The Chaebol Returns To The Presidency 1967 [EN]: Chapter 107

107. Korea-Japan FTA

Government Complex.

The Minister of Trade and Industry hosted a meeting with representatives from various industries, attended by relevant government officials.

They gathered to discuss the draft Korea-Japan FTA [Free Trade Agreement] negotiation plan that had already been distributed and to gather feedback.

A rice farmer representative, his face tanned by the sun, took the microphone and said,

“You know, I’ve tried that Japanese ‘Koshihikari’ rice. My goodness, it looks so shiny and almost oily, and when you taste it, it’s sweet. I finished a whole bowl without kimchi! If that kind of Japanese rice gets imported, who’s going to eat our Tongil rice? It’ll end up as dog food. All the farmers will have to abandon their fields and move to the city. Surely, you didn’t create the basic income program for *this*, did you?”

The Minister of Agriculture responded,

“We are currently developing a variety that tastes just as good as Koshihikari rice.”

“Can we plant that seed next year?”

“Well, it will take at least three years, if not longer.”

“See? What are we supposed to eat if we stop farming for four years? The fields will be overrun with weeds. What are we supposed to believe in and open up for? Are we just supposed to dig for oil like some grub worm?”

“……”

A representative from the automotive industry spoke.

“I test-drove a Japanese Toyota. It’s expensive, but quiet, fuel-efficient, and comfortable. Their technology is superior. If tariffs are lowered, the middle class and above will obviously buy Japanese cars. The automotive industry will face some very tough times.”

The Commissioner of the Korea Industrial Advancement Administration replied,

“That’s why we plan to gradually open up the industrial sector over three years, starting in three years. If we don’t succeed in localizing products with quality *better* than Japanese products within six years, we will lose the market to Japanese cars.”

“Six years is not enough. We need ten years, Commissioner.”

“Representatives from the automotive, agricultural machinery, construction machinery, and machine tool industries, listen carefully! Isn’t the reality that you easily make money by buying Japanese parts, assembling them, and adding a markup, rather than investing in technology and increasing localization rates?”

“……”

“There are many companies where R&D expenses are less than 3% of sales. In Japan, the average is over 10%. Why aren’t you investing more in R&D?”

“……”

“The problem isn’t the time frame, is it? It’s the lack of will.”

“……”

“I think six years is enough. In six years, either adapt and become world-class, or fail. Give it your all.”

“……”

This time, a representative from a financial company spoke.

“The yen’s economy is dozens of times larger than the won’s and is even called the key currency of Asia. One large Japanese bank could acquire all domestic banks. I don’t understand why we are opening up first.”

The Vice Minister of Economy and Finance replied,

“The value of the yen has plummeted due to the current oil shock. Thanks to becoming an oil-producing country, the won is stronger than ever. Isn’t this the best opportunity to open up the financial sector?”

“……”

The four years when oil prices peaked were an opportunity for the won.

That’s why they were opening up early without delaying the timing.

The Vice Minister was firm.

“The good old days of sitting comfortably and playing with money from the common people and businesses are over. Develop innovative financial products and actively seek investment opportunities. Merge small and medium-sized banks to increase your size. You must abandon the idea of maintaining the status quo. Now is the era of opening up!”

“……”

“Maintain your shareholdings carefully and be cautious about having your management rights taken over by Japanese financial companies.”

In that way, the government met with representatives from each industry several times, listened to opinions, and held discussions to consolidate public opinion.

The reason for hurrying to open up to Japan early was to stimulate localization and quality improvement in preparation for the main event: the FTA with the United States.

As liquidity became sufficient with oil money, more and more companies were trying to make money through finance by providing high-interest loans rather than developing technology.

Even if R&D expenses were sufficiently supported, it was useless if there was no motivation.

To prevent large corporations from entering the financial industry and to improve the expertise in their respective fields, the only option was to compete with higher quality foreign products.

*

Japanese Ministry of Trade and Industry.

“Korea is so proactive in the FTA [Free Trade Agreement]. They are too confident just because they have some oil.”

Japan, which started its industrial modernization drive decades earlier than Korea, believed that it was superior to Korea in all aspects of commerce and industry.

“Minister, they are probably trying to import Japanese products wholesale with their overflowing dollars, with low tariffs.”

“If Korea spends the oil money they earned from selling oil on buying our products, just like nouveau riches shopping wildly in department stores, that would be an ideal scenario. A Korean bonanza will occur.”

“That’s right. Japanese products are world-class, so once they use them, they will become addicted to consumption.”

“Now, let’s examine the conditions presented by Korea.”

– The primary industry, such as agriculture, forestry, and livestock, is excluded from the Korea-Japan FTA [Free Trade Agreement].

This was a measure to protect the Korean rural areas, which still mainly focus on rice farming.

“This is the same for Japan. The survival of rural areas is at stake, so we are taking special price support policies. Let’s exclude it from opening up.”

– For manufactured goods, the current tariff rate will be gradually lowered over five years to ‘domestic price +10%.’

“Who would use that terrible Korean product if it’s a 10% premium for Japanese products?”

“Hahaha, even +30% is competitive. We should tell them to buy stocks in TV and radio companies right away.”

“Machinery, automobiles, and motorcycles are also absolutely superior.”

– Open up culture, tourism, and finance first.

“It seems they are planning to invest oil dollars in Japan. Eventually, the dollars will gather in Japan, hahaha!”

– Education, medical care, and processed foods will be opened up after three years.

Japan, having reviewed the plan presented by Korea, was confident.

*

Seoul Chamber of Commerce and Industry.

Working-level officials related to Korea-Japan trade were adjusting the FTA clauses.

The Japanese representative said,

“Non-opening sectors will be the primary industry, immediate opening will be culture, tourism, and finance, opening after three years will be education, medical care, and processed foods, automobiles, and five-year phased opening will be manufactured goods such as machinery and electronics.”

Korea also agreed.

Soon after, the trade ministers of both countries signed.

The Korea-Japan FTA [Free Trade Agreement], which would take effect in six months, was announced.

Domestic companies, with their survival at stake, became tense again and accelerated research and development.

*

Presidential Office.

The President visited and received a report from President Jung on the investment status.

After listening to the report, the President handed over a piece of paper.

The paper contained a handwritten list of Japanese companies.

President Jung asked,

“What are these companies? They are leading Japanese conglomerates.”

“They are companies that represent the Japanese industry. This list is the 15 Japanese companies that our National Wealth Fund should buy.”

Toyota (automobiles), SMC (pneumatic control devices), Komatsu Manufacturing (construction machinery and machine tools), Sony (electronics and games), Nintendo (games), Japan Airlines (JAL), Canon (cameras and optical machinery), Shin-Etsu Chemical (chemicals, oil refining), Yamaha (musical instruments), NTT (Nippon Telegraph and Telephone Corporation), Secom (security), Lotte and Kirin (food), Mitsui Sumitomo Trust Bank (Japan’s largest trust bank and the largest asset management company in Japan and Asia based on total assets under management (AUM))….

“Buy?”

“The reality is that our heavy and chemical industries, except for steel, are behind Japan. We need to merge with and acquire Japanese companies, Koreanize them, and transfer technology by partnering with Korean companies. Besides, Japanese stock prices are a mess these days, so we can buy them right away.”

“Ah! You’re buying Japanese companies outright!”

“That’s right. State-owned companies like Japan Airlines (JAL) cannot be acquired, so buy as many shares as possible in the stock market, and acquire emerging industries like Sony and Nintendo, which are still in their early stages of growth and have small market capitalizations. The money earned in Korea must be recovered by our National Wealth Fund.”

“I understand what you mean.”

“Now, do you understand why I immediately opened up the financial sector?”

“Of course. You had a plan.”

“Hahaha, a businessman would never do something that loses money, would he?”

“That’s right! You’re right, Your Excellency!”

“President Jung has something to do before the opening.”

“What is it?”

“Besides the National Wealth Fund, President Jung needs to create a private asset management fund.”

“A fund?”

“The National Wealth Fund is based on transparency in its operation, so there are limitations in focusing on public interest and stability in investment destinations. However, the government cannot keep up with the profitability of private businesses. So, we need another private investment fund that maximizes profitability.”

“I see your point.”

“President Jung, establish a private asset management company that is not related to Hyunse Group.”

As Hyunse affiliates got on track and pre-orders increased, money began to accumulate in President Jung’s pocket.

There were no difficulties in establishing it.

“I understand. I don’t know much about finance, but I fully trust Your Excellency’s foresight.”

“I’ve already named it.”

“Ah, already?”

“How about Tiger Fund?”

“It’s intense! But why did you name it in English? There are many good Korean names….”

“We will advance to the United States in the future. The goal is a global fund.”

This Tiger Fund was modeled after ‘BlackRock,’ the world’s largest asset management company during Chairman Wang’s time.

At that time, Chairman Wang had studied BlackRock.

“Without a factory or a single worker sweating and shoveling, they rake in billions of dollars a year?”

He was amazed by the power of finance and investment.

He even felt foolish for sticking to digging in the ground and smokestack industries.

He was trying to realize the financial investment business he had been planning through the National Wealth Fund and the Tiger Fund.

The President said,

“We will indirectly invest 40% of the total amount of the National Wealth Fund by subscribing to the Tiger Fund’s fund products. The National Wealth Fund will invest in stability because it is a public enterprise, and the Tiger Fund will be responsible for aggressive profitability. The size of the Tiger Fund will grow significantly.”

“The Tiger Fund will become the second National Wealth Fund.”

“Another reason for establishing the Tiger Fund is to check the government.”

“Can a private investment company check the National Wealth Fund?”

“If the regime changes, it will be difficult to prevent the president of a public corporation from being replaced at will and used for populist policies, political funds, or slush funds. If the regime rashly withdraws the Tiger Fund or operates the National Wealth Fund poorly and profitability declines, they will have to take responsibility, so they cannot touch it at will.”

“Ah, the regime’s responsibility is clearly revealed, so it will be a check!”

“That’s right. And if the profitability of the Tiger Fund is confirmed this year, we are considering gradually increasing the Tiger Fund’s investment ratio in the National Wealth Fund to 60%.”

“You see the world differently as a businessman. I understand, Your Excellency!”

The President took a sip of tea and said,

“Investment is buying future value in advance, so I will provide the investment items.”

“I understand. I will give you a generous advisory fee, Your Excellency!”

“Haha, if the President invests for money, it will be a leak of official secrets and insider trading. I’ll just take your… guidance.”

“Ah, if you take money, the political world might find fault with it.”

“There must be no compensation for governing the country.”

President Jung immediately established a global asset management investment company named ‘Tiger Fund.’

The President ordered the government to revise the domestic foreign exchange investment law so that there would be no hindrance to global investment.