Korea's chaebol bounce back stronger than ever

PUBLISHED : Monday, 11 September, 2006, 12:00am
UPDATED : Monday, 11 September, 2006, 12:00am

The chaebol - the giant, family-run empires behind South Korea's economic miracle - have come back stronger than ever since the economic crisis of 1997-98 brought them to their knees.

That crisis exposed the conglomerates' excessive borrowing and size-is-all strategy.

'A key message of corporate campaigns was that major chaebol could do anything given sufficient cheap capital and abundant labour. Hence the chips-to-ships tagline used by Samsung,' said Neil Drewitt, a branding expert.

'Millions of dollars spent on name recognition were wasted as non-Korean consumers failed to understand what these companies did or what products they made,' he said.

From 1998, the Kim Dae-jung government forced the sprawling groups to divest and specialise in their core lines.

Businesses went under. In 1999, Daewoo Group became the world's biggest bankruptcy, under debts of US$80 billion.

But elsewhere, the results were spectacular.

Samsung Electronics, the erstwhile vendor of copycat electronics products, is now a top global digital media brand.

Hyundai Motor has established itself as a quality carmaker rather than the butt of the jokes it had been in the early 1990s.

Even so, restructuring did not go as far as some would like. Labour risk remains as do issues of governance, transparency and shareholders' rights. And some conglomerates seem to be above the law.

Industrial Research and Consulting director Hank Morris said: 'The chaebol were pushed into restructuring, but they fought a strong rearguard action. 'I don't think there is much emphasis in government circles at further reform.'