Antigraft Efforts In South Korea Force Thousands to Resign
IN one of the most sweeping antigraft efforts ever seen in an Asian nation, President Kim Young Sam of South Korea has banned the use of false or borrowed names in financial transactions.
Investors who have used such aliases, many of them politicians, bolted the Seoul stock exchange on Friday, a day after Mr. Kim's pronouncement. The composite price index fell 4.5 percent. But the impact may have been minimized because Kim had given subtle forewarnings of such a move since coming to office six months ago as Korea's first civilian president in three decades. Many investors had already moved their money elsewhere.
Kim's bold step was seen as the centerpiece to a series of reforms designed to reshape society after three decades of military-dominated rule and to liberalize the economy. The false-name system had allowed an estimated $5 billion to $25 billion in securities, real estate, and bank accounts to be used for suspect purposes, such as bribery.
"Without implementing a real-name system, we cannot substantially seal off corruption and irregularities," Kim said on national television. "Black money will disappear. The underground economy will go away."
MANY analysts said the move would eventually draw more investors to the securities market. Deputy Prime Minister Lee Kyung Shik said on Friday that the end of the uncertainty over the real-name system would boost mid- and long-term investment.
The move came a few weeks after Kim introduced a five-year plan to open up South Korea's financial markets, which have been tightly controlled by bureaucrats who often have kept foreign firms at arm's length.
"By 1997, Korea will have firmly established a basic framework for modernizing the financial market to the level of counterparts in the West," Finance Minister Hong Jae Hyong told reporters.
The real-name system was the latest of many anti-corruption moves by Kim. Thousands of Koreans, from military top brass to university officials, have been arrested or forced to resign under suspicion of corruption. And a new ethics-in-government law has started to flush out corrupt civil servants due to a strict requirement that they disclose their personal assets.
About 24,000 top government officials have begun to register their assets, but so far dozens have decided instead to resign. Most of those who resigned worked in tax, prosecution, police, and customs offices. A government survey found that many small and medium businesses now have to pay fewer bribes to officials.
To enforce the new real-name system, Kim set out severe penalties. "A strong democracy cannot flower without real name transactions," Kim said. He said collusion between big business and politicians can only be stopped by an open, honest financial system. The new system will make it easier to collect taxes and prevent political kickbacks and payoffs.
To register a false name is punishable by up to a year in prison. Those stock holders or bank account holders who fail to identify themselves within two months will have 60 percent of their funds confiscated. Anyone who withdraws large sums or sends more than $3,000 overseas will be investigated by tax officials.
But Kim said that any investigation will be for tax purposes only, not to probe an individual's possible involvement in corruption. To prevent false-name funds from going into the property market, the government will review all real estate deals over the next three months.
"Without settling this system, we cannot bring genuine economic justice to this country," the president said. The real-name system had been proposed by presidents since 1982 but never implemented due to strong political resistance. It was first allowed in the early 1960s when South Korea wanted to entice as much money into development as possible.