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July 21, 2017

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S. Korea conglomerates in election crosshairs

SEOUL -- As the three main candidates for South Korea's presidency cross swords on the campaign trail, they are united on one issue — the need to reform the country's giant, family-run conglomerates, or chaebol.

Chaebol-bashing is something of an election-year ritual, but the pitch and breadth of the criticism this time around from both liberal and conservative presidential hopefuls has got the mega-multinationals rattled.

"Economic democratization," has become the campaign buzzword, founded on deep voter discontent with income disparities and unfair competition that many blame on the chaebol whose tentacles reach into every sector of the economy.

The family-controlled conglomerates powered South Korea's post-war economic miracle and spearhead its booming export business, but they are also seen as suffocating small and medium-size firms at the cost of innovation and jobs.

All three main candidates — even Park Geun-hye from the traditionally pro-business ruling conservative party — have proposed reforms of varying degrees that would clip the chaebols' wings.

It was Park's father, the late military strongman Park Chung-hee, who allowed the chaebol to flourish under his 1962-79 autocratic rule and attain their dominant position in the national economy.

Park, who is bidding to become the country's first woman president, has called for tougher sentences for convicted chaebol heads and restrictions on circular equity investment among chaebol affiliates.

The most vocal chaebol critic is the independent candidate Ahn Cheol-soo, a popular software mogul who believes he would be one of many more self-made success stories if the chaebol were tamed.

Ahn has repeatedly likened the South's economy to a "zoo system" which small firms must enter as suppliers to survive, and then end up having their margins squeezed by unfair contracts to the point where they collapse.

"Once you are trapped as an animal in either Samsung zoo, or LG zoo ... you have no luxury of investing on research and development, and the only way out of the zoo is death," he said in a speech last year.

Outlining his economic program last week, Ahn said there was "no future in the existing economic system where a few dominate wealth and opportunities."

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