private businesses - SK Flashcards
reason for chaebols rise : government
effect: inflow of foreign loans to the chaebol accelerated, accounting for up to 36.6% of gross investments by early 1970s
created and rose under Park’s regime
in return, businessmen supported the dictatorship as it could successfully control a potentially violent workforce while proffering the financial elite cheap credit and tax incentives.
1962 Law Guaranteeing Repayment for Loans, allowing both principle and interest on foreign loans to be government-guaranteed
1960s: chaebols under the government
essentially managers for the state, had to follow instructions in order to access state financing and contracts.
Larger SK firms were assigned annual “export targets” by officials in the Ministry of Trade and Industry
[such that by the mid 1980s, Hyundai succeeded in winning substantial market share in the US]
change
late 1970s Chaebols too powerful, government unable to control them
reason:
1. much greater global reach of their activities and the intertwining of their networks with foreign capitalist corporations
-> meant that the chaebols were less prepared to accept state directions
[by the end of 1994, SK companies had begun 2650 projects overseas, involving investments of US$4.2 billion]
- increasing inefficiencies and lack of transparency started to hurt SK economy
[privatisation of banks and non-bank financial institutions (NBFIs), major liberalization of interest rates in 1988]
[despite a 10% legal limit on bank ownership, the 10 largest chaebols soon held up to 52% of all bank shares as a result of their control over NBFIs and by the simple use of registering bank shares in the names of family members by the chaebols owners]
-> finance tended to flow even more strongly to the chaebol themselves, increasing their size and power further
negative #effect of chaebols 1980s
short term profit-making, rather than long-term capital accumulation increasingly came to dominate their practices
[by 1988, only 10% of vacant land owed by the top 30 Chaebols was earmarked for plant construction]
[real estate speculation in 1988 and 1989 were 2.2 times the SK GNP]
