Chaebol reduce inter-affiliate trading

By Yi Whan-woo

Inter-affiliate trading among the country’s top 30 conglomerates reduced for the first time last year since 2008, data showed Monday.

Combined in-house deals made among the family-controlled business groups or chaebols including Samsung and Hyundai was 160.1 trillion won (141.98 billion) in 2012, down from 161.8 trillion won in 2011, according to data compiled by Chaebul.com, a website that publishes statistics relating to Korea’s conglomerates.

The figure reflects efforts taken by the chaebol to reduce the number of lucrative business deals with their respective affiliates and instead share them among small -and medium-sized enterprises (SMEs), the website said.

Inter-affiliate trading stood at 101.6 trillion won in 2008, 108.4 trillion won in 2009, and soared to 128.1 trillion won in 2010.

“It can be interpreted that the corporate giants are now geared toward sharing their jobs with SMEs following growing concern over the economic dominance of large firms,” Chaebul.com commented.

It cited the data that inter-affiliate trading accounted for 12.8 percent of the family-owned conglomerates’ total revenue of 1.25 quadrillion in 2012, down from 13.75 percent a year earlier with a combined revenue of 12.5 quadrillion won.

“The rate fell for the first time since 2008, and it is significant in a way that the chaebol are beginning to change in terms of their business management,” the website said.

The Park Geun-hye administration has been discussing measures aimed at reining in conglomerates to fulfill President Park’s commitment to co-prosperity among SMEs and larger firms.

The latter groups have been criticized for awarding lucrative business deals to their affiliates, which critics claim distorted fair market competition and stripped smaller companies of business opportunities.

Of the 30 conglomerates surveyed, 17 of them reduced inter-affiliate trading last year.

The country’s largest conglomerate, Samsung Group, cut business deals within its subsidiaries to 28.2 trillion won in 2012, down from 35.3 trillion won in 2011. Its revenue jumped to 312.5 trillion won in 2012 from 270.8 trillion won in the same time period.

OCI, a polysilicon manufacturer, also saw its inter-affiliate trading drop to 800 billion won in 2012 from 1.5 trillion won in 2011. The firm’s inter-affiliate trading rate out of its total revenue dipped 6.85 percent to 12.85 percent last year.

“And the rate was the highest among all the 30 firms,” Chaebul.com said.

Trading within the country’s’ No. 2 conglomerate Hyundai Motor Group stood at 35 trillion won in 2012, up from 32.2 trillion won in 2011.