Chaebol’s economic power stronger than ever

The concentration of economic power in the hands of top chaebol or Korea’s family-controlled conglomerates has deepened further, a think tank said Sunday. Its report raised questions about how the lack of competitive balance is hurting the vibrancy and growth potential of Korea Inc.

According to chaebul.com (www.chaebul.com), an institute monitoring chaebol, the country’s top-100 business groups combined to control more than 1.446 quadrillion won (about $1.26 trillion) last year, equivalent to 95 percent of the 1.523 quadrillion won in government assets.

“There is a possibility that chaebol will be having bigger assets than the government by the end of this year,” said Jeong Seon-seob, president of Chaebul.com. “The assets controlled by businesses were significantly smaller than the assets controlled by the government as recently as the early 1990s. However, conglomerates have expanded their assets at a far faster rate since.”

Chaebol’s accumulation of wealth and income has also intensified, with economic downturns accelerating the concentration of the proceeds of growth into the hands of the corporate elite.

The 754 trillion won in the value of assets controlled by the five biggest conglomerates _ Samsung, Hyundai-Kia, SK, LG and Lotte _ accounted for 52 percent of the total held by the top-100 firms last year.

While chaebol have provided the thumping heart of Korea’s export engine, an increasing school of critics say that their dominant presence is preventing the Korean economy from taking the next step in its evolution.

The most critical issue for the economy is that it needs a growth engine other than exports, with the deterioration of family finances induced by unemployment and stagnant income severing the country from an important tie to growth _ consumption.

Thus, it would be crucial to better support small-and-medium-sized companies and inspire entrepreneurship. But this is difficult to do with the financial might and influence of chaebol depriving the business sector of a sense of parity, critics say.

“It has been a long time since chaebol have been wielding stronger power than the government. The concentration of wealth by the elite firms has been too dramatic when compared to the levels at other advanced nations and this is beginning to pose a threat to the democracy of the economy,” said Lee Yoon-bo, a Konkuk University economist.

Samsung Group, the kingpin of the local industry and parent of global technology giant, Samsung Electronics, owned 279 trillion won worth of assets last year. This was 200 times larger than the 1.35 trillion won in assets registered under Sindoh Ricoh, Korea’s 100th-ranked company.

The Hyundai-Kia Automotive Group, which through Hyundai and Kia, controls around 80 percent of the country’s car market, and had 154.7 trillion won in assets last year.

SK Group, which recently absorbed computer memory chip maker, Hynix, had 136.47 trillion won in assets, followed by LG Group with 100.78 trillion won and Lotte Group with 83.39 trillion won.

Analysts say the widening chasm between the wealthiest firms and the rest indicates the country’s glaring ineptitude in sustaining healthy competition across markets, a problem that has been exposed by the recent downturn.

Korea’s biggest firms have faced little or no regulatory resistance in taking over key business segments merely by brute force and the compromised vibrancy in domestic markets is a grave concern for a country that needs another growth engine beyond exports.

The government’s extremely long leash on chaebol has often come at the cost of consumer interest. While the FTC detected over 3,500 cases of price-fixing in 2010, only 66 led to fines and the average penalty amounted to just 2.3 percent of the unfairly earned revenue.

Since recovering from late-1990s financial meltdown, Korea has had a succession of leaders in Kim Dae-jung, Roh Moo-hyun and Lee Myung-bak, whose export-supportive economic policies have consistently favored big corporations. Inequality, the inevitable result of this approach, was considered as something that should be tolerated as the cost of national prosperity.

Now the strengthening argument is that this polarization has hurt the country’s long-term growth potential and made it more vulnerable to financial downturns like the current one, where exports take a dive from worsening global conditions. <The Korea Times/Kim Tong-hyung>

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