Chaebols blamed for Korea's economic failure

Searching for explanations for Korea's economic misery

South Korea's giant conglomerates, the Chaebol, once seen as the bedrock of the country's economic success, are now seen as the source of its humiliating downfall.

Halla Group: collapsed just days after the IMF loan was agreed

Staggering under the weight of huge debts, the Chaebols face IMF-inspired demands for wholesale reform. But just how easy is it going to be to dismantle the symbiotic ties between Chaebol leaders and South Korea's politicians. Larry Jagan reports from Seoul.

The Kim Dae Jung theme song, part of the opposition's advertisement campaign, blares out at all the opposition rallies after Mr Kim has spoken. It is modern music to convey the image of a man ready to take South Korea into the 21st century.

Kim Dae Jung's message was simple: "I am asking them to support me to restore our economic strengths - even though it is very difficult, I am fully confident that we can solve our present difficulties, because if I can be cooperative with our people, they are patriotic and enthusiastic, so I can do my best efforts."

Supporters of Kim Dae Jung are convinced this can only happen after the political power of the country's industrial conglomerates -- the Chaebol -- is effectively challenged.

Unions blame the politicians and businessmen

Almost every day workers have been demonstrating against the Chaebol, blaming them for the country's current economic crisis. One banker attending a the protest said the answer was simple:

"I agree totally with the IMF package, and I hope that our citizens will take this fully and abide by it, and hopefully will take this chance to change a lot of the things that are not very good in our economy."

Financial worries could persist for years

The defeated Grand National party was also committed to reforming the Chaebols, according to spokesman, Kim Dong Su : "We have a financial crisis, but we have a long-term problem which is how to restructure the industry structures. So we believe we can get through this short financial crisis. But we have so many things to do to restructure the environment, businessmen shouldn't give money to politicians and politicians shouldn't receive their money."

There is no doubt that following several high-profile corruption cases, involving two former presidents and several businessmen over the past year, the Chaebol's power has already been curtailed.

Greater access to the media during political campaigns has also reduced politicians' dependence on the Chaebol according to Steve Marvin, chief analyst with Sangyong Securities: "This presidential campaign has involved a number of open, direct television debates among the principal candidates. These debates were quite comprehensive and they were carried on all the major channels, which means that the candidates received extensive coverage without the need to have these giant rallies which in turn required huge funds to organise."

Major restructuring of the Chaebol will have to follow as part of the conditions of the IMF-bail out. The then finance minister Lim Chang Yeol told foreign reporters that there was no alternative: "Frankly speaking, turning to the outside for financial assistance has been a bitter pill for the proud people of Korea to swallow. However, these short-term pains and complications are the unavoidable price we must pay in order to pave the way for another economic take-off. We have come too far to turn back now."

But some analysts think this is going to be much harder than any of the politicians let on. The fear is that Korea could be entering a slump, similar to that experienced in Europe during the 1930's. If slow or negative growth persists for a number of years, the pressure on the country's social institutions is certain to grow.