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Thursday, December 10, 1998 Published at 11:15 GMT

Business: The Economy

Korean unions protest over 'big deal'

Workers are becoming increasingly militant in South Korea

Union protests are increasing against South Korea's plan to restructure its biggest companies.

Thousands of workers occupied the headquarters of Daewoo, while 6,000 workers walked off their jobs at Samsung Motors.

[ image: Samsung is the country's biggest electronics company]
Samsung is the country's biggest electronics company
The workers are protesting about plans to swap the assets of the major conglomerates, or chaebols, which dominate the country's economy.

Under the "big deal", Daewoo would merge its electronics business with rival Samsung in return for acquiring Samsung's car business. It is part of a bigger plan which the government says is vital to revive the fortunes of the big companies which are the backbone of industry.

Workers fear the mergers will cause thousands of job losses.

"The deal threatens our livelihoods and will not contribute to our economy," they said. Korea's unemployment rate has soared to 7.1% as a result of the economic crisis.

Big companies dominate

[ image: Daewoo workers occupied the company's HQ]
Daewoo workers occupied the company's HQ
The five companies that dominate Korea's economy - Hyundai, LG, Samsung, Daewoo, and SK - make up nearly half of exports and one third of total industrial production.

But the economic crisis revealed that the chaebols had huge concealed debts as their unprofitable subsidiaries proliferated throughout the economy.

Now the government is trying to encourage them to slim down by merging or closing subsidiaries.

Finance Minister Lee Kyo-Sung said the government would allow the companies to work out their own plans.

"The government will encourage chaebols to speed up restructuring while leaving them to work out the details at their own discretion," he said.

Doubts on reform

Many analysts are sceptical about how serious the chaebols are about reform, which has been talked about for nearly a year.

They believe that the companies will demand further government subsidies before acquiring unprofitable units from their rivals.

"I don't think the chaebols will follow drastic steps on reform and the government may have little choice but to accept the slower pace," said a Citicorp analyst.

There is also doubt over how much foreign capital will be injected into the Korean economy, given the weakness of the currency.

The government has sold a stake in its steel-making firm Posco for $300m.

Thousands more job losses could follow the corporate restructuring process, while the Korean economy is not expected to see positive growth before 2000.

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