There is an opportunity in every crisis. And it seems to be Korea's family-controlled conglomerates that have put this management axiom into practice better than any other over the past two years.
The Fair Trade Commission recently reported that the number of firms affiliated with the nation's 30 largest chaebol increased from 681 in 2005 to 980 this past March. One-hundred-and-ninety firms, or 63.5 percent of 299 new companies, have been created since President Lee Myung-bak took office in February 2008.
This should surprise no one, as President Lee, himself a product of the chaebol system, has lifted almost all of the restrictions on these corporate behemoths to create jobs and quickly pull the nation out of the global recession, under his pro-business ― or more specifically, pro-big business ― policy.
The giant business groups are vying to expand again as if they had learned no lessons from the Asian financial crisis of 1997-98, and, fortunately or not, there have been few major fiascos witnessed so far, with the notable exception of the Gumho-Asiana Group, a construction-airline conglomerate which has barely escaped the crisis caused by excessive and ill-timed mergers and acquisitions.
Thanks in part to the hefty stimulus spending and to large exporters' impressive performances, Korea managed to get out of the worldwide business slump earlier than most. The problem is paying the cost for escaping the crisis through a return to old practices could be far larger and last far longer than the benefits.
The biggest victims of all are the nation's small- and medium-sized enterprises, which account for 99 percent of total businesses and 88 percent of employment. According to the Small Business Administration, the SMEs have taken out the government's policy loans at a pace the officials have never expected this year, indicating how cash-starved they are to stay afloat from the encroachment of their business domains by chaebol-affiliated competitors.
A case in point are the difficulties experienced by corner supermarket stores, many of which are in danger of shutdown in the face of ``super supermarkets," or SSMs, sprouting up in almost every neighborhood in large cities with the financial backing of conglomerates. Subsidiaries of the big-four chaebol are even eyeing to jump into the funeral service and water purifier rental businesses, traditionally domains for smaller enterprises, revealing their insatiable appetite for expansion.
The return to this time-old corporate expansion does more harm than good for the national economy. First, by absorbing the existing markets and businesses instead of developing new ideas and technology, these are stifling the entrepreneurial sprits of smaller and younger companies, a big damper for Korea Inc. Second, their capital-intensive business style does not allow the creation of many jobs contrary to what President Lee expects, as shown by their negligible records in new employment. Third, if a major chaebol goes belly up due to over-ambition, it would be taxpayers that bail out these seemingly too-big-to-fail groups.
Probably a decade is long enough to forget about the last crisis, but what's going on in Corporate Korea, including the return of convicted tycoons, shows the nation could be not so far away from the next one.
We hope the Lee administration, which has been blamed for turning back the clock of Korean politics and democracy to decades ago, would not do the same to the economy, too.