Outsized conglomerates weigh on Korea's growth

The oft-smiling Lee Jae-yong is both South Korea's biggest hope and its biggest problem.

The 46-year-old heir apparent to lead Samsung Electronics has been the object of media obsession since his 72-year-old father disappeared into a hospital. Lee Kun-hee, Samsung's chairman and Korea's richest man, had emergency surgery in May after suffering a heart attack. The nation is already moving on to Lee the younger, with analysts and investors praying he'll steer the family business well.

What's unfortunate is that the future of 50 million people hangs in the balance as this family drama plays out. One company doesn't make an entire economy, of course. But Samsung's outsized role in Korea makes the old axiom about General Motors - as GM goes, so goes America - seem quaint. Samsung remains the core of Korea's family-run conglomerates, or chaebol.

The five biggest ones generate about two-thirds of gross domestic product, and none is more dominant than Samsung, which counts more than 70 companies under its name. If the conglomerate closed shop tomorrow, the equivalent of 25 per cent of South Korea's GDP would vanish. Is it any wonder Koreans joke that they hail from the Republic of Samsung?

Handing off such an economically vital, publicly traded company from father to son to grandson doesn't reflect well on Korea's global brand. Why don't shareholders speak out about against the blatant nepotism exercised by most chaebol.

What about President Park Geun-hye, who rarely misses a chance to talk about the need for the country to evolve?

The transition from Lee to Lee illustrates why South Korea risks losing ground. The Organisation for Economic Cooperation and Development issued a report last week on the structural weaknesses that threaten to undermine Korea's effort to match Japan's living standards. None looms larger than the country's domineering chaebol.