S.K.’s large firms more powerful than ever: study

Powerful companies have biggest grip on economy since 1981

South Korea’s major companies were surveyed to have a bigger influence on South Korea’s economy than they had before the 1997-98 financial crisis.

The Fair Trade Commission (FTC) said the nation’s top 50 companies accounted for 39.7 percent of the total shipments in mining and manufacturing industries in 2004, from 37.8 percent in 2003. The figures have shown rises and dips since the 1997-98 financial crisis, as some companies were liquidated or reacquired. The number of shipments from the top 100 companies rose to 46.4 percent in 2004, compared with 43.8 percent in 2002. The figure for 2004 is the highest since 1981, when the survey began, and passed the previous high of 38.4 percent in 1998.

These figures mean that South Korea’s major conglomerates have a bigger influence on the national economy than they have for the past 25 years.

The announcement is expected to lend further credence to the commission seeking to ban major companies from share crossholding in their affiliates. FTC Commissioner Kwon Oh-seung said, "If the investment limit [for share crossholding] is scrapped, major companies will welcome the move, but it will spell a loss for small and medium-sized companies in the long term."

A burst in the economic bubble for venture start-ups in 2002 is one of the key factors that have allowed major firms to regain a bigger foothold in the economy, the commission said. Another reason is a sharp growth in export-dependent companies, such as Samsung and Hyundai Motor Corp., at the same time that growth in other companies has stagnated, the commission said.

The amount of shipments assigned to the top three firms in several industries rose to 44 percent in 2004, compared to 43 percent in 2003. In particular, in five key industries with a market size worth more than 5 trillion won (US$5 billion) - automotive, oil refining, steel, semiconductors, and shipbuilding - the largest three companies in each industry accounted for more than 75 percent of shipments.

Seoul National University professor Lee Sang-seung said, "If major companies have a bigger influence in an industry, in general, they will probably abuse their market dominance. However, if they hold a bigger influence via normal corporate activities such as technology development, it would benefit customers. So, more accurate analysis is needed of the situation."