By Kang Seung-woo
The economic concentration of the top 10 privately owned companies has increased in the manufacturing sector and stock market over the last five years, as its level hit a record high, a report said Wednesday.
Observers say that the concentration will have a negative impact on the nation’s economy.
“The economic concentration of conglomerates is sure to weaken the economic structure, as well as prevent continuous economic growth,” the Citizens’ Coalition for Economic Justice (CCEJ), a Seoul-based civic group, said in its public statement.
“If major companies take up a large portion of market profits, taking advantage of their superior market position and huge capital, smaller firms will have trouble surviving, which will eventually derail economic growth and deepen the polarization of the economy.”
According to Chaebul.com, an Internet-based researcher, Statistics Korea and Korea Exchange (KRX), the combined sales of 539 affiliates of the 10 major companies excluding those from banks, insurers and brokerages reached 756 trillion won ($705.35 billion) last year, accounting for 41.1 percent of the total in the manufacturing industry.
This is the first time for their portion in the sector to exceed 40 percent.
Between 2005 and 2010, collective sales from the 10 conglomerates increased 83.5 percent, from 412 trillion to 756 trillion won.
Overall, the increase was tallied at 53.8 percent from 1,196 trillion to 1,840 trillion won.
The rest of the industry managed 38.3-percent growth.
In 2005, sales by the top conglomerates remained at 412 trillion won, or 34.4 percent of the total for the manufacturing sector, but grew to 37.9 percent in 2009.
Among the 10 companies, Samsung Group’s subsidiaries nearly doubled sales in the cited period, from 109 trillion won in 2005 to 209 trillion won in 2010, to boost its share of all manufacturing-related sales to 11.4 percent, up from 9.1 percent in 2005.
Hyundai Motor, the nation’s No. 1 automaker, boosted its sales by 53 trillion to 124 trillion won, while SK Group and LG Group also topped the 100-trillion won mark at 112 trillion and 107 trillion respectively.
Conglomerates’ influence on the stock market has increased.
The report also said that the combined market value of the listed affiliates of the surveyed conglomerates, better known as chaebol, more than halved the overall value of shares listed on the Seoul bureau, as it came to 698.73 trillion won as of Aug. 1, or 52.20 percent of the stock market.
Their aggregate value stood at 277.38 trillion won in 2008, accounting for 44.5 percent of the stock exchange and climbed to 447.85 trillion won, or 46.32 percent, in 2009.
“Since 2007, when the ceiling on equity investment was lifted, assets of conglomerates and their affiliates have grown fast,” Korea Development Institute (KDI) professor Kim Woo-chan was quoted as saying by Yonhap News. “The government’s toleration of large companies’ economic concentration has contributed to the trend.”