A South Korean retail giant has shelved controversial expansion plans, while a large bank has made hundreds of contract jobs permanent after South Korean President Moon Jae-in took office vowing to reform the family-run conglomerates that dominate the nation’s economy.
The 64-year-old liberal leader campaigned on a platform of curbing the power of the conglomerates, or chaebol.
On Wednesday, he nominated an economist nicknamed “chaebol sniper” for his shareholder activist campaigns as head of the antitrust regulator.
Moon has yet to spell out his reform agenda and the fractured parliament, controlled by conservative and moderate politicians, would likely only support modest changes given the conglomerates’ outsized role in the economy, but some companies are choosing to stay out of the crosshairs even before they see any legislation.
Business lobby groups say they plan to work with Moon to create jobs — the president’s No. 1 priority, according to his advisers.
South Korea’s four biggest conglomerates — Samsung Group, Hyundai Motor Co, SK Group and LG Corp — account for half the nation’s stock market value. They released full-page ads after Moon’s election, featuring his photograph and saying they “will be with [President Moon] to make a better country.”
“They don’t want to be the first to cause some kind of a problem,” National University of Singapore professor of business administration Chang Sea-jin said. “It’s time to be very careful.”
However, big business has largely stayed silent on Moon’s call to create jobs, underscoring the challenges in delivering on his signature agenda. Moon pledged to create 810,000 public-sector jobs and has chastised the conglomerates for not hiring.
Moon has vowed to end the practice of pardoning convicted corporate criminals, and to break the nexus of business and politics that was once again exposed in the scandal that led to the ouster of former South Korean president Park Geun-hye and the arrest of Samsung Group heir-apparent Jay Y. Lee, who is accused of bribing Park.
Both are facing trials on criminal charges and have denied any wrongdoing.
The conglomerates helped transform South Korea into Asia’s fourth-largest economy, but critics say they have used their cozy ties with the government to crowd out smaller businesses.
They also blame the conglomerates’ complex web of cross-shareholdings among group companies and opaque governance for the so-called “Korea Discount” — meaning their shares are typically undervalued in comparison to their global peers.
Within days of Moon’s election, Shinsegae Inc, South Korea’s third-largest department store operator, indefinitely postponed a land purchase agreement for a new store it was planning to build in Bucheon, southwest of Seoul.
Small business owners near the site have been protesting the plan.
During the election campaign, Moon pledged to place limitations on large shopping complexes, including on where they could be built, to protect smaller firms and self-employed shop owners.
“I understand Shinsegae postponed the deal because of concerns that if they sign immediately after the start of the new administration, they will fall out of favor and be disadvantaged,” Bucheon Mayor Kim Man-soo said on Facebook.
A Shinsegae official said the company had already scaled back the shopping mall project late last year so as not to hurt traditional markets. He declined to elaborate.
Shinsegae was spun off from Samsung in 1997, and Jay Y. Lee’s aunt is its chairwoman and largest shareholder.
Another shopping mall project in northwest Seoul by Lotte Shopping Co Ltd, which had been in the works for four years, might also be scrapped.
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