12-20-97 : Chaebol Attentive to Kim Dae-jung's Economic Policy; Reshaping
Business Strategies with Expectation, Uneasiness
By Chun Sung-woo Staff reporter
Large business conglomerates, or chaebol, whose debt-financed expansion is blamed for the
economic crisis which has led to the International Monetary Fund (IMF) bailout loan, are now
busy reshaping their strategies to better suit the policies of President-elect Kim Dae-jung.
Officials at major conglomerates said yesterday that they are cautiously gauging Kim's
keynote policies on chaebol, giant, family-controlled, highly-leveraged business groups. On
the other hand, the officials said, some business groups have a guarded optimism that Kim's
chaebol policy will be little different from those of his predecessors.
''The consensus among the business community, however, is that President-elect Kim will
push for the voluntary industrial restructuring of large companies,'' an executive at a major
chaebol group said. He cited Kim's pledge that he would first resort to free market principles
to check the economic concentration on a few chaebol. If and when the chaebols fail to come
up with self-renovation, however, Kim would have no other choice but to reinforce them, the
official said. ''This is especially evident, considering the fact that chaebols' excessive and
overlapping investments have been the main reason for the current economic fiasco which
brought about the IMF retrenchment system,'' said the executive while requesting anonymity.
''Kim will most probably take some action, starting with marginal businesses and
overcrowded sectors,'' he said. Industry sources, while being careful of speculating on
chaebol's ties with him, show interest in those groups based in South Cholla Province, his
political stronghold. They include Kia, Kumho, Haitai, Daesang and Halla groups. Stock
investors seemed to stake hope on some of the Cholla-based groups. Shares of Haitai and
Kumho subsidiaries rose in the morning session yesterday.
One of those conglomerates which sources said feel a sense of more uncertainty than
expectation about Kim's view of chaebol is the Samsung Group. The group, under
speculation that it secretly supported a candidate other than Kim, may face an increased
pressure to abandon its car business, according to the sources. The domestic car industry is
cited as a typical case of chaebol's overlapping investments in the saturated local market even
amid the economic slowdown. It has been under fire for advancing into the crowded car
sector and making bids to take over the automotive Kia Group when it was at the brink of
bankruptcy.
''The urgent economic task facing the new President is to ease currency turmoil and recover
the national economy, rather than to penalize some firms for past wrongdoing,'' a Samsung
official said, requesting anonymity. He also dismissed the speculation on the group's ties with
Kim as rumor. The Hyundai Group hold guarded but higher expectation than the Samsung
Group.
Kim Dae-jung has noted that he would not oppose an integrated ironworks project that
Hyundai pushes for over the disapproval by the Kim Young-sam administration. A Hyundai
official said on condition of anonymity that his group has met opposition from the Kim
government over many of its new businesses including the ironworks project, possibly
because its founder ran against him in the 1992 presidential election. However, industry
sources say that it is questionable whether Hyundai's ironworks project, also cited as a case
of overlapping investments, can be realized without a hitch under the IMF system, which
requires contraction across all industries.
The Daewoo and LG Groups are known to have maintained no special relation with certain
candidates. The Kia and Halla Groups, both under court receivership, seem to hold some
optimism about Kim. He said when he visited a factory of Kia Motors Corp. on his campaign
trail that he opposed a third-party takeover of the company. Halla's flagship unit, Halla
Engineering and Heavy Ind., has built a shipyard in South Cholla Province. ''Frankly
speaking, change of power is some burden on businesses. Small and medium companies are
important in economic recovery, as Kim has emphasized. Even if so, the importance of large
companies should not be overlooked,'' an official of the Federation of Korean Industries said.
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