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S. Korea battles to loosen chaebols' iron grip

29 june 2011, 12:55
©RIA Novosti
©RIA Novosti
A dispute dubbed the "tofu war" has broken out as South Korea's government wages an uphill battle to loosen the iron grip of the country's mighty conglomerates over the economy, AFP reports.

The giant family-controlled multinationals known as chaebol powered the country's post-war economic miracle and spearhead its booming export business.

But they are also seen as slowly suffocating the small and medium-size firms best able to nurture innovators and create jobs.

The Commission on Shared Growth for Large and Small Companies, a state body seeking ways to help small and medium enterprises, is reviewing 230 manufacturing businesses -- including tofu -- which may be reserved for SMEs.

It plans to finalise the list in August or September. After that, large companies will be discouraged from entering the market for a specific period while the government nurtures SMEs in that business.

However, the Federation of Korean Industries representing the chaebol cannot swallow the potential loss of tofu.

In a statement it said large companies were needed to promote tofu exports and improve sanitation and safety control.

The Korea Federation of Small and Medium Businesses says the fight over bean curd, hardly a high-tech product, illustrates the greed of insatiable chaebols.

"Their greed is the source of all problems," Shin Sang-Hong, a senior federation official, told AFP. "We hope the government will play its role in curbing the concentration of economic power in chaebols' hands."

The largest group Samsung accounts for around 20 percent of the country's exports. And the chaebol have increasingly been expanding into other areas.

The number of subsidiaries controlled by the 30 largest conglomerates more than doubled between January 2006 and April this year to 1,087 companies, Chosun Ilbo newspaper said.

Now the conglomerates are beginning to feel pressure from a conservative government headed by a one-time chaebol executive, President Lee Myung-Bak.

A presidential adviser urged them to share profits with SME suppliers, and another suggested that the National Pension Service, as a leading shareholder, play a more active part in running them.

The conservative media is also growing critical.

"Chaebol claim they are investing in new growth engines. In reality, however, many new subsidiaries include pizza chains, bakeries, coffee shops, teokbokgi (rice cakes simmered in chili sauce) shops, wine importers and even golf schools," said Chosun Ilbo in an editorial.

A Korea Joongang Daily editorial said the chaebol had lost touch with the public. The conservative government "has also turned its back on the conglomerates and is pushing ahead with various anti-corporate measures, reflecting public hostility toward large companies," it said.

It urged them to exercise social responsibility and focus on developing new technology while leaving wine imports, bakeries and coffee franchises to small businesses.

Professor Kim Sang-Jo of Seoul's Hansung University said chaebol were adding new subsidiaries led by the third or fourth generation offspring of the founding families and nurturing them unfairly.

"As chaebol are advancing into every corner of the economy, SMEs, mom and pop shops and small-time merchants are all perishing," he told AFP.

"A balanced growth of the country's economy is seriously threatened under the onslaughts from chaebol serving their founding families' private interest."

Robert E. Kelly, a political science professor at Pusan National University, said chaebol, employing less than 10 percent of the country's workforce, "are pulling away from the life of regular Koreans and the (SMEs) where most work".

In a Korea Times commentary, he said the excessive concentration of market power and political influence in the chaebol spread "oligopolistic bad practices" far and wide.

"I can think of no market explanation whereby SK credibly synergises telecom, real estate and gas station chains," he said in reference to the fourth largest conglomerate in terms of sales.

Kelly urged the government to halt easy credit for chaebol, enforce antitrust law and stop "fine-tuning" the won's appreciation to help chaebol exporters.

By Park Chan-Kyong

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