Korea and Taiwan: Tigers Rising - Dragons and Tigers: A Geography of South, East and Southeast Asia - page 369

Motors has plants in such countries as Poland, India,
Iran, Uzbekistan, and the Philippines. Daewoo Electron-
ics hopes to capture 10 percent of the world market in
TVs, VCRs, PC monitors, refrigerators, washing ma-
chines, and microwave ovens.
South Korea is the world' is number one shipbuilder.
Hyundai, Samsung, and Daewoo are the largest corpora-
tions in this sector of the economy . More than 40 percent
of global ship orders go to these companies. Some worry
about competition from China but such fears are proba-
bly ill-founded.
New shipyards in China cannot compete with those
in Sough Korea in terms of engineering, technical expert-
ise, or quality . Moreover, China has trouble meeting pro-
duction deadlines. In addition, China manufactures
“simple” ships such as oil tankers and dry-bulk vessels.
China is more likely to cut into the Japanese market, as
Japan builds similar ships that are more costly due to
higher labor costs.

Chaebols

Chaebols are the equivalent of the Japanese keiretsu .
Both terms are written with the same Chinese
characters meaning “fortune cluster.” Owned and
managed by family groups, they are enormous
conglomerates of diversified businesses, each hav-
ing hundreds of ancillary firms. Of about 30 such
concerns, Samsung is the largest. Samsung manu-
factures products ranging from airplanes and semi-
conductors to flour and paper. It also operates an
array of service firms such as insurance, hotels, and
department stores.
The rise of chaebols to economic dominance
can be attributed, in part, to Confucian ideals and
loyalties. The chaebol is like a family with its struc-
tured loyalties intensifying toward the family head:
the boss. Unlike Japan, where consensus rules, in
Korea consensus is what the boss says it is.
In the Hyundai chaebol , Confucian spirit be-
came the “Hyundai Spirit.” A manual given to new
recruits observes: “The indomitable driving force, a
religious belief in attaining a goal, and a moral dili-
gence tempered with the frugality of the Hyundai
group have materialized as a major part in the
heavy industry of Korea.”
Another important chaebol anchor is the sup-
port of state-owned banks and guaranteed loans.
Government-infused capital has fostered expansion
and diversification. In 2000, the four top chaebols
accounted for 40 to 45 percent of South Korea' s
economic output.
More recently , with rapid wage increases under
democratic reforms, chaebols have become less
competitive. Disbanding or selling off numerous
unprofitable “family members” (ancillary firms),
venturing more into research and development, and
procuring cheaper labor overseas are part of recent
restructuring efforts. Chaebols today do not have
the power they once had.

ECONOMIC CRISES AND CHANGE
The Asian financial crisis of 1997 was especially severe in
South Korea. Having unlimited access to bank loans, many
chaebols incurred serious debt. That year, the Korean cur-
rency was devalued 50 percent and many subsidiaries went
bankrupt. Per capita income declined by 35 percent and
1.6 million people became unemployed. The International
Monetary Fund (IMF) came to the rescue with the largest
loan ever awarded a single country . Reforms were intro-
duced to reduce the power of the chaebols and more loans
were given to small and medium-sized companies. State-
owned industries are being privatized.
Unemployment continues to be a problem. About
five million South Koreans between the ages of 20 and 34
are unemployed or underemployed. Graduates fare the
worst in terms of having difficulty finding jobs. In 2002,
six out of ten higher-education graduates failed to find
employment.
There are two reasons for this situation. The first is
demographic. Children of the country' s second baby
boom—the progeny of the first baby boomers born after
the Korean War—are reaching adulthood and pouring
into the job market. The second reason is economic.
Since the Asian financial crisis of the late 1990s, compa-
nies have become more focused on profits and are reduc-
ing workforces. Many rely on temporary employees and
others with more experience and skills. They have also
turned to technology for labor-intensive tasks and are
outsourcing jobs to China and Southeast Asia.

South Korean enterprises are found worldwide. For
example, Daewoo, which means “Great Universe,” has
poured billions of dollars in planet-circling investments
including electronics and components, hotels, autos,
construction, finance, textiles, and heavy industries.
Daewoo' s globalization plans include hiring 250,000 for-
eign workers at 1,000 overseas subsidiaries. Daewoo