Chaebol Korea's Economic Development Korea's Economy Has

Chaebol Korea's Economic Development Korea's economy has been focused on developing the chaebol and export markets, as well as on the growth of existing industries. The country's economic strength thus lies in its export-dependent businesses. The particular strength of these strategies lies in the extreme concentration of its industries. The chaebol system allows economic focus on a few already prosperous business factions, and this concentration leads to the prosperity known by the country as a result.

Indeed, the superchaebol in the four top positions account for 40 to 45% of Gross National Product in South Korea, which is higher than even Japan, from which the system was adopted. The chaebol system is however very dependent on government approval, since there is no central financial institution for each chaebol. Furthermore Korea's banks had been nationalized until the mid-1970s, which resulted in a prohibition from owning large shares in these banks.

The economic system related to the chaebol therefore has to go through government channels, complicating matters of economy and profit. The Chaebol as Dominant Industrial Organization The chaebol organization derives from Japan, under whose colonial rule Korea fell during the 1920s and 1930s. The system was meant to benefit the Japanese markets through a number of companies that, while privately owned, would be controlled by the central government. The system was not abandoned after Korea attained independence, but was adapted to suite the Korean culture and climate.

The reason for this was President Park Chung Hee in the head of state position from 1961 until 1979. Being an admirer of the Japanese, the President saw no reason to abandon the system created and endorsed by this country. The chaebol however is a system that differs from the Japanese-imposed system in a number of fundamental ways, one of which is ownership. Chaebol firms are mostly own by family units, for example.

While this is changing, it is still found that a significant number of top executives in chaebol are related to the founders of these firms. The system however currently finds itself in a difficult economic situation. The growth fostered by the government during the 1950s and 1960s has been stunted by the economic climate of later years. The devaluation of the won (the Korean currency) for example resulted in considerable losses, including the debts from expansion programs during the 1990s.

The apparent recovery from the crisis is seen as deceptive by analysts who continue to call for reform in the chaebol. One of the suggestions for such reform is the transformation from technology-importing to a technology-generating economy. Global Competitiveness Changing the economy from one system to another appears simple in theory, but cannot be implemented in a simple way.