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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

KOREA GETS PERSONAL

Networks of family, school and palmgrease


Chaebol on the Brink: Korea's giants face reform

RESTRUCTURING THE CHAEBOL IS a cornerstone of President Kim Dae Jung's platform, for which there has never been a better time. Ordinary Koreans view reckless moves by the conglomerates and their collusion with politicians as having played a major role in the current economic crisis. But the process of reform is going to be slow - and not just because the chaebol are dragging their feet. At the root of the system is something that pretty much defines what a Korean is - relationships. Thus, reform requires not just cutting staff and unprofitable units, but a minor overhaul of the Korean mentality.

At the core of the chaebol is the family. During the Chosun Dynasty (1392-1910), a few powerful clans made up most of the elite - as they do today. "Oligarchic families essentially run the country," says Dave Kang, professor of government at Dartmouth College. "While more 'objective' interests exist, such as labor, intellectual and agriculture sectors, in large measure political and economic life is the function of large families."

Most chaebol which dominate the economy are family affairs run by the founder, his siblings or his children. Competition between the groups, Kang explains, is driven mainly by rivalry between the controlling clans. These family networks are often intertwined - with each other and the political world - through marriage. Former president Roh Tae Woo's daughter, for example, is married to the eldest son of the chairman of SK Group, the No. 5 chaebol. Daewoo head Kim Woo Choong and Kumho's Park Jeong Koo are in-laws; not coincidentally, Daewoo cars come with Kumho tires.

After clans come the old boys' links with friends and schoolmates. "That network is still important to many businessmen, chaebol or otherwise," notes Yoon Byung Chull, chairman of Hana Bank. For the elite, that usually means alumni of three leading universities - Seoul National, Yonsei and Korea - which account for some two-thirds of top local managers.

With those in authority enjoying a wide berth to interpret laws and regulations, businessmen will often use connections - or cash - to have the rules bent in their favor. The jailing of Kim Hyun Chul, disgraced son of former president Kim Young Sam, was in part due to his role in engineering the elevation of his buddies to high government positions. One analyst with a leading European securities house, who grew up in Korea, does not foresee big changes anytime soon. "The school connection has been used for generations," he says. "It's unlikely that it will give way to a new system in a stroke."

Still, Myongji University president Song Ja predicts: "When transparency in management and operations becomes a reality, the old system of reliance on school friends or political connections will automatically disintegrate." Maybe. Until then, though, don't throw away that address book.

- By Sangwon Suh, with reporting by Laxmi Nakarmi/Seoul


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