(AA) Focus on South Korea

esperanto (lingvoj@lds.co.uk)
Sun, 21 Apr 1996 03:58:20 +0200

Extract from FREEDOM 20th April 1996

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Population: 43.6m
Pop. per sq. km: 456
Human develop ind: 87
Av ann inf 88-93: 7.0%
Main export dest: Japan (23.8%)
Debt as % of GDP: 14.6
Cost of living: 108


The South Korean miracle continues unabated: 7%
economic growth expected this year, government
unemployment figures at around 2% and annual per
capita income having recently passed the $10,000
milestone. So why did nearly 200 owners of small
businesses commit suicide last year?
Geared from the beginning, when under military
dictatorship, to the international economy of (Japanese)
value added goods South Korea did the sensible thing and
remembered to build corporations in her own back yard.
Unlike Hong Kong and Taiwan who have turned instead to
legions of small firms and notorious sweatshops South
Korea has seen the rise of the Chaebol - huge sprawling
conglomerates whose tentacles reach out to dominate the
commanding heights of the economy. These are the guys
who command the heavy industry whilst the lighter
technology is handled by the Japanese. The two - when
times are fair - represent the wealth and capital of the
country whose only resource available for exploitation is its
In the 60s and 70s the Chaebol got all the breaks.
Exporters got bank loans at heavily subsidised rates, tarrifs
on imported raw materials were suspended as was income
tax. These policies taken together in some cases cut
corporate costs by some 40% and by the beginning of the
80s the top 30 companies accounted for 60% of GNP and
the top 10 controlled a third of all exports. Such deliberate
nurturing of big industry - going hand in hand with brutal
labour supression, again under the military dictatorship -
also benefited in the 1980s from the strong Japanese Yen.
The Korean won - pegged to the US dollar - was able to
soak up much of the Japanese South East Asian export
The Chaebol, who were benefiting from all this, were
essentially dynasties whose combined numbers formed a
social class unto themselves benefiting from their symbiotic
relationship with the state. The same of course could not be
said for all Koreans. The 1985 census gave South Korea a
population of 40.5 million which placed it as the world's
fourth most densely populated country, with 408 persons per
square kilometre. Nearly a quarter of the population was
resident in the greater Seoul area. This is the home of
wealth centered almost exclusively in the largest cities and
their metropolitan regions where living standards are highest
and public and private investment is most noticeable. The
result is that the cities of Saoul, Incheon, and Anyang and
the surrounding province of Gyeonggi, in the Northwestern
corner of the country, constitute a clear core of prosperity
with a fragmented periphery that corresponds to the
highland regions of the south and northeast.

Today it is reported that around 20% of Koreans control
some 42% of the countries wealth. Recent budgetary policy
threatens to deepen the divide with a growing group of
destitute people at the bottom of the pile. At the lower end of
society, it is estimated that over three million people live in
poverty, reflected in a figure from the South Korean
Economic Planning Board reporting that 7.7% of the entire
population receive significant public assistance.1
Indeed perhaps the situation would be even worse were it
not for the traditional militancy of Korean labour who have
always demanded their share. The Economic Planning
Board calculated that industrial production and exports lost
US $3 billion in the first quarter of 1989 due to industrial
action. Wages in '87 had been forced up by 12% and the
following two years (88 and 89) both saw increases of 20%.
The response of capital to such limited advances for labour
was predictable: relocation. And indeed during 1989 no
fewer than 250 medium sized firms relocated to SE Asia.
Thus the economy is becoming more polarised. On the one
hand we have non-Chaebol businesses which employ some
90% of the workforce. They have difficulty securing credit
and suffer delayed payments from the big boys for
subcontracted work. In addition they have to survive in the
rarefied atmosphere of the world market. 14,000 went
bankrupt last year and, as we say, the response of 250 of
their owners was the ultimate one. 'The governments
economics policies are heaven for big business but hell for
small companies', says Mr Lee Chong-chou in the Financial
Times (2/4/96).
The situation was not helped by the disclosure last year
that the Chaebol had given more than $1 billion in payments
to former presidents Roh Tae-woo and Chun Doo-hwan who
are now on trial in a cynical move by the ruling party to win
votes. We say cynical because the other culprits, those who
gave the money, go unpunished as President Kim hesitates
to attack the interests of those who hold the key to the
country's economic future. Indeed the oposition is accusing
Mr Kim - till now felt to be above reproach - of accepting
illegal payments for his 1992 presidential campaign. In
response the ruling party has accused the opposition of
selling nominations in the recent general election in return
for contributions. Of course the possibility that both
accusations are true cannot be discounted: 'The recent
political scandals,' said one electoral candidate, 'have only
convinced the public that all politicians are corrupt.' Perhaps
there is some hope.