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South Korea misses its chance for economic overhaul

Sprawling conglomerates dominate South Korea’s economy, making it hard to retool a creaking economic model. With a presidential election looming and financial technology firms growing, the market is ripe for disruption.

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South Korean president Moon Jae-in.
Photo: Getty

South Korea owes much of its economic success to the giant conglomerates, or chaebols, that tower over the nation. But over time, these family-owned empires amassed far too much power, stifling creativity, crushing innovative startups, and threatening the country’s economic renewal.

So powerful are they, in fact, that chaebols managed to rebuff pledges by three consecutive governments to reduce their reach across Asia’s fourth-largest economy. And judging from the jockeying ahead of the March 2022 presidential election, investors have reason to worry the chaebols will outflank a fourth government.

This “Korean government–chaebol coalition,” as Hyung-a Kim, professor of Korean politics at The Australian National University, calls it, “has degenerated into a winner-takes-all political economy in which chaebols have accumulated an exorbitant pile of cash reserves, as they have monopolised the country’s gains from growth with minimal trickle-down effect.”

Korea is often called the “Republic of Samsung” because of the scale and political influence of its biggest business group. But Samsung is a microcosm of the wider problem.

Lee Jae-yong, who is chairman of Samsung and also vice chairman of Samsung Electronics, has been in and out of prison since 2017, following convictions for alleged bribery and embezzlement.

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William Pesek is a freelance contributor for Asiamoney, based in Tokyo.
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