November 7, 2016 7:00 pm JST
David S. Lee

South Korean anti-graft law misses revolving door

South Korea's new law restricting gift-giving to officials has perhaps attracted the most attention for its so-called "3-5-10" restrictions which have even been lampooned on global news channels.

This provision refers to curbs on public officials being treated to meals costing over 30,000 won ($26), receiving gifts valued at more than 50,000 won and accepting donations of more than 100,000 won for family events such as weddings or funerals. For a country where gift-giving is ingrained in the culture and a key component of maintaining relationships, the economic impact of the new law, officially the Improper Solicitation and Graft Act, on farmers, restaurants and other small businesses has been especially pronounced. 

The law's detractors point to other faults. Its language is vague and critical areas left unclear. Many feel the application of the measure is too broad. For example, the law is ostensibly focused on public officials, but the definition of public officials has been construed to include journalists and even teachers under the rationale that the nature of their work impacts the public. The spouses of those considered public officials are also covered. All told, the legislation directly affects approximately 4 million people, roughly 8% of the population.

The act, also known as the Kim Young-ran Law for the former Supreme Court justice who proposed it while serving as head of the Anti-Corruption and Civil Rights Commission in 2012, initially lingered in legislative purgatory due to party politics and the lack of a real champion in the National Assembly to take on members' self-interests.

This only changed following the April 2014 sinking of the Sewol ferry that resulted in 304 deaths. The initial investigation uncovered lax regulation and oversight stemming from conflicts of interest arising from the "revolving door" between regulatory agencies and the private sector. With national sentiment and President Park Geun-hye pushing for action, lawmakers at last moved forward with the bill. Ironically, Park afterward raised reservations about the law's possible negative impact on the economy.

With economic inequality growing and perceived fairness declining, there is rising discontent in South Korea targeting elites and government ineptitude. Despite its status as a modern economic success story, many South Koreans perceive that their nation has problems with corruption. In recent surveys conducted by the anti-corruption commission, approximately 60% of those polled considered South Korea to be corrupt.

The view from abroad is not much different. South Korea ranked 37th in Transparency International's 2015 Corruption Perceptions Index. Though the country has seen some improvement in its ranking since 2008, there has been no significant improvement in its actual score. Overall, South Korea's performance in such corruption rankings places it in the lower tier among members of the Organization for Economic Cooperation and Development.

The widespread criticism of the anti-graft law is valid, but the prevailing commentary elides a key point. The law was propelled through the National Assembly as a partial response to the Sewol disaster, but did it introduce measures that would prevent another such tragedy from occurring?

Conflicts of interest

Unfortunately, the answer seems to be no. This is because the causal roots of the Sewol disaster were never about receiving a meal that might have exceeded an arbitrary cost cut-off. Indeed, those intent on illegally benefiting from their position are not going to be dissuaded because an extra order of Korean barbecue puts them over some limit. 

Beyond a general indolence when it comes to the rule of law, a key issue identified in the Sewol tragedy was conflicts of interest related to revolving door employment of government officials by the private sector. Many of the proximate causes contributing to the sinking emanated from this.

If the regulator and the regulated develop such a close relationship that some expectation of future employment or benefit may form, then the ability to properly monitor is jeopardized. The seeming pervasiveness of this dynamic resulted in the creation of a new word, gwanfia, a portmanteau combining the Korean word for government official with the word mafia. When considered on a wider scale, this constitutes a systemic risk that can lead to weak governance, financial crises, or worse, lost lives.

Korea is not alone in dealing with the revolving door problem. In Japan, the revolving door is referred to as amakudari, literally, descent from heaven, to describe the transition from bureaucracy to the comforts of the private sector. Japan has attempted a variety of measures to curtail amakudari with minimal effect. The U.S. and other advanced economies also have attempted to address the problem but most measures are limited in scope and largely ineffective due to loopholes and lack of political will necessary for strict enforcement.

Where South Korea may be unique, however, is that when considering a new law ostensibly aimed at helping prevent disasters like the Sewol, lawmakers did not deal with the core issue head-on but focused on matters that appear to be minutiae. Of course, entrenched self-interest is the cynical explanation for this.

As in other countries, former politicians, high-ranking civil servants, regulators and former judges and prosecutors are generally in high demand in the private sector. This is doubly true in an economy like South Korea's that is highly regulated and where relationships with the right bureaucrat can help facilitate approvals and licensing.

Given the structure of the South Korean economy and the human pursuit of self-interest, there is no silver bullet to resolving this issue. Any successful effort will likely require multiple iterations of policies, punishments and sustained education over a substantial period of time to inculcate a change in culture.

For example, the most recent version of the Public Service Ethics Act included a prohibition of at least three years on public officials joining companies they have monitored anytime during the previous five years. A similar cooling-off policy would also make sense for politicians and high-level government officials in relation to industries or companies they were lobbied by.

Conceptually, the rule on new employment seems strict but enforcement has been lacking. A public official may receive an exemption from the three-year prohibition by seeking approval from his agency's public service ethics committee. Such committees routinely approve the majority of such requests, with the rejection rate reported at one ministry to be less than 10%.

Additionally, though already required to a certain extent, more stringent mandatory reporting and monitoring of post-government employment and affiliation, such as serving on boards of directors, is also necessary. Punishment of reporting violations should be increased for both former government officials as well as new employers. Another more extreme option might be to empower the anti-corruption commission with enhanced responsibility and power similar to the Corrupt Practices Investigation Bureau in Singapore or the Independent Commission Against Corruption in Hong Kong.

With Park's presidency in crisis in recent days due to allegations of impropriety related to a relationship with a long-time friend, leadership failure, influence peddling and lack of transparency are fueling greater discontent among South Koreans. With calls for Park to step down rampant, recent events are at least compelling Korean society at large to think about such issues.

As South Korea continues to struggle to improve, however, the answer is not simply more laws. Before the Kim Young-ran Law was passed, the country already had a bevy of relevant laws on its books. South Korea does not just need more legislation, it needs better laws and ultimately, it needs better leaders who are willing to look beyond self-interest to restore the faith of the nation's citizens in government.

David S. Lee is a senior lecturer at the University of Hong Kong School of Business.

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