South Korean President Chun Doo Hwan today replaced 11 of his 22 Cabinet ministers in a bid to restore public confidence in his government, which has been strained badly by persistent rumors of high-level political involvement in a multimillion-dollar loan scandal.
Chun's quick reshuffling of key government posts followed a decision by the entire 20-week-old Cabinet last night to resign to accept broad responsibility for the scandal and came amid calls for more thorough investigations. It was accompanied by an equally speedy realignment of Chun's ruling Democratic Justice Party in which six top leaders were fired.
The changes brought a new group of Chun's trusted political allies to top Cabinet and party jobs and left others, including Prime Minister Yoo Chang Soon, Finance Minister Rha Woong Bae and Home Affairs Minister Ro Tae Woo, in their jobs.
The shifts were designed, knowledgeable observers here said, to cut Chun's political losses from a massive scandal involving fraudulent loans and commercial paper transactions that allegedly netted a distant relative of Chun more than $210 million and has paralyzed South Korea's financial markets.
Since coming to power two years ago after a military coup, Chun has tried hard to foster an image of clean government and has pledged to stamp out corruption. Sources suggested, however, that his recent housecleaning moves and a public prosecutor's report issued Thursday have failed to quell widespread speculation of government party entanglement in the scandal.
Chun appointed Yun Sung Min, 56, as defense minister, and Lee Hi Sung, 57, as minister of transportation. The selections were seen as significant because both men, along with Ro Tae Woo, who remained at the home affairs post, were among the Army commanders who played key roles in Chun's rise to power.
Chun retained Finance Minister Rha and Kim Joon Sung, who is deputy prime minister and minister for economic planning, despite earlier calls from government and opposition party politicians demanding they resign to take direct responsibility for the financial turmoil touched off by the loan scandal.
In the party reshuffle, Secretary General Kwon Jung Dal, a former Army protege of Chun, was replaced by Kwon Ik Hyun, another former general turned politician, who was a classmate of Chun at South Korea's elite military academy.
Outgoing party spokesman Pong Du Wan said Chun had made the changes in the party "to help realize the ideals of its founding as a responsible party." Editorials in Friday editions of major Seoul dailies, however, suggested that the quick Cabinet and party face lift might not prove sufficient to allay public suspicion churned up here since the scandal came to light two weeks ago.
The Cabinet resignations and party appointments came shortly before chief government prosecutor Chung Chi Kun announced the results of a 27-day probe into the affair. Chung, on television, read the government's 31-page report and stressed, "We have closely traced the whereabouts of the funds, and we have found no signs or evidence that they were converted into political funds."
The scandal began with the arrests earlier this month of former national assemblyman Lee Chul Hee and his wife, Chang Yong Ja, who is related to Chun by marriage. They are charged with defrauding six Korean companies in a series of questionable private loan transactions.
A total of 19 persons have been arrested in the affair so far, including two bank presidents, four other bank officials, five company executives, five private lenders and an uncle of South Korea's first lady, who resigned last week as president of the government-controlled Korea Mining Promotion Corp.
While the prosecutor's report stressed that Kwon Jung Dal, the former government party secretary general, had been cleared of "any suspicion that he used his influence" in aiding the lending couple, Korean sources said the prosecutors had not subjected the politician to formal questioning.
Also apparently in doubt is $55 million Lee Chul Hee and his wife said they lost on the South Korean stock market. Rumors have circulated widely, however, that the money, which apparently remains unaccounted for, may have found its way into political slush funds.
Opposition politicians have called for the National Assembly to hold a special session next week to organize its own investigation. The influential daily Dong-A Ilbo said today that it would be difficult for the government "to save face without remedying the climate in which the people laugh at what it announces. . . . The most urgent and important thing is to restore the public's trust and confidence."
In his efforts to restore public confidence, Chun now faces the task of reinvigorating the country's economy, which has suffered a setback in the aftermath of the scandal.
Another question, observers said, is how the country's student activists will react to government handling of the incident. In the past, spontaneous student-led demonstrations have been a major headache for Chun and his predecessor Park Chung Hee, who was assassinated in October 1979.
Under tight surveillance by South Korean police and government intelligence agents, antigovernment campus activities have been muted. Sources said, however, that riot police have been stationed outside major university campuses in Seoul as a precaution.