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Korean firms balk at donating to fund compensating victims of Japan's forced labor

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President Yoon Suk Yeol, left, and Japanese Prime Minister Fumio Kishida shake hands at the Japanese Prime Minister's office in Tokyo, March 16. Korea Times file
President Yoon Suk Yeol, left, and Japanese Prime Minister Fumio Kishida shake hands at the Japanese Prime Minister's office in Tokyo, March 16. Korea Times file

By Lee Kyung-min

Most of the state-run and private Korean companies that benefited from the 1965 Korea-Japan treaty appear to be hesitant about donating to a fund compensating Korean victims of forced labor under Japan's colonial rule, according to industry officials, Monday. The treaty enabled the resumption of bilateral diplomatic relations after WWII, in exchange for $500 million (655 billion won) in economic assistance Japan provided to Korea.

The stances of the companies could weaken the government's push to resolve decades of bilateral friction over the politically and diplomatically charged issue, despite the recent summit between the leaders of the two countries.

Earlier this month, the South Korean government announced an alternative plan to compensate victims of forced labor during World War II by Japanese companies ― Mitsubishi Heavy Industries and Nippon Steel ― through a fund created by Korean companies, without the direct involvement of the Japanese firms. But critics say the move relieves Japanese firms of legal responsibilities to compensate them, as outlined by Seoul's 2018 Supreme Court ruling.

The government cannot in principle force donations out of the firms. Otherwise, it will have to risk indictment on charges of extortion and abuse of power, as seen in the previous influence-peddling and corruption scandal under former President Park Geun-hye.

Among 16 Korean entities that benefited from the treaty, POSCO, a local steel titan, is the only one that has shown a willingness to donate to the fund. Last week, it said that it will donate an additional 4 billion won ($3 million) to the Foundation for Victims of Forced Mobilization by Imperial Japan.

In March 2012, the firm promised to give a combined 10 billion won to the foundation and donated 3 billion won each in 2016 and 2017.

The remaining 15 entities are Korea Rural Community, Korail, Korea Electric Power Corp., Korea Hydro & Nuclear Power, K-water, Korea Expressway, Korea Energy, KT, KT&G, Hana Bank, Industrial Bank of Korea, National Agricultural Cooperative Federation, National Federation of Fisheries Cooperatives, Korea Mine Rehabilitation and Mineral Resources Corp., and Korea Agro-Fisheries Trade Corp.

"The issue will be taken under consideration if we receive a request from the government," said an official at a state-run firm, who declined to be named. "I have it on good authority that the situation is the same at our other state-run peers. The issue will be reviewed, but not without orders from the top and consultations with related government ministries."

Potential political repercussions in the years to come are another major concern for the companies, the official said.

"Nobody is talking about how much backlash this political hot potato could bring, not because they agree with that, but because they fear that would precisely be the case. No one knows for certain what will happen when a new presidential administration takes office," said an official at another state-run company.

KT, the country's second-largest telecommunications service provider, said the issue will be discussed as soon as the government sends a request.

"We will take the issue under consideration. We have not received any request," a KT official said.

The sentiment was echoed by KT&G.

"We are closely monitoring the developments of the ongoing talks on victim compensation. We will cooperate fully in the process of reaching and implementing social consensus," a KT&G official said

Meanwhile, among donors to the fund are the American Chamber of Commerce in Korea (AMCHAM), and the Seoul National University Alumni Association.

Some legal observers say using company funds to compensate the victims could lead to their shareholders raising the issue of breach of trust.

This is because the contributions amounting to tens of billions of won, from an investment perspective, are a loss that would be otherwise returned to shareholders in the form of higher dividends.

However, others say the concern is overblown since not every decision to make donations is subject to a general shareholders' meeting.

"The issue has a political undertone to it, more so than economic and financial implications," said Shin Hyun-ho, lead attorney at Shin & Partners. "Whether and how much the firms use their funds can become an issue in the coming months."

Lee Kyung-min


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