SEOUL, Nov. 4 (UPI) -- The Federation of Korean Industries (FKI), an association of South Korea's top business executives, has long served as the powerful lobby group for big conglomerates, called chaebol here, which played a pivotal role in achieving rapid economic growth for the past decades.
The influential employers' group, which represents the country's 400 major companies, has coordinated economic policies with the government. It has been a symbol of the businesses' unity and power in the world's 12th-largest economy.
Its monthly-issued business confidence index, an indicator of companies' outlook for the coming month, serves as a key barometer of the country's economic fundamentals. The FKI chairman, mostly the heads of the biggest conglomerates, has been called the country's "economic president" for his huge influence and clout.
But the Korean version of the Japanese Federation of Economic Organizations, or Keidanren, is facing the biggest crisis since its foundation in 1961 in the wake of political fund scandals.
The chairmanship of the group has remained vacant since SK Group Chairman Son Kil-seung stepped down last month in connection with his implication in illegal political contributions.
No member executives are willing to take over the federation, which is still mired in illegal political funding investigations. They fear that FKI leaders may be the main target of the government's drastic reform campaigns aimed at overhauling the scandal-tainted big businesses. The country's family-run conglomerates have been blamed for the country's financial crisis in 1997-98 owing to their reckless expansion thanks to government favors.
Some executives are considering quitting the group, complaining that its efforts have been focused on bigger conglomerates. Still worse, key executives remain at odds following a competition over the lucrative telecom business. Some members even call for the dissolution of the group.
Many analysts say the FKI is likely rapidly to lose its status as South Korea's largest and most powerful lobbying arm for leading conglomerates.
The FKI have been accused of serving as a window to bribe politicians and government officials for business favors. The executives usually fabricate financial documents to create a massive slush fund.
Son, the chairman of the SK Group, South Korea's third largest conglomerate, became the first incumbent FKI leader who has been summoned by prosecutors for questioning. He resigned as the FKI chairman last month amid accusations that he established tens of millions of dollars in slush funds to bankroll the presidential campaign of the ruling and opposition parties in last year's elections.
Major conglomerates have been put on high alert as the prosecution has decided to launch a full-fledged investigation into last year's presidential campaign funds, targeting all business groups involved in the illegal fund-raising.
The country's top five conglomerates, Samsung, LG, SK, Hyundai Motor and Lotte, are set to face a prosecution probe over their alleged illegal "political donations." Prosecutors said they would request the business giants to present financial documents to find out whether they provided slush funds to political parties.
Lee Kyu-hwang, FKI executive director, expressed concerns that a tough probe would hurt corporate activities and the country's already troubling economy. "The investigation could further raise economic uncertainty at a time when the economy is still ailing with no signs of an early recovery," he said.
In the face of growing public criticism, the FKI said it would "no longer comply with any requests for political contributions unless reforms are instituted in the current political funds system." In a statement, it also said it was seeking to prohibit its members from offering political money on an individual basis.
But skepticism is lingering because the FKI has already repeated a pledge to stop the flow of illegal funds to politicians in recent years.
The FKI has suffered troubles since 1999 when its then chairman Kim Woo-choong, the founder of the Daewoo Group, stepped down after the country's once second-largest business empire was dismantled under $80 billion of debt in the world's biggest bankruptcy amid the 1997-98 Asian financial crisis. Kim is still believed to be hiding overseas.
Since then, Kim Kak-jung, chief executive of a minor textile company, had taken the helm of the group until last February, resulting in weakened leadership of the employers' lobbying arm.
FKI members hope one of the heads of giant conglomerates, such as Samsung, LG and Hyundai Motor, will take the helm of the federation. "If a strong leader does not take the reins soon and recover the FKI's reputation and role, it may become nothing more than a powerless organization churning out reports and surveys," an FKI official said.
But the owner-chairmen of the Samsung, LG and Hyundai Motor groups, which account for two-thirds of FKI's membership fees, have shown little interest in the FKI leadership. Kang Shin-ho, chairman of Dong-A Pharmaceutical Co. who was elected to succeed Son last week, has refused to take over the post.
They fear that the FKI chairmanship would trigger labor disputes in the chief's own company because the FKI head serves the interests of corporations. That's why Chung Mong-koo, the chief of the Hyundai Motor Group, remains reluctant to head the FKI. Hyundai Motor has suffered from a series of crippling labor protests. Further strikes may threaten the fate of the country's fourth largest conglomerate, he said.
Some analysts criticize the country's corruption-tainted political circles for causing the crisis of businesses' groups. "The political circles should move first to end the vicious cycle of business-politicians collusion," said Lee Soo-hee, a researcher at the Korea Economic Research Institute, the FKI-run think tank.
"The government should refrain from intervening in business activities and wielding political power to gather money," said Kim Jong-seok, a Hongik University professor.
