than fundraiser for the government can be taken up by other business organizations like the Korea Chamber of Commerce and Industry and the Korea Employers Federation. "It is time for the FKI to fade into history," he said.

Members of the ruling Saenuri Party, including its former leader Kim Moo-sung and potential presidential candidate Yoo Seong-min, joined the criticism. Kim suggested that the FKI be reborn as an organization for the underprivileged while Yoo proposed that it focus on research.

What's most painful to the FKI executive and staff would be the fact that calls for dissolving it -- or making a drastic overhaul at the least -- are growing even from its own members.

This means the FKI cannot avoid its responsibility for setting its future on its own. Every organization needs its raison d’etre and the FKI is no exception.

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