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?

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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?

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Abstract

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.

Introduction.
The export promotion policy.
1. Benefits of the export promotion policy.
2. Problems of the export promotion policy.
The heavy and chemical industries (HCI) policies.
1. Benefits and problems of the heavy and chemical industries (HCI) policy.
The financial liberalization.
1. The benefits of the financial liberalization.
2. The problems of the financial liberalization.
Commonalities between these three policies.
Conclusion.
References.

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[...] 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. [...]

[...] It was discussed each of these three government policies influenced the development of business groups and led to long run benefits and problems from 1960s to 1997, respectively. In analyzing across these three policies, it appeared South Korea's developed a rapid economic growth. However, it also raised its international dependence and favored business groups at the expense of both SMEs' and regional discrimination. References Burkett, P. and R. Lotspeich Financial liberalization, development and marketization. Comparative Economic Studies, 59. (accessed May from ABI/INFORM Global database). [...]

[...] ( 2.1 ) Benefits and Problems of the heavy and chemical industries (HCI) policy The reality shows a rapid national economic growth resulted from this policy. Mah (2007) says the HCI sector grew rapidly until reaching 54 percent of share of the manufacturing sector in 1980. While this trend was accompanied by an upward trend in exports (Mah 2007), there was also a rapid increase in wages that surpassed the growth of labor productivity (Harvie and Lee 2003, 272), which could allow to dominate the world market (Loret 2003, 101). [...]

[...] Seguino, S Gender wages inequality and export-led growth in South Korea. The Journal of Development Studies, 102-132. (accessed May from ABI/INFORM Global database). Shin, K The Treatment of Market Power in Korea. Review of Industrial Organization (accessed April from ABI/INFORM Global database). Shin, R. W. and A. Ho The role of science and technology in creating Korea's electronics industry. Asian Affairs, and American Review, 235-251. (accessed May from ProQuest Asian Business and Reference database). Thompson, G Economic dynamism in the [...]

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