[Lowest Share of Large Corporations] South Korea Trails Even Lithuania... 33rd Out of 34 OECD Countries [Exclusive]

Korean Industrial Forum 'Large Corporation Status' Report
Large Corporations Account for 0.09%... Switzerland Leads with 0.82%
Lower than GDP of Turkey and Lithuania
Causes Include Sharp Revenue Decline and Fragile Ecosystem

The proportion of large corporations (with total assets of 5 trillion won or more) among all companies in South Korea was found to be 0.09%, ranking near the bottom among the 34 member countries of the Organisation for Economic Co-operation and Development (OECD). Large corporations play a role in leading a country's economy at the forefront of the global market. However, considering the sharp increase in various burdens such as taxes upon entering the large corporation category, it is pointed out that it is difficult for companies to grow in scale domestically.

On the 27th, Samsung Seocho Building, Seocho-gu, Seoul. Photo by Jinhyung Kang aymsdream@

According to related industries on the 24th, the Korea Industrial Federation held an Industrial Development Forum at the Korea International Trade Association on the same day and released a report titled "Assessment and Tasks of Large Corporations," which included this content.

According to the report obtained in advance by Asia Economy, the number of large corporations in South Korea was 9 out of every 10,000 companies, ranking 33rd among the 34 OECD countries. This was significantly lower than Turkey (20th), Lithuania (19th), and Poland (16th), whose gross domestic product (GDP) is relatively smaller than South Korea’s. Switzerland had the highest proportion of large corporations at 0.82%, followed by the United States (0.62%), New Zealand (0.50%), and Germany (0.48%). A bigger problem is that this figure was identical to the proportion of large corporations surveyed and announced in April 2019 by the Korea Economic Research Institute under the Federation of Korean Industries (now Korea Economic Association), based on companies with 300 or more employees. This means that the growth, status, and influence of domestic large corporations have stagnated over the past five years.

Generally, large corporations refer to companies with total assets of 5 trillion won or more that belong to cross-shareholding restricted business groups and publicly disclosed business groups designated by the Fair Trade Commission. The Industrial Federation comprehensively considered factors such as the influence of the same individual on company management, shareholding ratio, total assets, sales, and market capitalization of each company to conclude that large corporations in South Korea account for only 0.09% of all companies.

The main reason cited for the contraction of large corporations in South Korea was a sharp decline in sales. Large corporations need to generate substantial profits to maintain their business scale and allow new companies to enter the large corporate group, but recently, this has not been the case. According to the "Global 500" published by the American business magazine Fortune, South Korean companies had an average sales revenue of $61.1 billion (approximately 81 trillion won) per company, the lowest among major countries such as the United States ($95.4 billion) and China ($83.3 billion). The ecosystem for creating unicorn companies (unlisted startups valued at over $1 billion) was also pointed out as weak. While the number of unicorn companies worldwide increased by 169.3% from 449 in 2019 to 1,209 last year, South Korea’s number rose only from 10 to 14 during the same period, an increase of just 4.

In addition to issues such as rigid working hours, sluggish labor-management negotiations, and deepening bureaucracy within companies, external factors such as challenges from China, which is increasing its influence in markets like electric vehicles, batteries, and smartphones, were also analyzed to have significantly impacted the growth of large corporations. In particular, discriminatory regulations against large corporations arising from R&D tax policies, corporate taxes, and policy financing were cited as factors hindering corporate growth. According to the "Discriminatory Regulations on Large Corporations" survey conducted by the Korea Economic Association (HanKyungHyup), as of June last year, 342 regulatory measures stipulated by 61 laws were found to be impeding the growth of large corporations in South Korea.

Lee Woong-jae, senior researcher at the Korea Industrial Federation who authored the report, emphasized, "The number of global large corporations is proportional to the size of a country's economy," adding, "Companies must contribute to the country through production, taxation, and employment, and achieve scaling through economies of scale."