Did government policy influence the development of large local firms and/or business groups in South Korea? What have been some of the long run benefits and problematic legacies of such policies?
- The export promotion policy.
- Benefits of the export promotion policy.
- Problems of the export promotion policy.
- The heavy and chemical industries (HCI) policies.
- Benefits and problems of the heavy and chemical industries (HCI) policy.
- The financial liberalization.
- The benefits of the financial liberalization.
- The problems of the financial liberalization.
- Commonalities between these three policies.
The South-korean state’s industrialization programs achieved national economic ob-jectives through the use of government economic policies, defined as “measures by which a government attempts to influence the economy” (Encyclopedia Britannica, 2008). This paper focus on three government economic policies namely ‘Export-oriented in-dustries’ (EOI), ‘Heavy and Chemical industries’(HCI) and ‘Financial Liberalization’(FL). It argues these policies influenced the development of business groups, called chae-bols. They consist of “large companies in highly diversified business areas, owned and managed by family members or relatives” (cited in Thomson 1998, 139). Long run benefits and problematic legacies resulted from these policies from 1960s to 1997. This essay is split into four parts. In the three first parts each policy discusses the influence on the develop-ment of the business groups and the resulting problems and benefits, respectively. The fourth part (4) attempts to analyze some common problems and benefits that are present in these three policies.
[...] The benefits of the financial liberalization Chaebols-owned commercial banks and the development of NBFIs Firstly, chaebols facilitated their access to funds in addition to develop NBFIs. In fact, after the FL, assets portfolio of commercial banks remained constrained by specific limits on lending to large firms (Harvie and Lee 2003, 276). In response, business groups expanded non-banking financial operations in order to broaden their internal capital market capabilities (Kim et al by enjoying free access to a substantial amount of funding from NBFIs (Kwon 2004, 84). [...]
[...] Benefits of the export promotion policy The growth of internal investment resources Firstly, the export promotion plan led to increase in employment, income and savings, by enabling the economy to benefit from economies of scale in production, technology transfers (Harvie and Lee 2003, 270) and new business opportunities (Kim 1999). This exhibited the greatest growth in the 1970’s (Thomson 1998, 218) where nearly 60% of exports were handled by four chaebols, including Samsung (Kim 2002, 172). The evidence of shared-risk investments Secondly, Thompson (1998, 219) says chaebols benefited from shared-risks investments with the government. [...]
[...] Hong The Evolution and Restructuring of Diversified Business Groups in Emerging Markets: The Lessons from the Chaebols in Korea. Asia Pacific Journal of Management: Corporate Crisis and Turnaround in Asia, 25-48. (accessed April from ABI/INFORM Global database). Kim, J. K An estimation of the productive efficiency of chaebols of Korea and their reform. International Journal of Social Economics, 172-186. (accessed April from ABI/INFORM Global database). Kim, L Building technological capability for industrialization: Analytical frameworks and Korea’s experience. Industrial and Corporate Change, 111-136. [...]
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