Oct 10, 2016

    Seoul still can't slay the chaebol giants

    SOUTH Korean President Park Geun Hye could not stand by fully her vow to pry the country out of the control of the chaebol, or family-controlled conglomerates, that she had made three years ago when she took office.

    Her recent decision to deny help to Hanjin, leaving South Korea's largest shipping company to go bankrupt, showed she still remembers her pledge.

    But she also must admit that purging the country of the chaebol monster is a pipe dream - at least for now.

    Last year, she herself led the decision to pump funds to improve the liquidity of Daewoo Shipbuilding & Marine Engineering (DSME), which posted losses up to three trillion won (S$3.7 billion).

    It was revealed recently that the decision was made at a "West Annex Conference", a secretive pow-wow held regularly in the west wing of the Cheong Wa Dae, the presidential house.

    The conference brings together the country's economic and financial bigwigs.

    Instituted in 1997 during the presidency of Kim Young Sam, the meeting is where South Korea's economic blueprints are being worked out or revised.

    And certainly no one at that gathering would suggest the chaebol are dispensable players in the country's economy.

    Hong Ki Taek, former president of the Korea Development Bank, saw it necessary to tell the public that the DSME needed to be saved because its near-fiasco was not solely its own making.

    But Ms Park was unsympathetic to Hanjin, saying she had no qualms seeing a lazy company, which assumed help was always available, go to seed.

    Choi Eun Young, who helmed Hanjin Shipping up to 2014 and was blamed for its crumble, confessed in tears that she was only a housewife and had no skill in running the company following her husband's death in 2007.

    The Hanjin debacle has again raised the question of whether the family-centred, scandal-prone, socially-divisive nature of chaebol would hobble South Korea's economy in the long run.

    Meanwhile, the "West Annexers" must be watching with glee the ongoing embezzlement and tax evasion suits filed against Shin Dong Bin, chairman of Lotte, South Korea's fifth largest conglomerate.

    He is alleged to have granted many unfair privileges to his kin, violating the principle of fair competition.

    Most analysts expect the group, which was notorious for making an air force base relocate for it to build a theme park, to have waned in influence over the government following the scandal.

    But Hanjin and Lotte are not your kingpin chaebol.

    Certainly no "West Annexer" was amused by the nationwide strike over wages by workers of Hyundai Motor, the largest in 12 years, that broke out on Sept 26 and continued into last week.

    Listing the massive losses the walkouts had cost Hyundai, Labour Minister Lee Ki Kwon warned the strikers that the government would take "necessary action" against them if they refused negotiation.

    Joo Hyung Hwan, minister of Trade, Industry and Energy, also warned that the wage demand would worsen the country's already dismal export performance, and pointed out India might soon overtake South Korea as the world's fifth biggest automaker.

    While Hyundai is too big to be allowed to fall, analysts warned that the drawbacks of chaebol are starkly visible again as South Korea struggles with other doldrums.

    The family groups' "octopus-like" control over an array of industries and their insider way of acquiring loans means little space is left for budding start-ups to survive.

    Park Chung Hee, Ms Park's father who ruled South Korea from 1961 to 1979, had reluctantly allowed enterprising families to flourish at a time of economic backwardness.

    But the monster has grown too huge to succumb easily to the frail sword of his daughter.