Top four chaebol’s value added accounts for nearly 10% of GDP

Posted on : 2014-09-18 16:56 KST Modified on : 2019-10-19 20:29 KST
Data for top four groups shows increasing concentration of power among a few large chaebol

By Lee Jung-ae, staff reporter

Affiliates of South Korea’s top four chaebol generated value added equivalent to 9.71% of gross domestic product in 2013.

The combined rate for affiliates of Samsung, Hyundai Motor, SK, and LG was up 0.23 percentage points from 2012, in what appears to be a sign of their tightening grip on economic power in South Korea.

CEO Score, a website specializing in corporate performance assessments, conducted the study on value-added for the 425 of the country’s top 500 companies by sales that submitted auditor reports to the Financial Supervisory Service (FSS). Insurance and securities companies were not examined because the changing settlement dates prevent clear year-on-year comparisons. The results for chaebol were announced on Sept. 17.

Value added is defined as new value created by the producer during the production process. For companies, it is typically divided into capital returns (net profits), wages paid to workers, and taxes (including corporate) paid to the treasury. For its report, CEO Score also included available details on net financial costs, depreciation costs, and rental fees from the auditor reports.

Because GDP represents the sum of value added produced in a country from the production activity of all economic actors, the total value added for a given company is considered a strong indicator of the importance that company holds in the national economy.

Among the 500 companies, seventy affiliates with the top four chaebol produced total value added of 140,238 billion won (US$135.5 billion) in 2013, a nearly 5 trillion won increase from the 135,253 billion won (US$130.7 billion) recorded for 2012. The rate as a portion of GDP also grew from 9.48% in 2012 to 9.71% last year.

The largest amount of value added came from the Samsung Group, whose 19 affiliates produced 68,365 trillion won (US$66.1 billion). That was over 3 trillion won more than the 65,674 trillion won (US$63.5 billion) generated in 2012, bringing the percentage of GDP up from 4.6% to 4.73%.

Next in line was the Hyundai Motor Group, with 18 affiliates producing 37,643 trillion won (US$36.4 billion), or 2.61% of GDP. In third and fourth place were LG and SK, where 14 and 19 affiliates produced 19,352 trillion won (US$18.7 billion, 1.34%) and 14,878 trillion won (US$14.4 billion, 1.03%), respectively. In all three cases, value added as a percentage of GDP rose from the year before: by 0.03 percentage points for Hyundai Motor, 0.01 percentage points for LG, and 0.06 percentage points for SK.

Combined, the three chaebol’s 0.1 percentage point rise was still less than 0.13 percentage point increase recorded for Samsung - a sign of how much economic power now rests with that group.

Companies ranked in the top 500 that were not affiliates of one of the four top chaebol produced a combined total of 113,930 trillion won (US$110.1 billion) in value added for 2013, down 13.5% from the 131,665 trillion won (US$127.2 billion) produced in 2012. The percentage of GDP declined by 1.33 percentage points from 9.22% to 7.89% over the same period.

“It means that the South Korean economy’s dependence on the top four groups is only intensifying amid the economic slump. That dependence is particularly concentrated on Samsung,” said CEO Score president Park Ju-geun.

By company, Samsung Electronics registered the largest amount of value added with 45 trillion won (US$43.5 billion), or 3.1% of GDP. Next in line were Hyundai Motor (15.9 trillion won/US$15.4 billion), Samsung Display (9.6 trillion won/US$9.3 billion), Kia Motors (8 trillion won/US$7.7 billion), and SK Hynix (6.8 trillion won/US$6.6 billion).

Other companies in the top ten, including POSCO, Lotte, and KT, saw their value added drop by anywhere from 4.7% to 33.7% from the previous year.

CEO Score did not release information on how each group’s value added was distributed in terms of capital, wages, and taxes.

 

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