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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

THE ASIAWEEK 1000

EVEN CHAEBOL GET THE BLUES
The biggest might have to think smaller


IN SOUTH KOREA THERE are chaebol, and then there are chaebol. During the past 10 months, 10 major conglomerates have gone under, leaving banks with more than $27 billion in bad debt. That doesn't even include loans guaranteed by the failed companies. Hanbo Iron & Steel Co., the flagship of the country's 14th-largest business group, collapsed in January with $6.5 billion in borrowings. Kia Motors, the country's third-biggest carmaker, has been in receivership since July. It is a company in death throes with $9.4 billion worth of debt.

These will not be South Korea's only casualties. Worries about tighter credit and currency instability are widespread. No business is too big to fail, and South Korea's largest chaebol are not immune to domestic problems or to the economic troubles in Southeast Asia. But they are more hardy.

For such companies as Samsung Co. (No. 24 in this year's Asiaweek 1000), Daewoo Corp. (No. 33) and LG International Corp. (No. 48), 1996 was a healthy year. Each group's total sales grew by about 25%. "While we were aided by the worldwide economic expansion in 1996, our global presence also helped us," says Park Chull Won, executive vice president for Samsung Co. The chaebol rely on four key industries: consumer electronics and semiconductors, automobiles, ships and machinery, and petrochemicals.

Asia, excluding Japan, now accounts for about 38% of Korea's global exports. For Samsung, that figure is 45%. So the recent turmoil in Southeast Asian countries is a cause for some concern. But don't expect to hear it from the bosses. "Since we export primarily components, parts and raw materials to Southeast Asia for refabrication and export to third countries, we do not expect to suffer greatly from the currency crisis," says Park.

Because sales in the region are expected to slow, the biggest of South Korea's big businesses will have to grow elsewhere. Daewoo Electronics has been setting up plants in France and Ukraine. Samsung hopes to invest $1.7 billion and Hyundai $1.3 billion in the production of memory chips in America. LG expects to put $2.5 billion into Wales and $5 billion into China by 2005. Daewoo hopes to boost sales by taking over existing carmakers in developing markets. It has bought plants in Poland, Romania and Ukraine. Hyundai wants to set up facilities in Poland and Turkey.

But it may not be so easy for the chaebol to increase global exports through investments. South Korean companies are finding it difficult to raise loans abroad after the downgrading of the country's credit rating in October. And because of the depreciating won, investment funding requirements have already risen by 10%. Samsung recently announced that it will scale back investments at home and overseas. In tough times, even big companies may have to hunker down. -- By Laxmi Nakarmi / Seoul


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