A former chairman of HSBC has been chosen to lead the inward investment body of South Korea, sparking accusations of a conflict of interest because his former employer looms over a Korean bank that was sold in controversial circumstances.

David Eldon, a 62-year-old Scot, has been appointed co-chairman of the National Competitiveness Committee by Lee Myung Bak, the president-elect, in an attempt to boost flagging foreign investment.

The choice provoked anger because it was announced only ten days after HSBC applied to buy Korea Exchange Bank (KEB), whose sale to Lone Star, the American buyout fund, in 2003 is being investigated by regulators.

Mr Eldon, who spent 37 years with HSBC, is also the first foreigner to lead one of the teams that manage state affairs during the transition to a new administration.

Tom Coyner, an expert on business in South Korea, said: “I was taken aback to see a foreigner appointed to head a transition team – and the name HSBC leaps out, given the controversy. It might be a cynical back-room arrangement or it could be the most expeditious way to clear the Lone Star affair off the table, given the damage done to Korea’s reputation.”

The Chosun Ilbo, the bestselling daily, said in an editorial: “There are almost no foreign CEOs of Korean companies. And until now a high-ranking government official hailing from overseas was unthinkable.”

Mr Eldon’s appointment to the transition team makes a permanent role likely. Yim Song Bin, a spokesman for the president-elect, said: “His main job will be to assess all applications or intentions to invest in Korea. He will be asked to help Korea [to] solicit foreign investment.”

The spokesman insisted it would not clear the path for HSBC’s acquisition of KEB. “He will not influence our decision in any way,” he said.

Overseas investment in South Korea has been falling for three years and its reputation as an investment destination has been hit by the political wrangling and bureaucratic inaction over the sale of KEB. Lone Star has been criticised by local media and civic groups for its perceived cavalier attitude and the tax-free profits – in excess of $5 billion (£2.5 billion) – that it is expected to make when it sells its 51 per cent stake.

Two potential deals have fallen through, as regulators insist that they will not approve any acquisition until the conclusion of trials concerning the sale of KEB to Lone Star. Those trials could drag on for three years.

In September HSBC entered exclusive talks with Lone Star to buy KEB for $6.3 billion. Last Monday, just before Mr Lee’s landslide victory on Wednesday, HSBC filed a purchase application with local regulators.

HSBC tried and failed three times to acquire South Korean banks under Mr Eldon’s leadership, leaving it with only a token presence in the third-largest Asian economy.

Mr Eldon retired from HSBC in 2005 and is not on the board. He is chairman of the Dubai International Financial Centre Authority and forged ties with Mr Lee in 2002, while he was HSBC chairman and Mr Lee was Mayor of Seoul. Mr Eldon, who headed the Seoul International Business Advisory Council under Mr Lee, was not available for comment.

C.V.

Name: David Eldon, CBE
Age: 62
Career: Scots-born Mr Eldon spent almost all his working life at HSBC, which he joined in 1968, starting out at the Middle Eastern offices. He was transferred to Hong Kong in 1979 (four years after marrying), where he would remain for the rest of his professional life, working his way up the corporate ladder to become chief executive in 1996 before being appointed chairman in 1999. After retiring in 2005, Mr Eldon – the last Asian-based executive to grace HSBC’s board – has continued to use his expertise in the Middle East and Asian financial markets. He is co-chair of the National Competitive Committee and chairman of the board of directors for the Dubai International Financial Centre, which develops the strategy for the group that owns the country’s relatively new stock exchange.

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