[보도]South Korean Family Conglomerates Pressured

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SEOUL — In Parliament, lawmakers call them “beasts.” Newspaper editorials liken them to unfettered predators robbing ordinary people of their livelihood. President Lee Myung-bak, once an ally, has withdrawn his promise to cut taxes for them, instead urging them to win “respect from the people” by doing more to help the poor.

 
Seongjoon Cho/Bloomberg News
A ship under construction in the dry dock at the Hyundai Heavy Industries in Ulsan, South Korea. The world‘s largest shipbuilder is a a typical chaebol success story of a family business built up into an industrial giant.

This is not a happy time for the chaebol, the family-controlled conglomerates of South Korea.

Abroad, they may finally be getting the recognition they have so long striven for, with their cars and cellphones competing in global markets. But at home, as one conservative mass-circulation daily, the Chosun Ilbo, noted in a recent editorial, they are attacked “like public enemies.”

Koreans have grown more uneasy as increasing consumer prices and rising household debts have squeezed their standard of living. Meanwhile, the big conglomerates have generated healthy profits for their owners and expanded their international reach.

“People got disillusioned when they saw big businesses make record profits and roar in the global markets but their own lives got worse,” said Kim Byoung-kweon, an economist at Corea Institute for New Society.

The chaebol and the government are grappling with the rising discontent.

“If you are successful abroad but fail at home, you can’t call that a success,” Chung Mong-joon, one of the country’s leading business magnates, said in a telephone interview, referring to the image problem the chaebol face in South Korea. “Our businesses need to build ties with ordinary citizens.”

Mr. Chung’s Hyundai Heavy Industries, the world’s largest shipbuilder, offers a typical chaebol success story of a family business built up into an industrial giant. Now, he and his peers are trying to show their social conscience.

Last month, Mr. Chung, also a national legislator with presidential ambitions, and his brothers, all owners of Hyundai subsidiaries, made donations worth 1 trillion won, or $930 million, to help needy students and young job seekers.

Even though a sizable amount of the money donated had been pledged years earlier to atone for corruption scandals, Mr. Lee lauded the acts of charity as “a cultural change” in a country where rich businessmen are often accused of bequeathing their fortunes to their children, rather than sharing them with the general populace.

In a further attempt to woo the broader public, Mr. Lee’s government and the governing Grand National Party said last week that they would suspend tax cuts for big businesses, increase subsidies for low-wage temporary workers and reduce college tuition.

Those measures were criticized as “utter populism” by the daily newspaper Munhwa Ilbo. But Mr. Lee was seeking to counter successful efforts by his political opponents to tap the discontent over income disparities.

Since last year, the governing party has lost a series of local and parliamentary special elections. The opposition has seized on the perceived economic “polarization” to galvanize voters.

“It has become a fashion among politicians to bash the rich and chaebol to win votes,” said Kwon Hyuk-cheol of the pro-business Center for Free Enterprise.

The conglomerates are in some ways victims of their own hard-driven success.

While struggling to rebuild the economy after the 1950-53 Korean War, the military dictators of South Korea favored a handful of families with tax benefits, special loans, anti-labor policies, cheap electricity and other subsidies. They grew into industrial giants, each commanding a fleet of subsidiaries. The policy also left South Koreans with a belief that they had participated in and made sacrifices for the achievements of the chaebol, said Mr. Kim of the Corea Institute.

Today, conglomerates like Samsung, Hyundai and LG ship more than 70 percent of the country’s exports, which in turn account for half its gross domestic product. They also dominate domestic markets for cars, TV sets, credit cards and cellphones.

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The conglomerates have taken pride in overtaking Japan, Korea’s historical rival, in industries like shipbuilding and computer chips. But they have also regularly run into controversy over the years, as many of their chiefs were convicted of bribing politicians, embezzling company funds and avoiding taxes.

Politicians, both in power and in opposition, used to collect illegal campaign donations from the chaebol to keep their political machines running. At the same time, they have also tried to rein in these industrial behemoths at the heart of the country’s economy by demanding that they be more transparent about some of their financial dealings and fairer in competing with smaller firms. But efforts to change the chaebol have often been stymied by concern that too many restrictions might harm the overall economy.

When Mr. Lee, a former Hyundai executive, became president in 2008, he vowed to be “business friendly.” He cut taxes and eased restrictions on big businesses, arguing that their success would trickle down to the rest of the economy with increased investment and more jobs.

But under his government, critics say, the gap between big and small businesses, and rich and poor, has only widened.

Last year, big businesses’ net profit accounted for 7.36 percent of their revenues, while the corresponding figure for smaller businesses was 3.46 percent, according to government data analyzed by the Corea Institute. The gaps in productivity and wages also widened between the chaebol and smaller businesses, which provide 90 percent of the jobs in South Korea.

In the second quarter of this year, average disposable household income for the wealthiest 20 percent increased 5.3 percent, while that of the poorest 20 percent inched up by less than 1 percent, according to the National Statistical Office.

Mr. Lee’s government argues that the gap between rich and poor has recently begun to narrow, if the government’s expanded social welfare programs are taken into account.

And the Federation of Korean Industries, which speaks on behalf of big businesses, insists that the top 30 business groups in South Korea are doing their part for the economy, hiring 124,000 people this year, the largest annual recruitment ever, and investing 114.8 trillion won, up 14 percent from last year.

“Samsung firmly believes in supporting growth of small- and medium-sized enterprises, as their success also benefits larger companies and the economy as a whole,” said Lee Keon-hyok, head of global communications at Samsung, the largest conglomerate in South Korea.

Earlier this year, Samsung signed “co-prosperity” pacts with smaller partners and suppliers to provide financial and other support.

But the conglomerates are nonetheless struggling to win the trust of smaller companies. In a survey by the Korean Federation of Small and Medium Business last October, the biggest fear among small-business people was of losing customers to the expansion of big businesses.

In recent years, the chaebol created companies that generated huge profits by dominating areas like logistics and the supply of parts and expendables for other chaebol subsidiaries. They also squeezed families making a living at traditional markets and mom-and-pop stores by building wholesale and retail chains.

In a display of public feeling against the chaebol, activists and ordinary citizens chartered “buses of hope” to travel to the southern port city of Busan to show their support for a gaunt female labor activist. She has been protesting layoffs at a shipyard owned by the conglomerate Hanjin for 250 days by barricading herself at the top of a giant crane.

When he donated 500 billion won last month, Chung Mong-koo, chairman of the Hyundai-Kia Automotive Group, one of the world’s largest carmakers, said “his heart ached” when he heard of the plight of college students who struggled with the burden of academic loans. He said he wanted to give them “hope.”

But not all South Koreans were impressed.

Some members of chaebol families have promised huge charitable donations and received light sentences from courts after being convicted of corruption. You Jong-il, an outspoken chaebol critic at the K.D.I. School of Public Policy and Management, called it “bribing the society.”

In 2007, when Mr. Chung of Hyundai-Kia was convicted of embezzlement, he sought the court’s lenience by vowing to donate 840 billion won by 2013. He received a suspended sentence. With his donation last month, he was fulfilling part of that promise.

“It’s good for chaebol to return some of their profits to society,” Mr. You said. “But what they need to do first is to honor laws and fair competition.”