EXCLUSIVE: Key investor in Saenuri politician’s Jeju airport project used fake bank documents

The following exclusive exposing fraud connected to an investor in a major development project on Jeju Island is published in Korean in the latest SisaIn Magazine. The following is the English version of the story, unpublished elsewhere. It is not a direct translation of the Korean-language report, and contains additional details and background, but maintains the key elements of the story. — John

사본 - 20140629_161804By John Power and Eunsun Heo of SisaIn Magazine

A key foreign investor in a former Saenuri Party gubernatorial candidate’s project to build a new airport and other infrastructure on Jeju Island has used forged bank documents to claim having billions of dollars at his disposal, according to a months-long investigation.

Leonard Dillon-Kaijuka, one of two principal investors in the project spearheaded by ruling party politician Kim Gyeong-taek, has circulated multiple documents purporting to show bank deposits in his name ranging in amount from 1 billion to 5 billion euros. The “proof of funds” documents, which first appeared on an obscure whistleblower website based abroad, feature the apparent letterhead of Dutch bank ABN Amro Bank and appear to contain the signatures of bank officials. The documents are dated between 2009 and last year.

Dillon-Kaijuka, the president and CEO of Dillon-Kaijuka Associates, confirmed his ownership of the documents when confronted for this story, but claimed they are genuine.

He said the documents had been “hacked” by malicious former employees as part of a “defamation campaign” against him. He also said they had not been used in his business activities in South Korea.

“The documents are private financial banking documents, legal financial banking documents,” he said. “And (it is) very destructive when they are leaked in the public like they have been. Those are private documents. Banks know what they are – bank communications. Those documents enable banks to communicate with each other, privately.”

He further claimed the issuing bank was very “displeased” over the disclosure.

But a press official at ABN Amro Bank earlier told this writer that the documents are forgeries and the bank has no dealings with Dillon-Kaijuka.

“The ABN AMRO documents showed on the website are false and forged documents. Who makes those documents or who is using these documents is unkown (sic) to me,” Jeroen van Maarschalkerweerd, senior press officer at the bank, said via email.

When contacted for a response, Dillon-Kaijuka claimed the bank was protecting his privacy in disavowing the authenticity of the documents.

He further claimed to be a victim of media harassment and a campaign to destroy his business, both of which, he said, have racist motivations. Dillon-Kaijuka is an African-American.

The massive development project on Jeju, which calls for the construction of a new airport, “world trade center” and cultural center, was first reported in Jeju’s local media in February. At the time, Kim, currently the head of the government transition preparation committee for Jeju governor-elect Won Hee-ryong, was vying to be the Saenuri Party nominee for governor in the June 4 elections. Kim, a former vice governor of Jeju, failed to secure the nomination, but fellow Saenuri Party candidate Won went on to win the election.

The conservative politician, who is pursuing the project through his think tank Jeju Future Society Research Institute, signed a memorandum of understanding for the project with Dillon-Kaijuka Assoc. and another firm, GK Holding Group, on February 22, according to local news reports. The MOU stated the two firms were to provide $5 billion for the project, according to the reports.

The reports contained little information on the exact nature, terms and time scale of the development, which still remain largely unclear.

In April, Kim told local media he expected the transfer of the first $50 million in capital to a commercial bank by the end of the month and for a special purpose company to be established for the project in May.

When contacted for clarification last week, Kim told SisaIN the plan is still going ahead but has been delayed.

“We failed to get money by the end of April, therefore we changed our plan. We are going to wait for the money until the end of this month (June),” he said.

In late May, Dillon-Kaijuka told this writer that the official process of seeking approval for the project would begin after a base of operations is established in June.

“We understand that the first process requires that we have a presence there, and with that presence we have a significant cash deposit there, we understand that. And once that happens we begin to take those next steps (for government approval).”

He claimed to have discussed the project with both the U.S. and Korean governments but declined to provide further details. He further claimed not to know the value of the MOU, adding that he has “no idea” where the figure reported in local media came from.

A spokesman for Won, meanwhile, denied the Jeju governor-elect had any knowledge of the project whatsoever, adding that a decision has yet to be made on the construction of a new airport. He said Won has no personal relationship with Kim, and had appointed him to lead his preparation committee as a result of their election rivalry.

“Accordingly, successful candidate Won certainly could not have known about any past issue with Kim,” a statement from his office read.

The documents in question first appeared on a seemingly little-known website called The Whisteblowers. The website, which contains thousands of apparently leaked documents including financial documents and passports, claims to expose irregularities in finance across the world. Its two apparent operators, David Rea and Sanjay Kalpoe, claim to be former independent financial brokers from the U.S. and the Netherlands, respectively. Both individuals are listed as founding partners on the website of an apparent investment and asset management firm called Hammer Wealth Solutions.

Rea said the documents linked to Dillon-Kaijuka were provided by a confidential source in South Korea. This writer was unable to independently make contact with this individual.

Dillon-Kaijuka’s history in business is unclear. He refused to disclose his previous projects or source of his funds, saying only that he has an extensive network of investors.

The American national, who has been operating out of an office in Gangnam in recent weeks, said that he is in Korea to forge business ties with Africa.

“What we’ve promoted is a relationship between Jeju and the island of Zanzibar, which has a similar status as Jeju has here for Korea. And helping facilitate entry of Korean infrastructure and technology delivery to Africa — facilitate the relationship between Jeju and Zanzibar,” he said.

Dillon-Kaijuka Assoc., described on its website as a provider of “investment and development services,” is registered with the state of Illinois as a corporation, but not with the state or federal financial regulatory authorities. Entities that wish to sell stocks to the public generally must be registered with the U.S. Securities Exchange Commission or equivalent state authority, but corporations are not generally required to disclose even the nature of their business. Kaijuka said that his company does not trade in securities.

Along with Dillon-Kaijuka as president, an Alvertis Bell is listed as director of the corporation in state records in Illinois.

Alvertis Bell, aka Al Bell, is the name of one of the most famous figures in Motown, having co-owned Stax Records in the late 60s and early 70s. Bell did not return correspondence seeking to confirm whether he is the same person. Dillon-Kaijuka and Bell are also listed on official records for the incorporation of a company in Arkansas, the famous Bell’s home state, called Southern States Service Corp. in 1979.

Meanwhile, Dillon-Kaijuka Assoc.’s head office, located in downtown Chicago, is a space rented from Regus, a multinational company that provides rooms and phone-answering services to businesses. A Regus employee who answered the phone listed on the firm’s website confirmed that the company has no physical presence at the address. Kaijuka’s home address, as listed on his firm’s incorporation record, has an estimated off-market value of just over $50,000, according to Homes.com.

Song Young-ho, introduced by Kim as the effective manager of the project, said he was aware of allegations against Dillon-Kaijuka but does not believe them to be substantiated.

“We have heard about that rumor that Leonard Dillon-Kaijuka is not a reliable person and we tried to investigate if the rumor is true or not,” said Song. “And we asked him directly. Leonard answered that it was just a kind of slander. And we found that he was not accused of anything at all. We thought, if there was something wrong with him, there would be a record that he was accused or something. But he was not.”

A new airport on Jeju has been a recurring issue at election time, with the current airport predicted to reach full capacity within about a decade, according to a report in Jeju Weekly from 2010.

Both President Park Geun-hye and former President Lee Myung-bak pledged a new airport for the island during their election campaigns.


South Korea Grapples With Implications of Ferry Tragedy

The following article originally appeared in The Diplomat.

In the aftermath of one of its worst-ever maritime disasters, South Korea has found itself grappling with the question of how a modern ferry came to capsize in calm waters with the loss of 302 passengers, most of them high school students.

Alongside the expected grief and anger, the sinking of the Sewol on April 16 has also fuelled introspection about arguably the crowning achievement of the country’s modern history: its rapid rise from poverty to prosperity.

From the 1960s up until the 1980s, successive dictatorial governments implemented massive infrastructure projects and ambitious manufacturing targets at lightning speed. There followed an almost uninterrupted period of unprecedented economic growth. The “ppalli ppalli” (hurry, hurry) mentality exemplified by former dictator Park Chung-hee is considered to have been an indispensable ingredient in the “Miracle on the Han.”

But in the wake of the tragedy, newspaper editorials and commentators have asked if one cost of such a dramatic economic rise has been a society with a pervasive disregard for public safety.

In the Yeongnam Ilbo, a regional newspaper based in the country’s fourth-largest city Daegu, one column described the Sewol disaster as “the worst sort of outrageous drama” created by a culture of “daechung daechung,” translated loosely as “cutting corners.”

Yoon Cheol-hee, the paper’s social affairs editor, wrote that the shame and regret felt over the tragedy must never be forgotten so that South Korea can “break free from being an underdeveloped country in terms of safety.”

An editorial for the Jeju Ilbo, headquartered on the island the ill-fated ferry had been traveling to, asked if the “ppalli ppalli” mentality was to blame for the disaster, warning that economic development alone cannot create an “advanced country.”

“The value we had was the value of efficiency: given the time, and given the cost, and how fast and how cost-efficiently you achieve the goal. So that… was compelling energy we had, which was used to promote economic growth,” Moon M. Jae, a professor at the Department of Public Administration at Yonsei University in Seoul, told The Diplomat. “I think the downside to that mode is actually the effectiveness in safety and those values that were a little bit lacking.”

In a strongly nationalistic country where tragedy and celebration alike are often seen to reflect the entire nation, the latest disaster has repeatedly been discussed in the same breath as previous calamities, many of them non-maritime, such as the collapse of a shopping mall in 1995 and a subway arson attack in 2003, both of which killed hundreds. As appears to be the case with the Sewol, incompetence and malpractice were features of both disasters.

Kim Chan-o, a professor at the Department of Safety Engineering at Seoul National University of Science and Technology, is one of many who believe the country’s rapid development has had negative consequences for safety right across society.

“As well as in the areas of construction and transportation, in all the other social areas, the negative effect exists now,” said Kim.

“Although the safety standards have many problems, I think the biggest problem is the safety awareness of the people, and that officials do not keep safety standards.”

South Korea lags other developed countries in a number of areas of public safety, according to statistics. The country had the highest death rate for pedestrians in the Organization for Economic Cooperation and Development in 2012, and the highest number of road fatalities per 1 billion vehiclekilometers in the previous year.

In its 2014 report on crime and safety in South Korea, the Overseas Security Advisory Council under the U.S. Department of State advised that, “vehicles frequently do not yield to pedestrians in marked crosswalks,” and that “it is common for drivers to watch live TV through their GPS devices via DMB (digital multimedia broadcasting) technology, a contributing factor in many accidents.”

Periodic work-related deaths at big name conglomerates such as Samsung, meanwhile, have been a recurrent source of controversy. In 2012, the country registered 1,134 fatal injuries in the workplace, not including 730 fatal illnesses. Differences in classification make comparisons across countries difficult, but the U.S., which has a population some six times greater than South Korea, had just 4,383 fatal workplace injuries in the same year.

And in the most recent blow to confidence in the country’s transport network, the government just last week announced that it would sanction Asiana Airlines over an incident in which its pilots continued a flight to Saipan despite engine trouble.

In the case of the Sewol, the list of alleged safety failures is long: the captain and crew failed to properly evacuate the ship; most of the life boats were not operational; and the vessel had been illegally modified and dangerously overloaded.

All 15 members of the crew involved in navigating the vessel, including the captain, have been arrested on various charges related to neglecting their duties. The operator of the ferry, Chonghaejin Marine Co., and its sister firms have come under investigation for alleged financial irregularities. Meanwhile, the Korean Register of Shipping and Korea Shipping Association, two of the main regulatory bodies for maritime safety, are accused of accepting bribes to overlook safety lapses.

“Although many people know what to do for maritime safety, they have not conducted it by themselves because of financial burden and bad habits,” said Hong Seung-kweon, an expert in maritime safety at Korea National University of Transportation in Chungju, about 150 km from Seoul.

The authorities’ response to the disaster has also generated shame and anger, aggravated further by the release Monday of footage of the initial rescue effort by the Coast Guard. In the video, a Coast Guard vessel is shown keeping its distance from the ship, which took nearly two hours to sink completely beneath the sea apart from a small section of the keel. Once onboard, rescue personal failed to enter the vessel to locate survivors.  Responding to the criticism, Coast Guards officials claimed that the severe listing of the ship and safety concerns for its personnel made it impossible to rescue a greater number of passengers despite their best efforts. Just 174 of the more 450 people onboard escaped the ship alive.

Moon, the Yonsei University professor, said the rescue operation, as well as the accident itself, illustrated a general problem with adhering to what on paper are often decent standards.

“Timely action wasn’t taken, and it is not because we didn’t have a disaster management or crisis management system – that system was there – but it didn’t play (out) a way we wanted to see,” he said.

Not all observers, however, agree that problems in maritime safety can be traced to the country’s fast accession to the club of rich nations or any related mentality.

“I can’t agree with their opinion. I think that the rapid economic development could not have led to weak safety standards,” said Hong. “I think that they are making excuses.”

A bigger threat to safety at sea, he said, has been old-fashioned greed.

“A noticeable threat to maritime safety is not to follow the safety rules for economic benefit.”

[The Korea Herald] Is self-defense properly recognized?

By John Power

The Supreme Court in Seocho-dong, southern Seoul (The Korea Herald)

As an idea, the right to defend oneself from attack would appear uncontroversial. But in its framing in law and interpretation by legal authorities, the concept has at times been highly contentious, both here and abroad.

One of the most controversial cases involving self-defense in Korean legal history occurred in 1992, when a man who had habitually raped his step-daughter was killed by her boyfriend. The Supreme Court accepted that there had been a “threat of imminent harm” required for a plea of self-defense, but not that the response had been proportionate. The two were found guilty of murder.

Basic principles

“In self-defense, there are three basic principles or requirements involved: imminent threat of harm to the victim or a third party, proportionality, and intent to defend,” Kang Ju-won, a lawyer and member of the Korean Bar Association and the Seoul Bar Association, told Voice. “Here, ‘Imminent threat of harm’ refers to a situation where the threat is not a future threat; ‘proportionality’ refers to an amount of force that is reasonably necessary to prevent the present harm; and ‘intent to defend’ refers to the victim’s intent to use force as a means to defend as opposed to a means of attack.”

Korean courts have often been hesitant in recognizing pleas of self-defense, particularly in cases of mutual violence, such as fights.

“Korean courts have been passive in recognizing the principle of self-defense. Even though defendants contend justification for their crimes in quite many cases, courts precisely study the requirements of self-defense,” said Lee Ji-young, a public defender at the Anyang branch of Suwon District Court.

One reason why justifications of self-defense are rarely invoked successfully, according to Lee, is that the law places the burden of proof on the defendant to prove he was acting to defend himself.

“(He will need) defendant-friendly witnesses and recorded videos, etc., to prove his innocence or self-defense. In reality, defendants are not as skillful at collecting favorable evidence as the prosecution so they lose,” said Lee.

There are signs, however, that prosecutors and courts have been edging toward a more liberal interpretation of the concept. In October, a Prosecution-Citizen Committee decided not to press charges against a woman who bit off part of her would-be rapist’s tongue, recognizing her action to have been a legitimate act of self-defense. The citizens’ committee, introduced in 2010 to reflect public opinion in prosecutorial decisions, is roughly analogous to the grand jury system in the U.S.

“It has often happened that governmental power has not rescued citizens from random crimes … Therefore, it is cautiously predicted that the prosecution has been gradually (more) in favor of self-defense from a point of view of self-help,” said Lee.

Police guidelines

The Korean National Police Agency also recently revised its guidelines for identifying instances of self-defense. The agency outlines eight criteria in determining whether a case meets the requirements: The act must have been intended to defend; the defender must not have started the violence; The act of defending cannot be more violent than the attack itself; a deadly weapon was not used; further violence cannot be used after the attack; the defender cannot inflict more harm than the attacker; the act must not result in harm requiring more than three weeks of hospitalization.

“Although these factors may seem somewhat strict, they are usually taken into account as a whole,” said Kang. “Indeed, many view the new guidelines as an attempt to introduce a more lenient stance in acknowledging the argument of self-defense.”

Regardless, the principle’s application has shown marked differences from other jurisdictions. The killing of teenager Trayvon Martin in February drew attention to Florida’s stand your ground law, which permits the use of lethal force in cases where it “is necessary to prevent imminent death or great bodily harm to himself or herself or another or to prevent the imminent commission of a forcible felony.” Police controversially did not initially arrest the shooter, George Zimmerman, possibly using the rationale of the law. Zimmerman was eventually charged with second-degree murder by a special state prosecutor six weeks after the killing, following a massive public outcry.

Legal critics of Florida’s law and similar laws in other U.S. states argue that the provisions give free rein to people to kill based on perceived danger, whether or not the danger is real. Korean law, which, unlike American stand your ground laws, does not outline a justification for “deadly force,” permits only force proportionate with the aim of “repelling” an attacker. This standard also applies in using force against an intruder into your home, whereas many U.S. states have “castle” statutes that apply the stand your ground principle to property. Florida was the first state to expand the long-recognized castle doctrine to outside one’s property, presaging similar action by at least 25 other states.

“The amount of force entitled would differ depending on whether the intruder was carrying a deadly weapon, the intruder’s manner of breaking in, the type of threat used, or the number intruders involved,” said Kang. “In case of break-ins, the criteria of ‘imminent harm’ or ‘intent to defend’ would not be such a big issue. The key issue would be ‘proportionality.’ In other words, was the force used by the defender reasonably necessary, from an objective point of view, in ‘repelling’ the intruder?”

Legitimate self-defense

While Kang pointed out that Korea has relatively low violent crime compared to some other jurisdictions, he said that an overly restrictive conception of self-defense could inhibit victims of violence from legitimately defending themselves.

“We need to keep in mind that Korea is generally regarded to be one of the safer parts of the world with a relatively low number of violent crimes,” said Kang. “Still, I believe a rigid, mechanical interpretation of the law runs the risk of psychologically deterring people from resorting to force as a legitimate means of defending themselves.”

By John Power (john.power@heraldcorp.com)

[The Korea Herald] How can Korea end corruption?

By John Power

South Korea, by many criteria, increasingly fits the mold of an advanced nation. But, despite the country’s growing role in international affairs and its status as the world’s 13th-biggest economy, one black spot, at least, challenges that definition: pervasive corruption.

Korea’s public sector ranked just 43rd out of 182 countries in last year’s Transparency International Corruption Perceptions Index. The ranking was a drop of four places from the previous year. Meanwhile, a survey released by the Anti-Corruption and Civil Rights Commission last month found that 40 percent of businesspeople deemed Korean society to be corrupt.

This year alone, several of President Lee Myung-bak’s aides and family members, the ex-head of the Korea Communications Commission and the floor leader of the main opposition party have all been implicated in corruption scandals. The private sector has fared little better: Taekwang Group and Hanwa Group’s respective chairmen were handed down prison sentences for separate instances of embezzlement. At the lower levels of the economy, the Financial Supervisory Service sanctioned some 450 financial company employees for misconduct in the first nine months of the year.

Rotten nation

In a withering assessment of Korean society, the president, himself currently embroiled in a scandal over a now-abandoned retirement home project, last year claimed that “the entire nation is rotten.”

Kim Sung-soo, the executive director of Transparency International Korea, told The Korea Herald that regulations and punishment of corruption were insufficient, largely because of an overly cozy relationship between the government and private business.

“Korea’s anti-corruption policy and regulations are not strong enough, especially for the private sector, to combat corruption. Presumably there is strong lobbying or even bribery from the private sector to the public sector,” said Kim, who believes that a change of power in December’s presidential election would be a positive step forward as Korea’s corruption perceptions ranking has dropped on the current government’s watch. “Money talks too much in Korea.”

All three main presidential candidates, Park Geun-hye of the Saenuri Party, Moon Jae-in of the Democratic United Party and independent Ahn Cheol-soo, have placed heavy emphasis on cleaning up the political and business worlds during their campaigns.

Korea’s rapid development in the latter half of the 20th century came on the back of heavy state involvement in the economy, with crony capitalism a persistent feature of previous dictatorial governments. Economic growth was in the past seen as a greater priority than transparency and the rule of law, said Park Gae-ok, director-general of the Anti-Corruption Bureau of the ACRC.

“In the case of Korea, illegalities and irregularities were tolerated in the course of rapid economic growth and in connection with nepotism and paternalism characteristic of Korean society,” said Park. “It takes a very long time to remedy such problems, and detection and punishment are not a fundamental solution.”


Illegality is just one factor in government-business relations with an influence on the scale of corruption. Much of the political realm’s authority to shield the powerful from the consequences of their crimes is enshrined in law. The current and former presidents’ pardoning of numerous political and business figures has long been a source of public antipathy.

Kim Pan-suk, dean of the College of Government and Business at Yonsei University, said that the president was “critical” to efforts to fight corruption.

“In my view, political will is the most important factor in reducing corruption,” said Kim. “If you go back to the Kim Dae-jung regime, he was a very good president and had a good vision to reduce corruption so he promulgated many rules and regulations.”

The Kim Dae-jung administration introduced the Anti-Corruption Act in 2001, and established the Korea Independent Commission Against Corruption the following year. The Lee administration merged the KICAC with two other bodies in 2008 to form the ACRC. The most recent legislative move against corruption was the Act on the Protection of Public Interest Whistleblowers, passed last year. As of October, the ACRC had received 1,216 whistle-blower reports, ranging from issues to do with consumer rights to healthy and safety.

The legislation has resulted in a number of significant outcomes in the public interest, according to Park.

“The new whistle-blowing mechanism has since contributed to correcting violations of the public interest and improving relevant laws and systems,” said Park. “For instance, flaws in reinforcement work for the understructure of a railway bridge were corrected, while legal amendments and introduction of new facilities were made to prevent the infection of the hepatitis B virus through blood transfusion.”

Lee Sang-deuk, the elder brother of President Lee Myung-bak, answers reporters’ questions outside the Supreme Prosecutor’s Office in Seoul, where he was questioned on charges of taking bribes in July. (Yonhap News)

Lee Sang-deuk, the elder brother of President Lee Myung-bak, answers reporters’ questions outside the Supreme Prosecutor’s Office in Seoul, where he was questioned on charges of taking bribes in July. (Yonhap News)

Other anti-corruption measures by the ACRC include a corruption impact assessment of proposed legislation, a yearly assessment of corruption in the public sector, and anti-corruption education and training of public employees.

Culture factor

Park said that his organization is also currently working on the passage of the Bill on the Prohibition of Illegal Solicitations and Prevention of Conflicts of Interest of Public Officials, which would rectify the current situation where officials can avoid punishment if it cannot be established that they provided favors in return for a bribe.

“The bill is aimed at prohibiting malpractices in the public sector, as well as providing specific standards of behavior for preventing the interference of private interests in the performance of public officials’ duties. When enacted, the bill is expected to contribute greatly to preventing and deterring corruption in the public sector,” he said.

Politics and business are not the only explanations offered for the scale of corruption ― many also point to a problem of culture.

“Korean culture is Confucian and authoritarian bureaucracy. Also, school and family ties are very important to (personal) circumstances,” said Kim Taek, a professor of police administration at Jungwon University.

We must renew our social mind and Korean officials and nationwide support for the fight against bureaucratic corruption, for transparency and justice. But Korean political groups, especially the president, parliament members and Korean officials, seek private interest and lack common sense and so they encourage in corruption.”

Yonsei University’s Kim said that an overly partisan media that fixates on certain scandals but ignores others for political reasons added to the lack of transparency in Korean society.

“Under such circumstances, if you investigate something, people may suspect some biased evaluation, so I think this situation should be corrected. The media should be fair and broadly supported by the general public and then investigate certain things and they will have the public’s confidence and trust.”

Institutions, however, can only be so responsible for fixing societal problems, according to some experts. The most fundamental change must ultimately come from the public.

“The most fundamental element in fighting corruption is the change in the mindset of people,” said Park. “Increased soundness and transparency in a society helps create an environment that keeps even customary malpractices and minor forms of corruption from taking root.”

[The Korea Herald] How can Korea ensure energy security?

By John Power

An unusually hot summer is raising fears of a repeat of last year’s country-wide blackouts. The Korea Power Exchange last week issued a number of power shortage warnings as scorching weather pushed people to crank up their air conditioners, causing reserve levels to drop below 3 million kilowatts. While Korea’s longest heat wave since 1994 has certainly stretched energy reserves, the country’s energy security challenges go much deeper than unseasonable weather. The world’s ninth-largest energy consumer, Korea imports about 97 percent of its energy sources due to a lack of fossil fuels and uranium needed to run its nuclear power plants. With the grid already stretched thin and high economic expectations for the future, Korea has to be able to rely on a stable and affordable energy supply.

Much of that responsibility falls on Korea Electric Power Company, the country’s main electricity provider. KEPCO assured The Korea Herald that it has measures in place to deal with potential shortages.

Officials at the Korea Power Exchange keep an eye on power levels after a shortage alert earlier this month. (Yonhap News)

“KEPCO has strengthened information sharing with the concerned organizations and established a framework for prompt response to address power supply emergency situations,” the company said in a statement. “To be prepared for low reserve margins, we have increased demand-side management resources and their implementation. Also, we have reviewed our manuals for addressing power supply emergencies and performed various drills.”

Roots of the problem

KEPCO also plans to increase its reserve rate from the current 6-8 percent to 13-20 percent by 2014, which it says will remove the need for emergency conservation measures seen this and the previous summer.

Korea’s energy crunch has been a long time in the making. Past predictions of future energy demand have proved far from accurate. At the same time, above-expectations consumption over the last decade has not been accompanied by any significant expansion of the grid’s capacity.

“In 1999, we expected 2011 consumption to be 351 terawatt-hours but the actual consumption was 455 TWh,” said Roh Dong-seok, a senior research fellow at the Korea Economic Energy Institute. “On the other hand, in 1999 we expected the capacity of our facilities (in 2011) to be 76 gigawatts and the actual was 77 GW, only a marginal difference. The reason why the expectation was quite precise is because it is impossible to build facilities in a short amount of time. Especially something like a nuclear power plant takes about 10 years at least to build.”

With increasing capacity a long term project, encouraging a reduction in consumption remains one of the government’s few immediate options for avoiding shortages. Recently, the government duly asked businesses and households to voluntarily rein in consumption. Low electricity prices, at almost half the OECD average, are seen by many as driving over-consumption. Last year, electricity was sold at less than 88 percent of the optimal price as determined by KEPCO.

“The grand campaign the government has launched this year of saving energy can hardly achieve anything without being accompanied by an actualization (increase) in electricity prices,” said Roh.

“The only (other) way to secure the supply at the moment is to enforce strong consumption monitoring.”

In the long term, Korea simply needs a greater energy supply. One essential step toward this, according to University of Seoul international relations professor Ahn Se-hyun, is to secure resources overseas.

“From Korea’s standpoint, Russian natural gas and shale gas access on the North American continent are the most important tasks to deal with, along with African and Australian resources,” said Ahn.

The Ministry of Foreign Affairs and Trade last year allocated about $9 billion for the purpose of securing natural resources in developing countries. Such a strategy brings with it the potential for controversy. U.S. Secretary of State Hilary Clinton last summer warned against a “new colonialism” in Africa, by which rich countries strip poor countries of their resources with little regard for the wellbeing of the local inhabitants.

Regional rivals

While this is potentially a concern when it comes to Africa, Ahn says, Seoul has done a good job of avoiding a vulture-like image overseas.

“Specifically, the Republic of Korea put more emphasis on helping out local communities by using more of a local labor force and eventually creating the Seoul consensus, which is distinct from Beijing or Washington Consensus. As an example, providing medical social care services could be most tempting for the ROK considering the high quality of human resources within the ROK.

“Not only in Africa, but also in Central Asia, the ROK is using a strong network grid and historical ties and ethnic Koreans to avoid the neocolonial approach, which China (has) failed to do.”

The sentiment fostered in poorer nations is just one consideration in exploiting resources abroad. Another is how the behemoths of the region will affect Seoul’s energy strategy. Negotiating regional rivalries and security issues will be a crucial task, Ahn said.

“Russia is a very important energy partner for both Korea and Russia, especially regarding massive natural gas in the Siberian region and a transfer mechanism, possibly a pipeline scheme.

“Therefore, in the next few decades, an energy alliance among three countries, possibly four countries including North Korea, is realistic and essential. However, on the African continent, ROK and China will turn out to be strong competitors in the next few decades. Also, as far as energy aid to the North (goes), I would expect severe energy competition or conflict between ROK and China in the next several years.”

But fossil fuels are no less finite overseas, and KEPCO has committed itself to investment and research in renewable energy. Among its focuses are wind energy, photovoltaics, thermal energy and integrated gasification combined cycle, a technology used to turn carbon fuels into gas. KEPCO formed KEPCO-Uhde Inc. with German engineering company Uhde to foster this latter technology in July last year.

Questions about renewables

“Currently a feasibility study is being performed on building a photovoltaic energy station using idle land at Shin-Namwon Substation,” KEPCO said. “Most notably, KEPCO’s new head office in Naju, where it is to be relocated, will be Korea’s number one energy-conserving building as it uses various renewable energy sources such as building integrated photovoltaics and thermal energy.”

Yet, many remain skeptical of the economic viability of such renewable energy sources. Roh said that renewable energy can cost up to six times as much as nuclear energy, which currently produces more than 31 percent of the country’s energy needs. The government aims to raise that share to almost 50 percent by 2024.

“Many who support the use of renewable energy ― including civic organizations ― think if we take into account the trend of decreasing prices of renewable energy, by 2020, we can reach grid parity (the point at which renewable energy is as cheap as fossil fuels),” he said. “By and large, I agree that the cost of renewable energy will decrease but I doubt a dramatic decrease will be possible like they argue.”

KEPCO, whose subsidiary Korea Hydro & Nuclear Power Corporation handles nuclear energy operations in the country, is betting otherwise.

“Renewable energy is presently increasing mostly among advanced countries, but after 2020, when renewable energy sources are expected to reach grid parity, the renewable energy market is forecast to exponentially grow,” the company said. “KEPCO is also looking into the future in this area and is seeking to develop a specialized business model and establish a business fleet with Korean companies to enter the global market.”

[The Korea Herald] Has populism taken over politics?

Ahead of the 2012 National Assembly elections, candidates reliably made big promises to the electorate. Accordingly, related concerns about political populism became a major topic of debate within and outside of the political sphere. — John.

By John Power

It’s a charge both the ruling and opposition parties have faced since election season began: Unrealistic campaign promises, with little regard for how to pay for them or their long-term consequences, point to one thing ― populism.

Last month, a group of business organizations including the Federation of Korean Industries released a joint statement cautioning against reckless pledges at election time.

“Campaign pledges should be tailored to reflect the current economic environment facing the country and the government’s fiscal capabilities,” the statement warned.

The Saenuri Party’s list of pledges for the April 11 election includes additional spending of 89 trillion won ($79 billion) on welfare, health and education over the next five years. The opposition Democratic United Party is pledging 164.7 trillion won in similar spending over the same time frame.

A recent “conservative” estimate by the Finance Ministry put the cost of implementing all the two main parties’ pledges at 268 trillion won, considerably above either party’s own estimate.

Other pledges accused of being populist include both parties’ commitment to build an airport in the southeast of the country, the DUP’s vow to abandon nuclear energy and the Saenuri Party’s to quadruple the monthly wage given to military conscripts.

Both the Saenuri Party, headed by Park Geun-hye (upper photo), and the Democratic United Party, headed by Han Myeong-sook (bottom), have been accused of populism in their election promises. (The Korea Herald)

Challenging such perceived electoral pandering with gusto, the Maeil Business, a vernacular daily, even published the so-called Maekyung Populism Index as part of its “monitoring mission against populist policies.”

International attention, too, has honed in on the issue, with a March 7 Wall Street Journal editorial praising Finance Minister Bahk Jae-wan for having “the guts to stand up to such economic populism.”

Unsurprisingly, the political establishment has rejected the charges.

“See what the Lee (Myung-bak) government has done as it attacks ‘populism’ on one hand and calls for financial stability on the other? The government and the ruling party cut taxes by around 100 trillion won in the past five years for the rich, spent 30 trillion won on the Four River Project. It is nonsense that they are supporting financial stability,” Park Joo-sun, a lawmaker from the Democratic United Party, told Voice.

Kim Jong-in, a member of the Saenuri Party’s leadership council, in February similarly hit back, calling the Finance Ministry’s intervention in the debate inappropriate and “unprecedented.”

There is a difference, politicians may argue, between reckless populism and listening to the will of the people. Accordingly, what all parties have stressed in this election cycle is a desire for “new” politics that reconnects with the public.

Karl Friedhoff, a program officer at the Asan Institute of Policy Studies, said that the timing of the sudden drive to ramp up spending inevitably leaves parties open to accusations of populism.

“The timing of it all is the real give away. Nothing in society has changed all that drastically. There were always the poor. There were always the rich. And every year, for the past decade at least, Korea has reached a new level of affluence. So, why this push all of a sudden?” he said.

But pledges to, for example, increase welfare spending shouldn’t automatically be labeled populist, especially, Friedhoff said, as they reflect very real public demand.

“Korea has a weak safety net, that is not in question. Moreover, according to the Asan Institute’s survey, the issue of redistribution has been the second most important, after job creation, for the past twelve months. The issue of redistribution and the economy are clearly linked. There are three measurements for the economy. The first is absolute … The second is relative … The final way is the one less talked about: perceived growth.

“So, people hear that the Korean economy is growing. But when we ask them in our survey about how they feel about their own personal economic well-being, a majority perceive their own economic well-being to be getting worse. And that has been true since we started the poll in January 2011.”

Cho Heung-seek, a politician science professor at Seoul National University, said that populism in Korea politics is nothing new, but is characterized by some distinctly local features.

“I don’t think populism has become a defining feature of this election campaign, rather, I think populism has always existed at election time in Korea … I think Korean politics tends to utilize characteristics that Korean people are rich in emotion,” said Cho.

Korean politics’ entrenched regionalism, too, plays a part, especially when it comes to grand projects such as the plan to build a new airport in the southeast of the country.

“Although Korean politics’ regionalism has gone down in recent years, I think regionalism is still the problem for encouraging big projects in certain areas for political gain,” said Cho.

The revived airport plan, previously an election pledge of President Lee Myung-bak before it was scrapped on economic feasibility grounds in March last year, has an estimated price tag of at least 9.8. trillion won. At present, 11 out of the country’s 14 local airports are loss-makers.

But if populist rhetoric is nothing new, Moon Seung-sook, a Korean-born-and-raised sociology professor at Vassar University in New York State, sees this election as noteworthy for how the debate on populism has been framed.

“The current national assembly election is very much affected by the resignation of Oh Se-hoon, former mayor of Seoul, who ignited the showdown between the ruling party and the opposition party concerning the free school lunch program. The debate was framed as a contest between irresponsible populism and practical considerations by Oh,” said Moon.

Moon, however, doesn’t see populist tendencies as being especially representative of Korean politics, so much as reflecting the failures of representative democracy generally.

“I don’t think Korean politics is particularly susceptible to populism. I see it as a symptom of mass democracy which has failed to deliver democracy and social justice at a deeper and more substantial level. That is, populism is a rhetorical substitute for the real,” she said.

She adds, however, that Koreans may be more sensitive to disparities in wealth than citizens of other countries, giving impetus to party plans to raise taxes on the wealthy and curb chaebol power.

“I see such emphasis as an example of populism in contemporary mass democracy, which we also see a lot here in U.S. politics. If I look hard into the Korean culture and history, Koreans may be more sensitive to inequality and status differences ― than Americans for example ― because of relatively strong nationalism and belief in homogenous ethnicity ― especially among older generations.”

During the campaign for last October’s Seoul mayoral by-election, conservative candidate Na Kyung-won of the Grand National Party, the former name of the Saenuri Party, faced criticism over what were later revealed to be false accusations of lavish spending on skin care. President Lee came in for similarly-themed attacks when his granddaughter was photographed wearing an expensive Moncler band jacket during a family outing with the president.

Widespread dissatisfaction with established politics has surely been fuel for the populist impulse. But such antipathy could find an outlet divorced from party politics entirely, believes Friedhoff. He sees youth disillusionment in particular as potentially transformative ― even more so in the event of a conservative electoral victory.

“Their dissatisfaction is real and it doesn’t really have any outlet. Where that energy will be directed is difficult to say. But, I think if the (Saenuri Party) is somehow able to win a narrow majority, the disappointment and frustration of the youth is going to be more than anyone expected. And again, how that frustration will express itself is anyone’s guess. … It could be in an outward form, i.e. protests. Or it could be a more internal movement, where those in their twenties just see no way to have their voice heard, and effectively give up on the democratic process.”

[The Korea Herald] Can Korea break the two-party mold?

Numerous smaller political parties have come and gone in Korea, which in recent years has tended toward what is essentially a two-party system. Ahead of the 2012 National Assembly elections, a number of minor players, including the then new Korea Vision Party, hoped to make their mark on the political landscape. The results of the election, however, mostly reinforced the status quo, with the conservative Saenuri Party retaining its majority, and the liberal Democratic Party taking most of the remaining seats. The remaining handful went to the left-wing Unified Progressive Party and Progressive Justice Party and a small number of independents.  — John.

By John Power

Korea, like so many democracies, broadly fits the definition of a two-party system made up of liberal and conservative camps.

Yet its two-party mold remains young and fragile compared to countries such as the U.S., where power has passed between the same two parties without interruption for more than 150 years. Korean parties rarely last more than a few years before a name change, merger or outright dissolution, while the National Assembly typically accommodates a number of small parties aside from the big two.

In the country’s first free presidential election in 1987, not two, but three major parties vied for Korean politics’ top job. The conservative Democratic Justice Party’s Roh Tae-woo clinched victory, benefiting from a spilt in the liberal vote between the Reunification Democratic Party’s Kim Young-sam and Party for Peace and Democracy’s Kim Dae-jung. Kim Jong-pil, the founder of the Korean Central Intelligence Agency, the precursor to the National Intelligence Service, came a distant fourth on the conservative opposition New Democratic Republican Party ticket. For the next election in 1992, Kim Young-sam merged his party with Roh’s ruling bloc, creating a clearer two-party spilt and ultimately winning Kim the Blue House. Parliamentary elections, since 2000 in particular, have tended toward reinforcing the presence of two major parties and a number of bit players.

Park Se-il speaks at a press conference for the recently formed Korea Vision Party last month. Park’s party hopes to shake up the two-party status quo. (Yonhap News)

“The first reason is the political parties are largely based on regionalism, Jeolla regionalism and Honam regionalism,” Kyung Hee University politics professor Yun Seong-yi told Voice.

“So unless the regionalism breaks down, there is not much chance to have a multi-party system in Korea. We also have a sharp competition or clash between the liberals and the conservatives nowadays. People want to have two distinctive ideological parties.”

The election system, which sees 246 out of 299 seats chosen in single seat constituencies favoring bigger parties, is also a factor.

“Generally speaking, single-member constituencies tend to bring about two-party systems,” noted Hong Deuk-pyo, a political science professor at Incheon’s Inha University.

The upcoming April 11 general election, as a clash between the recently renamed Saenuri Party and Democratic United Party, would appear to continue the two-party mold. What could be a game-changer, however, is the pre-election alliance of the DUP with the minor Unified Progressive Party. With the two big parties expected to take 130-145 seats each, the far-left UPP could become kingmaker in the next Assembly, even if it only wins the roughly15 seats predicted by opinion polls.

“After the election the UPP and DUP will cooperate to pass laws, but case by case,” said Hong. “It is obvious that the UPP and DUP are going to keep their pace by checking the Saenuri Party in the National Assembly along with searching for ways for cooperation to win the upcoming presidential election.”

Another challenger to the two-party status quo is the recently formed center-right Korea Vision Party, headed by former Saenuri Party member and Hansun Foundation chief Park Se-il.

“We were established in order to break that chain (of power moving between two major parties),” said Park’s deputy chief of staff Lee Sang-baek. “Both parties have been based in certain regions, as you know. For instance, the Saenuri Party is very strong in the Gyeongsang area whereas DUP is very comfortable and strong in Jeolla. But instead of regionalism, KVP hopes to create values that we believe in. Instead of a region, we want to be Korea-based party based on our ideology.”

Lee, whose party is fielding 27 single-seat constituency and eight proportional representation candidates, accepts that is “very difficult to break that barrier” and make an impact as a third party. But he sees the party’s electoral bid as “a good and meaningful experiment.”

Nor is the party concerned about the possibility of splitting the ― in this case conservative ― vote and handing power to the other side, the curse of so many third-party bids in two-party set-ups.

“I don’t think we are splitting the conservative vote,” said Lee. “Basically we are creating a new definition of conservative in this society. That why the KVP is trying to come into play, come in to provide more reasonable and reform-minded conservative policies.”

Yang Seung-ham, a political science professor at Yonsei University in Seoul, said that Koreans’ lack of a unifying ideology leaves the door open to third or fourth parties.

“At present, Korean political positions are diversified according to region, income, age and ideology. The major parties are not enough to embrace the complicated differences. And 40 to 50 percent of Korean voters do not identify themselves with any political party due to political apathy and indifference. Therefore, there is always room for a third or fourth party,” he said.

But much depends on the presence of a major figure to rally around, said Yang. Korean politics has long been personality-driven: Park Geun-hye maintains considerable allure and influence despite her reputation for reticence on policy issues, while former presidents Kim Dae-jung and Roh Moo-hyun each founded the parties that carried them to power and continue to be revered in liberal circles.

“Unlike the 1987 election, a third party may not present their own candidate this time because they don’t have a prominent figure to compete with the two major party candidates,” said Yang. “Only in the case that professor Ahn Cheol-soo runs for the presidency, then there will be more than two major figures. Or a person with the support of professor Ahn might become a third major figure in the upcoming presidential election.”

Yun attributes the penchant of Korea’s “2.5-party system” for personality politics in part to the tendency of parties to distinguish themselves by region rather than ideology, making it “much easier to base (them) on their political leaders and personalities.”

This, argues Hong, restricts voter choice, raising the need for a third, “moderate” party to act as a broker between the two “polarized” major parties.

As Gregory Henderson mentioned, politics of vortex have been one of the distinct characteristics of Korean politics since 1948,” said Hong. “Political parties have served as political machines for the prominent political elites in their striving for the presidential job. … Grouping around powerful figures is one of the negative factors that restricts voters’ options, but their choice affects party alignment.”

The emergence of a full-blown multi-party system, while increasing voter choice, would make coalition governments more of a norm, potentially increasing political instability. Their perceived instability has made the Korean public wary of such arrangements, according to Yang.

“Political coalitions are unstable in nature. It is particularly so in Korea, because dialogue, discussion, persuasion, negotiation, cooperation and tolerance are the concepts to be more developed in Korean politics. A coalition is more like a marriage of convenience for political purposes,” he said.

This makes the entrenchment, rather than weakening, of the two-party system more likely in the future.

“I think Korea will move toward the two-party system in the future as Korean democracy matures gradually,” said Yang. “At the moment the Korean political parties are not based on policy orientation but are catch-all parties. The political parties are the verge of the democratization process.”

By John Power (john.power@heraldcorp.com)