FKI "Korean Large Corporations' Economic Power Concentration in Lower Ranks... Regulatory Review Needed"

[Asia Economy Reporter Park Sun-mi] It has been argued that a shift in perception regarding current large conglomerate regulations, which focus on curbing economic concentration, is necessary as the economic concentration of South Korean large corporations continues to show a declining trend.

On the 7th, the Federation of Korean Industries (FKI) announced that, based on a comparison of economic concentration among OECD (Organisation for Economic Co-operation and Development) countries, South Korea's large corporations' economic concentration (sales concentration and asset concentration) is at a lower level compared to OECD member countries.

The sales concentration of the top 100 companies ranked 15th out of 19 OECD countries, placing it in the lower tier. This ranking is lower than that of the United States (11th), Japan (12th), Germany (8th), and France (10th), as well as countries with GDP similar to South Korea such as Canada (3rd) and Australia (7th). The sales concentration of the top 30 companies was also 14th among 19 OECD countries, and the top 10 companies ranked 11th, indicating a relatively low level among OECD members.

The asset concentration of the top 100 companies, which analyzes the proportion of total corporate assets held by these companies in South Korea, also ranked 15th among 19 OECD countries, placing it in the lower tier.

In fact, the share of total sales accounted for by the top large corporations has been steadily decreasing. An investigation of South Korea's sales concentration from 2011 to 2020 showed that the proportion of sales by the top 100 companies in total sales dropped from 58.1% in 2011 to 45.6% in 2020, a decrease of 12.5 percentage points. During the same period, the sales concentration of the top 10 companies also fell from 26.1% to 19.6%, a 6.5 percentage point decline, and the sales concentration of the top 30 companies decreased from 42.1% to 31.1%, down 11.0 percentage points.

Current Fair Trade Act regulations impose various restrictions such as limits on cross-shareholding, prohibition of debt guarantees, and restrictions on transactions between affiliates based on the perception that South Korea's large corporations have high economic concentration. Yoo Hwan-ik, head of the Industry Division at FKI, stated, “Compared to major countries worldwide, the economic concentration of South Korean large corporations is not high but rather at a low level,” adding, “A shift in perception regarding current large conglomerate policies focused on curbing economic concentration is necessary.”