Jong-Hyon Chey

Interest-rate cuts; an emphasis on free and fair global trade; less government intervention; the privatization of state industries; support for [...]

October 1 1993 by Jonathan Burton


Interest-rate cuts; an emphasis on free and fair global trade; less government intervention; the privatization of state industries; support for small business; the liberalization of banking and financial institutions; an end to barriers on foreign investment; and an assault on government corruption.

Sounds like a CEO’s wish list. But in South Korea, many business leaders are nervous that these bold reforms by the new administration of President Kim Young-Sam will capsize the golden boat that over the past three decades has brought the country enormous-if selective-prosperity.

Jong-Hyon Chey, the outspoken chairman of the Sunkyong Group, firmly believes otherwise. The leader of South Korea‘s fifth-largest conglomerate, or chaebol, Chey urges his skeptical counterparts to work with President Kim and to embrace the new programs. The chaebols, which have enjoyed longstanding government favoritism, have been reluctant to break old habits. But they slowly have been coming around, if only because the changes offer a hopeful chance to jump-start Korea‘s flagging economy.

“Big business has to cooperate with the government,” insists the 63-year-old businessman, who graduated from the University of Chicago in 1959 with a master’s degree in economics and became chairman of Sunkyong in 1973 after 11 years with the company. “We business people should pay more attention to getting the pie bigger,” he adds. “Instead, we are talking too much about dividing the pie.”

Tough talk inspired by uncertain times. In the optimistic 1980s, when Korea‘s exports were roaring, living standards were rising, and gross national product growth topped 9 percent annually, it was easier to overlook government shackles on new business and investment, and corruption that by some estimates extorted up to 8 percent of corporate sales. No longer. GNP growth this year could reach 5.2 percent, slightly better than 1992′s 4.7 percent expansion but dismal by Korean standards. Neighboring countries such as China pose a real economic threat; they can build products of comparable quality far more cheaply than high-wage Korea. Meanwhile, Japan has leapt out front on cutting-edge technology.

If Korea is to shore up competitiveness and revisit its glory days, exports and productivity must improve quickly. The key to recovery is lower central bank interest rates to put Korea on a more equal footing with Japan, Chey mainta ns, downplaying the notion that a rate cut would spark inflation.

In two decades, Chey has built a single-minded textile manufacturer into a vertically integrated, global network of trading, energy, fibers, petrochemicals, engineering, and construction companies, with total sales last year of more than $14 billion. Sunkyong is the fifth largest Korean conglomerate, behind Hyundai, Samsung, Lucky-Goldstar, and Daewoo. Integrated chemical and energy operations-most of which are combined under the company’s Yukong Ltd. subsidiary-account for some 58 percent of group revenue, while import and export trading comprises another 24 percent. Sunkyong America, a $1.5 billion trading company active in Europe and the U.S., is headed by James M. Demitrieus. Demitrieus took the helm in September, becoming the first non-Korean to run the subsidiary of a major Korean company. Stateside, Chey recently joined with Chicago‘s U.S. Cellular to operate mobile phone service in rural Tennessee. An alliance with the Fleming Cos., a major U.S. grocery distributor, will help Sunkyong enter that business in Korea.

Outspoken by Korean standards, Chey keeps his profile and his opinions public. He recently was named chairman of the powerful Federation of Korean Industries, whose members account for nearly two-thirds of the country’s corporate revenue. Though seemingly without political aspirations himself, Chey’s links to the Korean government are unusually close: In September 1988 his eldest son married the daughter of then-president Roh Tae-Woo. The family relationship caused a stir last year when the Roh government awarded Sunkyong a lucrative cellular communications contract. Charges of favoritism eventually forced Sunkyong to decline the pact.

Chey may appear acerbic, but like many executives, he also holds a visionary, surprisingly philosophic outlook that is rooted in pragmatism. The world, he believes, is becoming a single, unified market. Chey contends that conventional nation-states eventually will give way to broad economic alliances in which the movement of people, money, goods, and services will proceed uninterrupted, and he is positioning Sunkyong for such a time. Chey has fashioned a progressive corporate culture with its own vernacular: “Hardware” refers to Sunkyong’s products, while “software” describes the internal structures that enable employees to create and excel.

“If you have a soft layer of management,” he explains, “you’ll be out of business. In order to survive, and keep surviving, you have to be superior.”