10 groups form 77% of GDP

The nation’s dependency on its top 10 conglomerates is at an all-time high as their earnings accounted for almost 77 percent of GDP last year, according to Chaebul.com.

The Web site, which is dedicated to studying the nation’s biggest-cap enterprises, has set alarm bells ringing by highlighting just how dependent the country is on groups like Samsung and Hyundai-Kia Motor Group.

Ten years ago, their combined earnings represented 53 percent of GDP. The proportion rose to 63.8 percent in 2008.

Last year, their combined revenue reached 946.1 trillion won ($833.39 billion), or 76.5 percent of Korea’s GDP of 1,237 trillion won. Samsung alone accounted for nearly 22 percent of GDP, based on revenue of 270.8 trillion won.

Hyundai-Kia, which raked in 155.8 trillion won last year, trailed with 12.6 percent of GDP. SK, the telecoms and energy giant, was third, as it accounted for 11.7 percent of the nation’s economy with earnings of 144 trillion won.

LG was next (9 percent), followed by GS (5.4 percent), Hyundai Heavy Industries (5 percent), Lotte (4.5 percent), Hanwha (2.8 percent), Hanjin (1.9 percent) and Doosan (1.7 percent).

Despite the growing economic woes caused by instability in the global market, major conglomerates’ combined revenue this year is expected to surpass 1,000 trillion won.

More worrying is the strong influence these chaebol wield over the local stock market. According to Hanwha Securities, the combined market capitalization of the top-30 companies on Seoul’s main bourse was 640 trillion won as of Friday. This makes up nearly 60 percent of the total market cap of listed companies on the benchmark Kospi.

On May 2, when Samsung Electronics’ share price hit a record high for the year of 1.4 million won, its market cap amounted to 208 trillion won. This is larger than New Zealand’s GDP of roughly $181 billion. New Zealand is the world’s 56th largest economy.

Political parties have been poring over more stringent policies in the run-up to December’s presidential elections in a bid to reduce the economy’s heavy reliance on conglomerates, while also stimulating SMEs.

“This excessive reliance … is dangerous not only for the local stock market, but for the Korean economy in general,” said an analyst at a local brokerage. “If these companies struggle during a recession, the stock market will face a severe tumble and the economy will shrink at an alarming rate.”

By Lee Ho-jeong [ojlee82@joongang.co.kr]