Saturday's meeting between Korean president Kim Dae-jung and the leaders of the top chaebols has resulted in a decisive win for the conglomerates.
In the run-up to the meeting Kim's staff were attempting to negotiate deals that would show his plan for the 'big deal' swap of subsidiaries was taking shape (see VNU Newswire, 3 July). In the end, a more nebulous 'nine-point pact' emerged.
The major features are helpful to the chaebols. Export credits and guarantees will be made available by the government, which will also restructure the financial industry as quickly as possible.
The conglomerates will be permitted to pursue business swaps on their own, while the government "will seek to provide institutional support to facilitate the swaps". That could mean financial aid.
The chaebols have also agreed to "put an end to illegal internal trades," which surely cannot be seen as much of a concession, and to close marginal subsidiaries. The government will also do some pump-priming, stimulating the economy by tax cuts and beginning to privatise state-owned corporations.
So effectively the prospect of the chaebols being forced to swap subsidiaries at gun point has receded, while the prospect of them collecting state aid in order to ease the pain of swaps and closures has emerged. That is likely to be a blow to President Kim's newly formed government.
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