Can South Korea’s untouchable chaebols change?

CNBC International

23 Feb 202412:15

Summary

TLDRChaebols, South Korea's family-run conglomerates like Samsung, Hyundai, and LG, have played a pivotal role in transforming the nation's economy from poverty in the 1960s to a global export powerhouse. Despite their economic dominance, accounting for nearly 60% of South Korea's GDP, these entities face criticism and calls for reform due to high-profile scandals and controversies. The government's support for startups and the rise of new industries like smart mobility are seen as potential drivers for change, with a growing sentiment against the traditional chaebol structure and its impact on the economy.

Takeaways

🤝 Chaebols are large South Korean conglomerates, often run by a single family, with total assets exceeding 5 trillion won.
📈 Over 80 chaebols exist in South Korea, with the top 10 accounting for nearly 60% of the country's GDP in 2021.
🌏 Chaebols have played a significant role in transforming South Korea's economy from poverty in the 1960s to a major global exporter.
📢 There is a growing call for change and innovation within chaebols to continue propelling South Korea forward.
🔊 High-profile scandals and controversies have been associated with chaebols, affecting their international reputation.
💡 The Korean government's Heavy-Chemical Industry Drive in the 1970s laid the foundation for the growth of chaebols.
📊 South Korea's GDP saw a monumental increase from less than $4 billion in 1960 to almost $67 billion by 1979.
🛠️ The Korea Fair Trade Commission was established in 1981 to regulate economic competition and address monopolistic practices.
🚀 Startups in South Korea are gaining momentum, with a 12% growth in non-real estate startups between 2020 and 2023.
🌱 The Korean government is encouraging the growth of green companies to meet carbon reduction goals and create jobs.
🌐 Globally, there are successful multi-generational family businesses that have transformed and adapted to modern times, like IBM, Ford, and Porsche.

Q & A

What is a chaebol?
-A chaebol is a large South Korean conglomerate, typically run by a single family, with extensive business interests and assets exceeding 5 trillion won.
How many chaebols are there in South Korea as of 2023?
-There are more than 80 chaebols in South Korea in 2023.
What percentage of South Korea's GDP did the top 10 chaebols account for in 2021?
-The top 10 chaebols accounted for almost 60% of South Korea's GDP in 2021.
What was the first manufactured item by a South Korean chaebol?
-The first manufactured item by a South Korean chaebol was a wig, exported to someone in New York.
Which sectors were selected for government subsidies under Park Chung-Hee's plan to pull South Korea out of poverty?
-The sectors selected for government subsidies were electronics, shipbuilding, machinery, petrochemicals, and non-ferrous metals.
What was the GDP of South Korea in 1960 and how did it change by 1979?
-In 1960, South Korea's GDP was less than $4 billion, and by 1979, it had jumped to almost $67 billion.
When was the Korea Fair Trade Commission established?
-The Korea Fair Trade Commission was established in 1981.
How has the startup scene in South Korea evolved between 2020 and 2023?
-Between 2020 and 2023, the number of non-real estate startups in South Korea grew by 12% to more than 581,000 companies.
What are some recent South Korean startups that have gained international recognition?
-Recent South Korean startups that have gained international recognition include messaging platform Kakao and e-commerce website Coupang.
What is the role of the Korea Fair Trade Commission?
-The Korea Fair Trade Commission is the country's regulatory authority for economic competition, ensuring fair business practices and preventing monopolies.
What are some challenges faced by chaebols in terms of public perception and internal practices?
-Chaebols face challenges such as high-profile scandals, controversies, and anti-chaebol sentiment fueled by corruption and financial scandals involving their leaders. Additionally, there are internal challenges like maintaining family succession and adapting to modern business practices.

Outlines

00:00

🌟 Chaebols: South Korea's Economic Giants

This paragraph discusses the concept of chaebols, which are large South Korean conglomerates typically controlled by a single family. It highlights the significant role of these conglomerates in the South Korean economy, with the top 10 chaebols accounting for nearly 60% of the GDP in 2021. The script mentions the presence of over 80 chaebols in South Korea and the transformation of the country's economy from poverty in the 1960s to a leading global exporter. Despite the economic success, there are concerns about the need for change and innovation, as well as the controversies and scandals associated with these corporate giants.

05:26

📈 The Evolution and Challenges of Chaebols

The second paragraph delves into the history and current state of chaebols, including the establishment of the Korea Fair Trade Commission to regulate economic competition. It discusses the growth of startups in South Korea, which are supported by increased government investment and are contributing to job creation and economic diversity. The paragraph also touches on the anti-chaebol sentiment fueled by corruption scandals and the issue of pardons for corporate leaders. It explores the traditional aspects of chaebols, such as family succession and the persistence of certain practices, and compares the South Korean model with other successful family-run businesses around the world.

10:31

🚀 Innovation and the Future of South Korean Business

The final paragraph focuses on the government's desire for job creation and the development of new sectors, particularly green companies, to meet environmental goals. It highlights the trend of individuals with experience in major chaebols starting their own businesses, using their knowledge and expertise. The paragraph also considers the preferences of a new generation that may not wish to work for large corporate groups, suggesting a potential shift in the South Korean business landscape over the next five years.

Mindmap

Keywords

💡Chaebols

Chaebols are large South Korean conglomerates typically controlled by a single family. They play a significant role in the South Korean economy, with the top 10 chaebols accounting for nearly 60% of the country's GDP. In the video, it's mentioned that these business groups have transformed South Korea from a poor nation in the 1960s to a global exporter, with Samsung being a leading example.

💡South Korean GDP

Gross Domestic Product (GDP) is a measure of the economic output of a country. In the context of the video, it highlights the economic dominance of chaebols in South Korea, as their combined revenue accounts for a significant portion of the country's GDP. This indicates the importance of chaebols to the national economy.

💡Heavy-Chemical Industry Drive

This was a government initiative implemented by Park Chung-Hee, South Korea’s third president, to promote economic growth by focusing on export-oriented sectors such as electronics, shipbuilding, machinery, petrochemicals, and non-ferrous metals. It was a pivotal policy that laid the foundation for the growth of chaebols in South Korea.

💡Korea Fair Trade Commission

This is South Korea's regulatory authority responsible for ensuring fair competition in the economy. It was established in 1981 to oversee and prevent monopolistic practices, which are often associated with the dominance of chaebols.

💡Startups

Startups are new businesses that are often seen as drivers of innovation and economic growth. In South Korea, startups are catching up, partly due to increased government investment, which is creating more jobs and fostering competition.

💡Anti-chaebol sentiment

This refers to the public's growing dissatisfaction with the power and influence of chaebols, often fueled by corruption and financial scandals involving their leaders. The sentiment reflects a desire for change and a more balanced economic landscape.

💡Family succession

In the context of chaebols, family succession refers to the traditional practice of passing leadership and control of the company down through generations within the same family. This can sometimes lead to a lack of diversity in leadership and resistance to change.

💡Smart Mobility

Smart Mobility is a concept that involves the integration of advanced technologies to improve the efficiency, safety, and sustainability of transportation systems. It's part of Hyundai's strategy to innovate and diversify beyond traditional automotive manufacturing.

💡Green companies

Green companies are businesses that focus on environmental sustainability and reducing their carbon footprint. The Korean government's support for such companies aligns with global efforts to combat climate change.

💡Multi-generational families in business

This concept refers to family-owned businesses that have been successfully passed down through multiple generations. It's a model that has been successful in various parts of the world, and the video suggests that South Korean chaebols could learn from these examples to adapt and thrive in the modern economy.

Highlights

Samsung, Hyundai, and LG are all chaebols, which are large South Korean conglomerates.

Chaebols are usually run by a single family and have total assets exceeding 5 trillion won.

Over 80 chaebols exist in South Korea, with the top 10 accounting for nearly 60% of the country's GDP in 2021.

The chaebol system has transformed South Korea's economy from one of the poorest to a major exporter.

Despite growth, there are calls for change and innovation within chaebols.

The top 5 chaebols in South Korea include Samsung, with others unnamed.

Chaebols have been involved in numerous high-profile scandals and controversies.

The average Korean citizen's perspective on chaebols differs from the international view.

South Korea's third president, Park Chung-Hee, implemented a plan to pull the country out of poverty, selecting five sectors for government subsidies.

The Korea Fair Trade Commission was established in 1981 to regulate economic competition.

South Korean startups are catching up due to increased government investment, creating more jobs and competition.

South Korea has seen a rise in non-real estate startups, with over 581,000 companies between 2020 and 2023.

Some startups like Kakao and Coupang are putting South Korea on the global map.

Anti-chaebol sentiment in South Korea has been fueled by corruption and financial scandals involving corporate heads.

Convicted corporate leaders have been pardoned, allowing them to serve their sentence through probation.

Chaebols have diversified into many different subsidiaries, some with over 100 affiliated companies.

Family succession and traditional leadership roles persist within chaebols, often limited to male family members.

Globally, there are successful multi-generational family businesses, such as IBM, Ford, and the Porsches in Germany.

Hyundai is moving into Smart Mobility, developing the brand in Korea and expanding overseas.

The Korean government aims to see job creation, new sectors, and more green companies to meet carbon reduction goals.

The maturing Korean population and experience within major groups are leading to a rise in startups.