Greasing Korean Business

Until recently, American businessmen working in South Korea couldn't afford to leave home without a little more than their American Express cards. Specifically, they needed cash. But not for hotel bills, meal costs, souvenirs from the world-famous Itaewon shopping mall, or other travel expenses.

No, the cash was needed to pay a "gratitude fee"--or bribe, depending on whom you asked--to his Korean counterpart for the privilege of doing business.

Naemul, or "gratitude fees," are as institutionalized in Korean business practices as negotiation and dealmaking. At the end of any business meeting, the solicitor (for example, a subcontractor) quietly and unceremoniously hands an envelope full of cash to the solicitee (for example, the contractor).

In the Confucian world of Korean business, the practice of naemul signifies respect and deference. Most businessmen see nothing unethical about this custom. They point out that Koreans have practiced naemul ever since their country was freed from Japanese colonial rule in 1945 and have still enjoyed a rather spectacular rise from agrarian backwater to industrial power.

Indeed, naemul has been around for as long as Korean business has. The practice, relatively simple on its face, has some elaborate rules. For instance, the envelope must always be sealed. The giver must always bow his head and present the envelope with both hands. And perhaps most importantly, the receiver must never ever look inside the envelope while still in the giver's presence.


The amount of money in the envelope is of only secondary importance. It is the act itself that is significant. In a society that values respect for elders and superiors above almost anything else, naemul has come to grease the wheels of almost every economic transfer. Those who are unaware of the procedure or, worse, choose to ignore it might as well not even bother playing the game in the first place.

The ritual of naemul is an outgrowth of the Confucian grounding upon which Korean society is based. Just ask any Korean or Korean-American about the New Year's Day custom of parents, grandparents, uncles, aunts and other adults handing out envelopes of money to children, who respond with a long, ceremonious bow and a wish of good blessings. Because of this fundamental grounding, naemul in one form or another has penetrated almost every other aspect of Korean society.

The Korean educational system, long noted for its emphasis on merit in general and high standardized test scores in particular, is at the same time characterized by parents who offer "gratitude fees" to teachers. Curiously, the less aptitude a child seems to show in the classroom, the more generous his or her parents seem to be with such "fees."

As one might expect, businesses competing for government contracts also engage in the practice--something that would certainly raise eyebrows in the United States. Just about any economic transaction, from a supply shipment to an express mail purchase, could be expedited by a "gratitude fee."

American exporters, for instance, have long been aware that they can get their products to market quicker and secure the all-important initital market share by engaging in naemul with dock or port workers. These workers then repeat the process with truckers, who pay "fees" to wholesalers, who would pay retailers, and so on. Only in this way could each participant in the chain hope to compete effectively.

One particularly noteworthy spinoff of the naemul practice is keup haeng ryo, the practice of offering envelopes to government officials to expedite the processing of state-issued certificates and licenses.

Although this practice is used ostensibly for garnering different kinds of licenses, keup haeng ryo givers more often seek the highly-sought emigration papers needed to move to America. With a waiting list of up to ten or more years for would-be emigrants, many well-off Koreans choose to buy their way to the West.

This omnipresent custom raises a serious question: Where to draw the line between a monetary payment made out of respect and adherence to tradition and outright bribery. It is this dilemma that Korea's newly-elected president, Kim Young Sam, has tried to address. His answer has been quite clear.

Kim, Korea's first civilian president since General Park Chung Hee staged a coup in 1961 and established military authoritarian rule, has issued a sweeping rebuke of the practice of naemul since taking office earlier this year. In a cascade of reform legislation, Kim has attempted to put the practice of naemul out of commission for good.

He has outlawed the "gratitude fees" in commercial activity, government operations, education and almost every other aspect of Korean life. The scope of the legislation extends even to "wedding solicitations." By custom, when a couple is to be married, the families of the bride and groom send an announcement to everyone with whom they are even remotely familiar. The real purpose of the announcements, of course, is to solicit money to pay for the wedding.