North payoff claims stir South Korean presidential race

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North payoff claims stir South Korean presidential race
Fri Sep 27, 7:00 AM ET
By Paul Eckert

SEOUL (Reuters) - South Korea ( news - web sites)'s president and the main opposition party traded barbs on Friday over claims of secret payoffs to North Korea ( news - web sites) in the first major skirmish of a December presidential election that is expected to be bitter.

The opposition Grand National Party (GNP) has resurrected allegations from mid-2000 that the Hyundai conglomerate, which has spearheaded economic exchanges with North Korea, diverted a $400 million state loan to the communist state.

Hyundai has denied the GNP's allegations, which are based in part on a vaguely worded sentence in a U.S. Congressional report, carried in a conservative Seoul magazine.

On Thursday, GNP's chairman Suh Chung-won called on President Kim Dae-jung ( news - web sites) to step down, accusing him of "aiding the enemy" by using government money to bribe Pyongyang to hold the historic summit with North Korean leader Kim Jong-il in June 2000.

Kim's spokeswoman, Park Sun-sook, called the allegations "baseless" and said on Friday: "Even in politics there are proper limits to wild talk.

"People with knowledge of this matter know well why the GNP is engaging in this preposterous and groundless rumour mongering," Park told a news conference.

TWO BIRDS WITH ONE STONE

In his news conference on Thursday, Suh made his targets clear, alleging "three-pronged collusion" between Kim's government, North Korea and independent presidential candidate Chung Mong-joon, son of the founder of the Hyundai conglomerate.

Media opinion polls show the candidate of the GNP, Lee Hoi-chang, is leading in the December 19 election to succeed Kim, who is limited to a single five-year term, which ends in February.

But in a contest that has focused more on personality than policy, the 10-day-old candidacy of the telegenic and charismatic soccer chief Chung has tightened the race. Chung has vowed not to join the mudslinging that is the mainstay of political debate.

Without commenting on the validity of the Hyundai allegations, which a GNP lawmaker presented in parliament on Wednesday, Seoul's daily Korea Times said in an editorial on Friday that: "The GNP is pursuing two goals."

"One is to damage the incumbent administration and the other is to indirectly reduce the popularity of Chung Mong-joon, a presidential candidate who is the largest shareholder of Hyundai Heavy Industries," it said.

A campaign spokesman for Chung told Reuters: "It has nothing to do with Chung Mong-joon and we have no comment."

"INFORMED SOURCES"

Hyundai has denied any wrongdoing in a case that some observers fear could throw cold water on recent burgeoning inter-Korean exchanges in economics, sports and war divided families.

A June 2000 report by the (U.S.) Congressional Research Service that helps form the basis of the GNP allegations says: "According to informed sources, Hyundai made additional secret payments to North Korea. Hyundai denies making secret payments."

The GNP alleges that Hyundai had diverted $400 million it received to resolve a short-term liquidity crisis from state-run Korea Development Bank (KDB) to support communist North Korea.

The cash was said to be in addition to the nearly $400 million the firm had paid Pyongyang for the right to run cruise tours to the North's scenic Mount Kumgang. It was forced by creditors to stop the loss-making operations last year and they are now run by a different Hyundai outfit.

"It's not true. We used the loans only to meet operating expenses," Hyundai said in a statement on Thursday.