Episode 67: The Invisible Hand
Despite it being winter, the weather was warm. The man who approached, wearing a short-sleeved shirt, had tanned skin that made his white teeth stand out.
“Long time no see, Mr. Lee. How have you been?”
“Your face is quite tanned. Have you been playing some sport?”
“Well, I’ve been sailing yachts as a hobby. Lately, I’ve been really into sea fishing. I’m thinking of participating in a fishing competition this time.”
“You still live life joyfully. Doesn’t your wife have any complaints?”
“Of course, my darling is always generous. Maybe it’s because I’m good in bed. Women depend on how their men treat them, right? She even built me a cottage so I wouldn’t go too far.”
“You romantic! I’m jealous.”
“You should get married soon too. If you want, I can introduce you to some of my wife’s friends. I hear you’re doing very well these days. Wrap things up in Seoul and move here. I’ll fully support you.”
“Haha, thanks, but I’ll pass. I still have a lot on my plate. I’ll contact you if I need it later.”
The handsome man, with a face that looked like a movie star, was Kim Yoon-geun, a schoolmate of Lee Chang-jin.
Kim Yoon-geun had joined KOTRA after graduating and was dispatched to Malaysia as a resident employee. In just three months after arriving, he managed to marry a rich woman from the Chinese community, making him a wealthy man and giving him a very relaxed attitude towards life.
“Since a big guest is here, I’ll be your tour guide today.”
“Haha, thanks. I’ll be in your care then.”
Lee Chang-jin boarded the yacht driven by Kim Yoon-geun and headed to Borneo Island. Borneo, the world’s third-largest island, is divided among Malaysia, Indonesia, and Brunei. The northwest part is divided into the Kingdom of Brunei, Malaysia’s Sabah and Sarawak states, and the rest is Indonesian territory, commonly known as Kalimantan.
The place Lee Chang-jin arrived at was Kota Kinabalu, a famous tourist destination in Malaysia. Inside the island, there were rows of date palms and betel nuts, used as natural dyes.
“This entire area is involved in the dyeing business. I’ve already arranged everything, so we should be able to take a look around leisurely.”
“Thanks.”
As they walked around the streets, colorful handmade woven products caught their eyes.
“How about this?”
“The colors are very nice. What dye did they use?”
As Lee Chang-jin showed interest, the shopkeeper excitedly started speaking in Malay.
Not understanding Malay, Goo Chang-dong looked puzzled.
“What is this person saying?”
At that, Kim Yoon-geun, who was beside him, translated.
“He says these products use dyes from the tannery process. For leather or synthetic leather dyeing, they typically apply dyes, and this dye is excellent for color correction.”
“Hmm, then give me a few of these.”
After buying a few woven samples, Lee Chang-jin toured the place where natural dyeing was done. Next to the old wooden building were large pits, each with a different color. Some water looked like ash, while other pits were blue or green.
Walking along a path that looked like a painter’s palette, he felt like Alice in Wonderland. While wandering around the dye factory, a pungent ammonia smell suddenly hit them.
The foul stench made Goo Chang-dong frown and pinch his nose.
“What is this smell? Is it urine?”
“Yes, it is.”
“Are you serious? Why would they collect urine? Are they boiling eggs with it like some people do in China?”
Lee Chang-jin chuckled at his remark.
“Of course not. This is a mordant.”
“A mordant?”
“Dyeing isn’t just about having dye. Natural dyes typically don’t bind well to plant-based fibers, so a mordant is essential to help the dye adhere. Urine can help fix the dye and can also strip the original color from fibers to apply new colors.”
“That’s quite useful… I understand. But still, wearing leather washed in urine feels a bit off.”
Surprisingly, Lee Chang-jin could distinguish most of the dyes. Jung Ho-sung, a fellow expert in the dye business, was quite amazed at Lee Chang-jin’s near-expert knowledge. Jung Ho-sung knew a fair bit about dyes due to his work in the textile industry but didn’t know hundreds of dyes like Lee Chang-jin did.
In just a few weeks, Lee Chang-jin had mastered the characteristics and manufacturing processes of dyes.
‘This is no joke. I thought I knew a lot, but I need to stay sharp.’
For several days, Lee Chang-jin toured various parts of Borneo, verifying dye suppliers and their quality. According to his research, Borneo wholesalers had very little experience dealing with external partners.
Kim Yoon-geun, who was in charge of the Kuala Lumpur branch, agreed to help in exchange for a commission. Since Kim Yoon-geun’s in-laws ran a local company in Malaysia that would guarantee the imports, the wholesalers felt secure and were actively engaging in exports.
A dye merchant proposed to Lee Chang-jin:
“Let’s use a letter of credit for the order.”
“That sounds good. It’s the safest and most reliable method. Would you prefer FOB (Free On Board) or CIF (Cost, Insurance, and Freight)?”
“Let’s go with CIF. It’s easier since it doesn’t require separate insurance documents.”
“Then, let’s do that.”
An L/C or letter of credit is a guarantee document issued by a specific bank on behalf of an importer to ensure payment for goods in international trade, typically used when there is no mutual credit between trading partners. Most international trade transactions are conducted under CIF terms.
Having successfully secured a supplier, Lee Chang-jin returned home after a week.
Upon returning, he immediately sent samples to textile companies to verify. The textile companies responded quite positively to the quality of the samples.
“Oh, this quality is top-notch.”
“The colors are clearer and purer without using neutralizers.”
“It’s much less irritating to the skin.”
The textile companies were very favorable. The new dyes were over 20% cheaper than existing ones and had no neutralizers, making the quality incomparable.
‘Now, all that’s left is to open the letter of credit.’
When both the exporter and importer agree to use a letter of credit for payment, the importer’s bank opens the letter of credit, guaranteeing payment on behalf of the importer to the exporter.
Feeling relieved after securing the deal, Lee Chang-jin headed straight to the Export-Import Bank.
However, when he sat down with the bank officer, he encountered an unexpected obstacle.
The bank immediately refused to open the letter of credit, citing various reasons.
“Why is it not possible?”
“We’re sorry. Due to tightened regulations, we’re not issuing letters of credit without collateral for the time being.”
“Why? All the documentation meets the requirements. This doesn’t make sense.”
“We apologize, but recent international fraud cases involving letters of credit have led to stricter evaluations. We’ve received directives from higher management to be very thorough.”
“What do you mean by raising the evaluation standards for letters of credit? On what grounds?”
The bank officer explained to the bewildered Lee Chang-jin:
“Oh, you must not have seen the news while you were abroad. There was a major incident recently. It’s complicated to explain, so it might be better to read this article.”
The front page of the newspaper handed to him by the bank officer had a large headline about a letter of credit fraud case.
“15 Billion Won Import Letter of Credit Fraud! Four Related Individuals from Palpo Trading (Daegu) Arrested.
Defrauded 1.3 Billion Won in Customs Refunds by Disguising Export with Trash.
Is It Okay to Issue Letters of Credit Without Creditworthiness?”
“Do Ji-woon, head of the Crime Proceeds Recovery Division at the Seoul Central District Prosecutors’ Office, announced on the 25th that Palpo Trading Co., Ltd. had diverted 850,000 kg of export-grade clam shells (worth 15 billion won) to the market and disguised the export with trash, defrauding 1.3 billion won in customs refunds. The representative of Palpo Trading, Lee Soon-min (40), and four others were arrested and charged with violations of the Specific Economic Crimes Aggravated Punishment Act, Trade Law, and Foreign Exchange Control Law.
… (omitted) …
The government views this incident as a moral hazard exploiting import-export regulations and has ordered stringent measures for future import letter of credit matters.
Meanwhile, the police have requested an Interpol red notice for Kim Dong-myung (45), the Hong Kong partner and head of Hwashin Trading, who is considered the key figure in this case.”
- Kyunghoon Daily, Reporter Joo Young-mi.
The situation was as follows: They would appoint a partner in places like Hong Kong or Singapore to handle the disguised export. When the partner opened an L/C in Korea, they would import raw materials like clam shells without customs duties.
Selling the imported clam shells in Korea would yield more than eight times the profit. After selling the raw materials, they would pack empty boxes with trash like wood chips and Styrofoam and disguise them as exports to Hong Kong.
In Hong Kong’s bonded warehouse, such items would be auctioned off to dispose of them. Of course, no one would buy empty boxes, so the trash would naturally be thrown away at the port’s waste disposal site.
After selling all the clam shells, the Korean manager would convert the dollars into cash at the airport. Then they would either receive the payment from a Hong Kong bank or reclaim customs duties in Seoul under the pretext of UNPAID. The payment location would be determined based on the circumstances each time.
Over a few years, this would yield enough profit to comfortably open a tourist hotel in the outskirts of Seoul.
Seeing big money makes people’s eyes turn. Bribing customs officers and export inspectors was relatively easy. However, the crucial part was the Hong Kong partner.
At first, they would cooperate willingly, but once they realized their pivotal role in the operation, they would start having second thoughts. This time, the Hong Kong partner had sensed the impending betrayal and acted first, leading to the Korean operatives taking the fall.
A 15 billion won (approximately 30 million USD) export might not seem significant, but achieving a 1 billion USD export was a national goal at the time.
In 2010 terms, this was a substantial sum exceeding 10 billion won, so it was only natural that the newspapers gave it significant coverage. The bank officer, noticing Lee Chang-jin’s reaction, explained further.
“… So, due to this incident, it has become difficult to open letters of credit for the time being.”
Checking the date of the criminal’s arrest, it was shortly after Lee Chang-jin had left the country.
Even Lee Chang-jin, who usually remained composed, showed a drastic change in expression.
‘This is a disaster…’
After painstakingly securing the import contract, he couldn’t get the letter of credit issued…
The problem was that he had no recollection of such a sudden event in his memory.
Had history changed, or had he simply overlooked this part?
But he couldn’t just sit idly by, so Lee Chang-jin protested.
“Is there no other way?”
“I’m really sorry, but this is the current policy. If you want to open a letter of credit with us, you’d need to deposit more than 50% of the goods’ value as collateral. After that, separate individual reviews would be conducted. This applies uniformly to all bank branches.”
In other words, they would review whether to open the letter of credit only after he deposited a substantial amount of cash as collateral.
Lee Chang-jin protested against the abruptly changed conditions.
“Changing procedures without notice goes against the principle of good faith. Can’t the rules be applied more flexibly based on transaction history and the importer’s creditworthiness? Furthermore, the contract I signed predates the regulatory changes.”
“I’m sorry, that’s beyond my authority. The upper management intends to maintain this policy for the time being. While I understand your predicament, we can’t retroactively apply the rules or offer special treatment just for you.”
The bank kept repeating their standard response. They indicated that only existing importers and those with sufficient capacity would have their letters of credit opened after a review, leaving no grounds for objection. Reluctantly, Lee Chang-jin asked again.
“Then, if I deposit the required amount, can it be done immediately?”
“That too… I can’t give you a definite answer.”
“Then what am I supposed to do?”
“We’re sorry. Although I’ll report this to higher management, it seems difficult to issue a letter of credit for you due to your limited export-import history. Moreover, there’s a backlog, so the review process could take several months.”
“Ugh, but please expedite it if possible.”
Despite bowing his head and asking for help, the response remained lukewarm.
Leaving the bank empty-handed, Lee Chang-jin had a sudden suspicion.
‘Is someone deliberately blocking new letters of credit…?’
Could the clam shell incident be just an excuse? Perhaps there was a higher-up trying to monopolize the issuance of letters of credit for their benefit?
But he had no concrete evidence, only suspicions. Moreover, they held the legitimate justification.
‘This is serious. If I waste any more time, it could be disastrous…’
Lee Chang-jin grew anxious. He had already received substantial advances from textile companies, assuming the letter of credit would be issued. Further delays could not only damage his credibility but also result in significant financial losses.
Contacting Section Chief Sung Gong-cheol yielded no solution. It was an issue involving higher authorities and wasn’t easily resolvable.
“Is it possible that the Taeyang Group is behind this?”
“Yes, that seems likely. As you know, they have close ties with the upper management, making it difficult for us to intervene. I apologize for not being of much help.”
“No, I’m the one who should apologize for asking such a favor.”
After ending the call, Lee Chang-jin sighed. Hearing the expected answer made him feel suffocated. He wanted to smoke a cigarette to calm his nerves. As he took out a cigarette and stepped outside to get some fresh air, he suddenly heard a commotion.
“Why are you doing this? This is private property.”
“No, hey! Where do you think you’re going?”
Hearing Yeo Jin-joo’s unusually high-pitched voice and the ensuing chaos, Lee Chang-jin hurriedly went outside.
There, he saw bodyguards in sunglasses and black suits storming into the factory.
“Is Mr. Lee Chang-jin here?”
Seeing the burly figures intruding into the workshop, Lee Chang-jin’s face hardened.
“Mr. Lee!”
Lee Chang-jin stepped forward, pushing back the struggling employees, and spoke.
“Hey, what do you think you’re doing intruding into someone else’s business without permission?”
“Ah, are you Mr. Lee Chang-jin?”
“Yes, I am, but what’s this about? Don’t you know that entering someone’s office without permission is considered interference with business?”
“Sorry, we had no choice due to urgent circumstances.”
“What’s the reason? If it’s not convincing, you should leave immediately.”
At Lee Chang-jin’s firm attitude, one of the bodyguards, seemingly the leader, lightly saluted.
The bodyguard showed his ID and revealed his identity.
“Apologies, Mr. Lee Chang-jin. I’m Captain Park Jung-woo from the Blue House Security Service. We’ve been trying to reach you, but there was no response. We need to escort you to the State Guest House immediately.”
“Pardon? What do you mean?”
State Guest House? What on earth was he talking about?
Seeing the bewildered employees, Park Jung-woo explained again.
“Oh, it seems you haven’t been informed yet. Mr. Lee Chang-jin, you have been selected as an exemplary entrepreneur for the Saemaul Undong (New Village Movement) and will be receiving a presidential commendation.”
“What?”
The employees halted their actions, stunned.
The noisy workshop fell silent as if doused with cold water.
- To be continued in Episode 68 -
