Chaebol Reforms Of South Korea Case Study
Chaebol Reforms of South Korea: Developmental State and Beyond,
Focusing on the Kim Administration (1998~2003)
International Studies
1569095 Yun Gyoung Choi
The unique Chaebol structure in South Korea could be said to be a vestige of the developmental state system in East Asia, in which the government provided almost unlimited support to emerging or prospective industries to achieve rapid economic growth. However, after the Asian Financial Crisis of 1997, suspicions arose that the ‘too big to fail’ Chaebols were, to a large extent, responsible for the instabilities in the domestic market. Ever since, following administrations have continuously brought up Chaebol reforms as an integral part of their policy concentrations. Three issues in this …show more content…
This brought with it a number of difficulties that come with overextended businesses, including that of moral hazard; many Chaebol leaders were convinced by the time of the crisis that their companies were too big to fail. In many instances, this was the case; the top 30 Chaebols had an average of 26.8 subsidiaries at the end of 1997 and they were much more likely to move into sectors unrelated to their core business than were their conglomerate counterparts in Japan. However, as the result of the state’s push, there have been huge changes in many areas of the Chaebol’s structure. The four largest Chaebols cut their total number of subsidiaries from 232 in 1997 to 137 in 1999. Hyundai and LG cut their debt-to-equity ratios to 181 percent and 184.2 percent, respectively and Samsung and SK registered debt-to-equity ratio of 161 percent and 166.3 percent as of …show more content…
It is debatable whether the governmental efforts to break up those systems refers to a decline of the influence of the East Asian developmental model in South Korea. Some may say it is still state-led industrial coordination, an extension of the developmental state model, others may say it is a backtrack to normalize the ‘too big to fail’ Chaebols and reset the influence of the government interventions behind them. With the new Moon administration also pledging to follow the steps of Chaebol reforms, the only way to find out may be to look out for the direction in which the reforms are
Focusing on the Kim Administration (1998~2003)
International Studies
1569095 Yun Gyoung Choi
The unique Chaebol structure in South Korea could be said to be a vestige of the developmental state system in East Asia, in which the government provided almost unlimited support to emerging or prospective industries to achieve rapid economic growth. However, after the Asian Financial Crisis of 1997, suspicions arose that the ‘too big to fail’ Chaebols were, to a large extent, responsible for the instabilities in the domestic market. Ever since, following administrations have continuously brought up Chaebol reforms as an integral part of their policy concentrations. Three issues in this …show more content…
This brought with it a number of difficulties that come with overextended businesses, including that of moral hazard; many Chaebol leaders were convinced by the time of the crisis that their companies were too big to fail. In many instances, this was the case; the top 30 Chaebols had an average of 26.8 subsidiaries at the end of 1997 and they were much more likely to move into sectors unrelated to their core business than were their conglomerate counterparts in Japan. However, as the result of the state’s push, there have been huge changes in many areas of the Chaebol’s structure. The four largest Chaebols cut their total number of subsidiaries from 232 in 1997 to 137 in 1999. Hyundai and LG cut their debt-to-equity ratios to 181 percent and 184.2 percent, respectively and Samsung and SK registered debt-to-equity ratio of 161 percent and 166.3 percent as of …show more content…
It is debatable whether the governmental efforts to break up those systems refers to a decline of the influence of the East Asian developmental model in South Korea. Some may say it is still state-led industrial coordination, an extension of the developmental state model, others may say it is a backtrack to normalize the ‘too big to fail’ Chaebols and reset the influence of the government interventions behind them. With the new Moon administration also pledging to follow the steps of Chaebol reforms, the only way to find out may be to look out for the direction in which the reforms are