If you’re a Korean student, it’s where you want to land a job. If you’re looking to get married and the potential significant other isn’t a lawyer or a doctor, then mom and dad will want him to be working for a Chaebol (재벌). Chaebol are a form of Korean business conglomerate that are often family controlled. Many you will have heard of, such as Samsung, Hyundai, LG and Kia to name a few, are usually into a lot more than you realize.
Samsung, for example, is the world’s biggest producer of electronics, such as phones (the world’s largest mobile phone maker) and other household electronics. But did you know that they are also the world’s second biggest shipbuilder? The world’s second largest microchip maker? One of the world’s biggest construction companies (they have built some of the most iconic buildings in the world: one of the two Petronas Towers in Malaysia, Taipei 101 in Taiwan and the Burj Khalifa in United Arab Emirates)? The world’s 14th largest life insurance companies? A huge aerospace and defense company? And the world’s 16th biggest advertising agency?
Interestingly, two of Samsung’s major clients are also intertwined with the province I grew up in and the country I spent the last 6 years in. The United Arab Emirates government has awarded a consortium of South Korean firms – including Samsung, Korea Electric Power Corp and Hyundai – a deal worth 40 billion dollars to build nuclear power plants in the United Arab Emirates. This relates to a post I did on here when Etihad opened up it’s flights to Korea.
The Ontario government has also signed off one of the world’s largest renewable energy projects, a $6.6bn deal that will result in 2,500 MW of new wind and solar energy capacity being built. Under the agreement a consortium – led by Samsung and the Korea Electric Power Corporation – will manage the development of 2,000 MW-worth of new wind farms and 500 MW of solar capacity, while also building a manufacturing supply chain in the province.
The Chaebol grew out of the Korean war and began diversifying and solidifying their monopolies as the Korean government turned its focus on industrialization and nationalization. It was because of the Chaebol and their heavy industrial leadership, export and manufacturing, that South Korea became one of the four Asian Tigers.
But it was not until the Asian financial crisis in 1997 that the weaknesses of the system were widely understood. According to Wikipedia, of the 30 largest chaebol, 11 collapsed between July 1997 and June 1999. The chaebol were heavily invested in export-oriented manufacturing, neglecting the domestic market, and exposing the economy to any downturns in overseas markets. In competing with each other, they had built up unsustainable overcapacity. For example, on the eve of the crisis South Korea, with a population only ranked at #26 in the world, had seven major automobile manufacturers.
As with any monopolistic conglomerate, eventually investigations began exposing widespread corruption in the chaebol, particularly fraudulent accounting and bribery, but also involvement in political corruption. Most chaebol have played a significant role in South Korean politics both publicly and very much behind the scenes. Despite recent government attempts to reform the economic system, the chaebol continue to dominate South Korea’s economy. Hyundai and SK Group have been implicated in separate scandals involving both presidents. Samsung President Lee Kun-hee resigned amid charges of tax evasion and breach of trust in April 2008. The Federation of Korean Industries, a consortium of chaebol, has taken a leading role in resisting changes.
So Chaebol will remain, and in fact are flourishing more than ever. Samsung is one example, however, Hyundai is also doing very well. There is also a world cultural export of Korean pop music, movies and television, which has given Korean brands a new panache.
This is probably why, as a recent article in Bloomberg described, many university graduates in Korea are turning more to Chaebol rather than become lawyers and doctors. “As more Korean companies become global brands, their appeal to alumni of the nation’s top schools will strengthen, says Jasper Kim, an international studies professor at Ewha Womans University in Seoul. The key is what Kim calls “the SNS trifecta” of stability, nationalism, and social status. There’s “a unique sense here in Korea that working for a large Korean firm is not just valuable for the job seeker, but also good for the country itself,” Kim said in an e-mail. This “resonates not only with the individual job seeker, but also with the individual’s collective networks—from family to friends and even one’s foes.”
I find the notion of Chaebol fascinating. Please share your own thoughts in the comments.