Rise of Lotte Group and modern Korea

By Kyung Moon Hwang

News of the arrest of the oldest daughter of the Lotte Group founder for suspected bribery and other misdeeds represents the latest chapter in the ongoing saga about the nation’s fifth-largest conglomerate, or chaebol.

Over the years, it seems most of the major conglomerates that dominate the South Korean economy have passed through very public struggles among the ruling family members, as if they were staging a television drama from the dynastic past.

Indeed Lotte’s aging founder, Shin Kyuk-ho, must feel like Yi Seong-gye, the founder of the Joseon Kingdom, who abdicated in the face of murderous infighting over the throne among his children.

Lotte’s place in modern Korea carries powerful historical overtones in other ways as well, including the complex hold of traditional family practices and Japan’s prominent role in South Korea’s economic development. The story begins in Ulsan, the home region of Shin Kyuk-ho, in the closing years of the Japanese colonial period, when the peninsula was caught in the throes of Japan’s war against China and the United States.

Back then Ulsan was not the powerhouse center of industry as it is now, so Shin made his way to nearby Busan, the thriving gateway to and, in many ways, product of Japan, in order to attend high school. Upon graduation he moved to Tokyo to attend Waseda University, somehow avoiding conscription into the battlefront as a student soldier.

This was also when Shin’s first daughter, Young-ja, was born, with a familiar name for that generation of Korean females, given that it could easily be rendered as a common Japanese name as well. Upon Korea’s liberation in 1945 Shin stayed in Japan, joining hundreds of thousands of Koreans who, for various reasons, made that difficult choice.

He began his company in the late 1940s and chose the name “Lotte” in reference to the love interest (“Charlotte”) of Werther, the anxious young protagonist in the famed novel by Goethe. This unusual name for a company thus reflected Japan’s outsized role in absorbing and transmitting the globalizing currents of Western culture in the early 20th century throughout East Asia, including of course in its colony of Korea.

As the young company formed into a producer of confectionaries, particularly chewing gum, in postwar Japan, Shin’s two sons, Dong-ju and Dong-bin, were born in the mid-1950s to a Japanese woman, a different mother from that of their older sister Young-ja.

Nearly 30 years later they would witness the birth of a fourth sibling, from yet another mother. All of Shin Kyuk-ho’s children would take leadership positions in the company, although not surprisingly it would be the two elder sons who held the most power.

As for the company’s development, the next major step came following the normalization treaty between South Korea and Japan in 1965, which opened the doors for Japanese investment in its developing neighbor and allowed Shin to expand into his home country.

Thereafter Lotte grew steadily in both countries, particularly South Korea, where the company gained a dominant standing in its original industry of food production. “Shin Ramyun,” perhaps its most famous product (along with the ubiquitous “Shrimp Crackers”), used the family’s name, which conveniently also means “spicy.” But Lotte gained prominence in other industries as well, such as hotels, shopping, resorts, sports (the Lotte Giants of Busan, the counterpart to the Chiba Lotte Marines near Tokyo), and, most impressively, construction.

The recently topped-off Lotte World Tower in Seoul’s Jamsil area, next to the Lotte World amusement park, is the culmination and symbol of Lotte Engineering and Construction’s extraordinary growth, as it now stands as Korea’s tallest skyscraper and one of the tallest in the world.

How a company known for its packaged gum developed into a builder of giant buildings is a story intimately tied to the ways South Korea’s economy nurtured the explosive expansion of family-owned companies through state aid, particularly since the 1960s. These conglomerates also grew through connections to Japan, not only through the normalization of relations but the historical basis established by Japan’s colonial rule, as seen in the life of Shin Kyuk-ho.

Now his sons, themselves in their early 60s, are battling over ultimate supremacy over the company that their father founded, which is interesting for many reasons, including that Dong-bin, the slightly younger brother, has sought to overturn the traditional Korean preference for the oldest son. But this, too, might reflect Japanese influence.

One of the major challenges in Japan’s colonial rule, in fact, came in harmonizing the two countries’s family customs. The Japanese encountered great difficulties in figuring out the intricacies of traditional Korean practices involving inheritance, adoption, concubines, their children, and how these realities could accommodate newer patterns of divorce and economic activity centered on the nuclear family.

The convergence of these strains appears to have played an important role in the development of Lotte Group up to the present day, as the founder’s children battle over their respective inheritances. It is said that Shin Kyuk-ho made sure to divide his time equally between his residences in Busan and Tokyo in order to reinforce the bi-national basis of his business empire.

His life story, and that of his company, highlighted the close interaction between the two countries in South Korea’s economic development, but the current difficulties also seem to issue reminders of this relationship’s complex hardships as well.

Kyung Moon Hwang is professor in the Departments of History and East Asian Languages and Cultures, University of Southern California. He is the author of “A History of Korea ― An Episodic Narrative” (Palgrave Macmillan, 2010). The Korean translation was published as 황경문, “맥락으로 읽는 새로운 한국사” (21세기 북스, 2011).