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2016: Korea Not Doing Business as Usual

South Korea: Not Business As Usual

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Here is a quick summary of Korea’s 2016: we had an influence-peddling corruption scandal, chaebols were behaving badly, and a president facing impeachment. Lest we forget, the country also experienced low economic growth, coupled with unemployment reaching over a million, and mass layoffs in traditional industries including shipbuilding. Add all these together and you end up with a formula for public distrust across all four institutions measured by the Edelman Trust Barometer: government, business, media and NGOs. Government and business, in particular, suffered – meaning Korea again ended up in the “distruster” category (less than 50 percent average trust in the four institutions).

A dramatic downfall

Let us start by looking back at the end of 2016, which marked a pivotal moment in Korea’s young history of democracy. No other story brought more dismay and anger than the dramatic influence-peddling scandal that swiftly engulfed President Park Geun-hye. Outrage spread across the country after it was revealed that Park’s friend-turned-confidante, Choi Soon-sil, a woman with neither official position nor authority, had been wielding enormous political power. This fact led to the discovery of further evidence of corruption relating to governmental institutions and big Korean businesses.

By late November, Park’s approval rating had plummeted to 4 percent, according to Gallup Korea. The scandal – which is still under investigation – was unprecedented. It uncovered a quite unbelievable, unpalatable and yet very grim reality that corruption lies at the core of the Korean government. What surprised most was that the corruption appears to have been far more reaching than possibly conceived – or accepted. Indeed, trust in government officials’ credibility plunged 10 percentage points, from 27 to 17 percent.

Distrust was truly one of the hottest topics of 2016, and trust in the government dropped from the already low 2016 figure of 35 percent to 28 percent. Korea, so often politically divided, saw people from all sides and ages gather in downtown Seoul and across the nation for candlelit rallies often over a million-strong – all united in their demands for Park to step down.

Media: from conveyor of truth to bearer of justice

The presidential scandal was (and is) nothing short of a media sensation. A major cable broadcaster’s news program was the first to shed light on some of the key allegations of abuse of power. The channel’s ratings shot up and the nation became transfixed by the daily writing – and broadcasting – of history.

Most major networks followed suit, adding special programs and inviting panelists to make (often unsubstantiated) claims, while the media ensured the rumor mill stayed in full swing. This might explain why, in the era of “fake news,” despite the Korean media’s newfound role as a

bearer of justice, trust in the media actually went down 3 percentage points to 40 percent, also in line with global trends.

There were also claims that the media had done too little, too late. Many believe that the media was already aware of the government’s corruption – but chose not to act.

A case in point involved one of Korea’s most powerful conservative newspapers, which had a sudden change of heart in its attitude toward the president. Once one of her staunchest supporters, the paper suddenly found itself on unfavorable terms with the president, and dramatically turned on her. Perhaps this is also one of the reasons the country has witnessed a dramatic drop in journalistic credibility, from 24 to 17 percent.

Lowest trust in business, again

Among all the countries surveyed, Korea ranked lowest in terms of business trust again this year, dropping from 33 to 29 percent. The mighty and often scandal-struck chaebols, the mega-companies that dominate the Korean economy, faced increasing scrutiny regarding their complicated governance structures and lack of transparency.

Practically no major chaebol has come out of ‘Choi-gate’ unscathed. The scandal uncovered evidence of companies putting large sums of cash into a slush fund – and punishing those that did not cooperate. Koreans are also extremely distrustful of company CEOs, which dropped 11 percentage points to 24 percent (for the general population).

In 2016, we also saw Korea’s top businesspeople apologize for their company and own families’ misdoings and mistakes. Chaebol CEOs were already perceived as sources of corruption, but the Choi scandal reinforced existing negative opinions. Interestingly, the informed public also expressed significant distrust in the credibility of CEOs – this also took a two-fold drop from 40 percent to a low of 19 percent.

Lack of trust in businesses is often linked to the health of the country’s finances, and Korea showed low economic growth in 2016. There were mass layoffs in the shipbuilding industry, unemployment topped the million-person milestone for the first time and among the youth – already burdened by an aging population – unemployment figures hit a record high. It is no wonder, then, that so many people have lost their trust in businesses.

Unilateral decisions, no public opinion

Park Geun-hye’s presidency has been characterized by a lack of communication and its tendency to make decisions that fly in the face of public opinion.

At the end of 2015, the Korean government lost credibility after making a “final and irreversible” deal with Japan resolving the comfort women issue (regarding the Japanese military’s use of Korean women as sex slaves during WWII). This sudden move took many Koreans by surprise, with many immediately calling for the accord to be scrapped.

Last year also saw the sudden closure of the inter-Korean Kaesong Industrial Complex, in retaliation against perceived North Korean provocation, and despite the implementation President Park’s so-called “Trust Building Process” policy.

And finally, there was the decision to deploy the THAAD anti-ballistic missile defense system. This provoked much discomfort and objection in Beijing, and China has since decided to ban Korean cultural content, including dramas, films and celebrity coverage.

Further, some Korean companies were blamed for perceived double standards in terms of product safety in the Chinese market. And as such, we have witnessed a staggering 21 percentage point drop in the trust the Chinese have in Korean products – from 72 to 51 percent.

Change takes time

With distrust, scandal and corruption the main topics of 2016, it is very fitting that anti-corruption measures were enshrined into law last year. An all-encompassing anti-graft law was put into effect last September that essentially prohibits any “excessive” money or gift-giving among companies, government bodies (officials) and media representatives (journalists), the institutions that have experienced the greatest loss in trust.

To say that 2016 was a rough year would be an understatement. Put simply, Koreans do not know who to trust anymore. Given all the revelations of favors and scandals that have plagued the government, ordinary citizens cannot help but question whether anything that is said by the government, media and businesses can be taken at face value.

What is in the cards for 2017? For a start, there will be a constitutional decision on President Park’s impeachment, possibly leading to a new president taking office well ahead of schedule. There will also likely be mixed messages from presidential candidates and the press, and more Choi-gate developments. Amid the chaos, it is difficult to anticipate any significant changes in the level of trust for the year ahead. While it is high time for Korea to start a real “Trust Building Process,” this will no doubt be a slow process.

SB Jang is managing director, Edelman Korea.

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