South Korea and the Samsung saga

By Koustubh Tol

On 28 February 2017, Samsung’s de facto chief Lee Jae-yong was indicted by the special prosecutor’s office on numerous charges including bribery and embezzlement, marking a huge blow to one of the biggest consumer electronics companies in the world. The case is allegedly linked to the “scandal” which led to the impeachment of South Korea’s President Park Geun-hye in December last year. The prosecutors have blamed Mr Lee of bribing Ms Choi, a close friend of the President, in order to win government backing for a smooth transfer of power within Samsung from his father to himself.

Samsung’s scandals

Mr Lee has been accused of giving $36m worth of donations to organisations linked to Ms Choi apart from embezzling money within the company. This is not the first time that Samsung leadership is being accused of corruption. In 2009, Mr Lee Kun-hee (Mr Lee’s father) was indicted for tax evasion and breach of trust. Considering Samsung’s importance for South Korea’s economy, he was later pardoned by the former president in an act that revealed the country’s weak judicial system against family-run conglomerates, also known as chaebol.
Samsung is one of the biggest tech companies in the world and marks a fifth of all South Korean exports. A fall in Samsung’s fortunes will definitely cast its shadow on the country’s GDP and this makes the situation immensely complicated. The chaebol leadership like the one in Samsung usually gets away with fraud or corruption charges due to government pressure since the economy must, after all, move forward. But the recent decisions of the prosecutors have reaffirmed public faith in the judiciary. Even though this was expected, the indictment of the Samsung chief surely has turned heads across the globe. With Samsung already showing a slow growth in the recent past, the incident may not go down well with investors and consumers, eventually leading to slower economic growth for South Korea.

South Korea’s downfall

Once considered a fast-growing economy, South Korea’s political landscape has taken a huge hit in the recent past, ever since Park Geun-hye took over as President of South Korea.  The President’s scandal is centred around Park’s relationship with her longtime friend Choi, who is believed to have advised the President on many issues of state and international policy.

But the scandal goes far beyond divulging information unlawfully. Ms Choi is accused of using her connections to solicit millions from multi-national corporations for her own non-profit organisations. In fact, Ms Park has openly admitted to disclosing classified information to Ms Choi, which eventually led to her approval rating falling down to an abysmal 10%. Currently, Ms Park’s presidential powers stand suspended after the National Assembly voted for her impeachment in December last year. Her case is now being heard by the Constitutional Court which will decide whether or not to remove Ms Park from the presidency. The Samsung chief’s indictment only makes the situation more complicated.