Global Insight Perspective | |
Significance | The case has acted as "a ticking bomb" with regard to Lee Myung-bak's chances in the presidential race, with the GNP frontrunner having nevertheless maintained 40% of the vote, despite facing various challenges from within the conservative camp threatening to split the vote. |
Implications | The outcome of the probe serves to remove the key obstacle for Lee and the conservative GNP to return to power, spelling an end to a decade of liberal rule in Asia's fourth-largest economy. |
Outlook | It is hoped that the country will develop into a more business-friendly entity and shed its legacy of economic nationalism and schizophrenic attitudes to foreign investment, with Lee having pledged further opening to foreign businesses. |
Way Paved to the Blue House
South Korean prosecutors today cleared presidential frontrunner of the opposition Grand National Party (GNP) Lee Myung-bak on fraud and embezzlement charges, thereby paving the way for the conservatives to return to power at the 19 December polls.
During a live broadcast on national television, senior prosecutor Kim Hong-il held that no evidence had been found that Lee had conspired in stock manipulation in a major securities fraud case that took place in 2001 and involved his former business partner Kim Gyeong-jun. An investigation was launched after the liberal United New Democratic Party (UNDP) filed a lawsuit early last month alleging that Lee and Kim had colluded in attempts to artificially raise the stock prices of Kim's Optional Ventures, a successor to his defunct investment company, BKK. The case gained momentum after Kim was extradited from the United States in mid-November, and has acted as "a ticking bomb" with regard to Lee's chances in the presidential race, with the GNP frontrunner having maintained 40% of the vote—20 percentage points more than his closest contender, right-wing independent Lee Hoi-chang. Meanwhile, such challenges have now been removed, with prosecutors moving to indict Kim today on charges of share rigging, fabrication of documents, as well as a series of other charges related to the 2001 fraud case, including the embezzlement of some US$42 million. In a further boost to Lee's presidential candidacy, Kim changed his original story, which held that Lee was in fact the real owner of BKK and has now claimed 100% ownership of the company.
Rivals Unite
Upon being presented with the findings of the probe, Lee's rival joined forces in voicing strong criticism against the prosecution. The majority UNDP, the successor of President Roh Moo-hyun’s now defunct Uri Party, accused it of having colluded with the GNP frontrunner, calling for an independent reinvestigation of the fraud case. The Labour Democratic Party (LDP) and the Create Korea Party (CKP), along with independent presidential candidate Lee Hoi-chang, who is second in the race with 19% support, also joined in the criticism. They promptly decided to halt their campaigns as a result in favour of staging joint mass rallies in a bid to make their denunciations heard.
Outlook and Implications
Final Obstacle Removed
The outcome of the probe serves to remove the key obstacle for Lee and the conservative GNP to return to power, spelling an end to a decade of liberal rule in Asia’s fourth-largest economy. Lee has faced a number of challenges during his candidacy, which have threatened to split the conservative vote in two. He has been engaged in a bitter battle for the official GNP candidacy with former party chairwoman Park Geun-hye, whom he succeeded in defeating following a close primary in August, raising the spectre of an intra-party split. Given Park's high-levels of support within the party, Lee's inability to win her backing for his campaign for the following three months was considered a significant problem in terms of unifying the conservative forces behind him. This was put further into relief last month when former prime minister and GNP chairman Lee Hoi-chang in a surprise move announced his candidacy on an independent ticket to provide what he has promoted as "a morally superior alternative" to Lee, referring to the fraud charges that had been launched against him. Lee Hoi-chang’s entry into the race once again threatened to split the conservative vote, causing Lee's support ratings to fall from 50% to 40%. Polls cited by Agence France-Presse (AFP) at the time showed that some 25% of Lee Myung-bak's backers would withdraw their support in the event that Lee had been found to have been implicated in the scandal, which would have been likely to tilt the balance in the direction of Lee Hoi-chang. With Lee's clearing in the fraud case, the initial objective of Lee Hoi-chang’s campaign has now been undermined, and he is likely to suffer yet another defeat after having done so at the last presidential elections some five years ago. Lee, meanwhile, further received a boost when his party rival, Park, last week announced that she would join his election campaign just three weeks before the vote in a move that signalled that the two prominent figures had—at least on a public level—transcended intra-party rivalry. All these factors along with Lee's move to team up with independent legislator Chung Mong-joon earlier this week have placed him in an unrivalled position for the 19 December vote. As the support rating of the liberal UNDP presidential candidate, former unification minister Chung Dong-young, has stagnated at 15%, the liberal forces do not seem capable of rallying much more backing despite efforts to join forces with the CKP announced yesterday, with their link to the unpopular president Roh seemingly being a major hindrance (see South Korea: 4 December 2007: Alliance-Building Continues Among Presidential Candidates Ahead of South Korean Polls).
Yet Again on a Conservative Path
With the way having been paved for Lee to emerge victorious in the upcoming presidential election, discounting any extraordinary developments, South Korea seems firmly set on a conservative path for the next five years. Hopes are that country will develop into a more business-friendly entity and shed its legacy of economic nationalism and schizophrenic attitudes to foreign investment. Lee, who is a former top executive at the conglomerate Hyundai, has promised to cut down the number of regulations that are currently imposed on businesses and commit to general efforts to open up to foreign businesses. Known from his previous job as mayor of the capital, Seoul, as "the Bulldozer", he has a reputation of pushing through his policies and has pledged to take measures to improve infrastructure and to hold South Korea's militant labour unions on a short leash. In the realm of foreign policy, his party has moved towards a more centrist line on North Korea and the current administration's engagement policies, but has made it clear that a continuation of such a line will be dependent on the Stalinist state honouring its commitments under the 13 February Nuclear Disarmament Agreement. However, though an expected victory by Lee in the presidential polls is good news for the business sector, South Korea's deep-seated economic nationalism cuts across party lines and is unlikely to completely disappear any time soon.