by Thomas K. Wash
On March 10, Park Geun-hye was removed from her position as president of South Korea. Her ouster came on the heels of a scandal involving her close confidant who is accused of seeking bribes from chaebols, a group of family-owned multinational conglomerates that dominate the South Korean economy, to curry favor with the Park administration. Prior to the scandal, Park’s political party, Liberty Korea, had been accused of prioritizing the interests of the chaebols over the interests of the Korean people.
This controversy has paved the way for populist candidate Moon Jae-in, from the Democratic Party of Korea, to rise to the presidency. It is assumed that he will look to loosen government ties with chaebols. Recently, chaebols have come under scrutiny as many people feel that their overall size and dominance have constrained the economy. Currently, South Korea suffers from high youth unemployment, rising household debt and rising income inequality. Moon Jae-in has vowed to tackle each of these problems in addition to chaebol reform. This task may prove to be difficult as the chaebols have accumulated a lot of political clout over the years, thus he may find it difficult to pass serious reforms through parliament.
In this report, we offer a brief history on the origins of chaebols and their influence in lifting the country out of poverty. From there, we will focus on the role the Asian Financial Crisis played in changing public attitude toward chaebols and examine possible chaebol reforms. Finally, we will conclude with market ramifications.