The Role of Chaebols in South Korea’s Economic Miracle

South Korea’s rise from a $79 GDP per capita in 1960 to $20,579 by 2010 is a global success story, driven by the developmental state and its partnership with chaebols—family-owned conglomerates like Samsung and Hyundai. As a Master’s student researching economic development, I’m intrigued by how chaebols shaped Korea’s export-oriented industrialization, as detailed in Sung-Hoon Jung’s The Korean Development Strategy (2011). For Nepal, where the private sector is underdeveloped, chaebols offer lessons and cautions. This post explores their role and implications for Nepal.

Chaebols: Engines of Growth

Chaebols were the backbone of Korea’s industrialization, leading sectors from textiles to semiconductors. The state nurtured them with loans, tax incentives, and policy support (Jung, 2011, p. 456):

• 1960s–1970s: Hyundai drove shipbuilding, and POSCO led steel production, supported by industrial complexes (p. 461).

• 1980s–1990s: Samsung’s semiconductor investments positioned Korea as a tech leader (p. 462).

• 1998–2010: Chaebols like LG expanded into IT and biotechnology, contributing to 50% of GDP from exports (p. 454).

Strengths and Weaknesses

• Strengths: Chaebols achieved economies of scale, enabling mass production and global competitiveness. Their state-backed growth aligned with national goals (p. 456).

• Weaknesses: Their dominance created uneven development, marginalizing SMEs and exacerbating regional disparities (p. 464). Over-investment contributed to the 1997–1998 financial crisis (p. 457).

Lessons for Nepal

Nepal’s private sector, dominated by SMEs, could benefit from fostering large enterprises in hydropower or tourism. For example, supporting firms like Nepal Electricity Authority or private tourism conglomerates could drive scale, similar to chaebols. However, Nepal must balance this with SME support to avoid Korea’s disparities. Public-private partnerships and FDI could fund these efforts, but anti-corruption measures are crucial.

Read more in our series:

• How South Korea Became an Economic Powerhouse for context.

• How Korea’s Five Year Plans Drove Growth for planning insights.

• Supporting Nepal’s SMEs for SME strategies.

Can Nepal create its own chaebols? Share your thoughts below!

References:

• Jung, S.-H. (2011). The Korean Development Strategy. Journal of the Economic Geographical Society of Korea, 14(4), 453–466.

• OECD. (2010). Economic Survey: Korea.