S. Korea’s Conglomerates: Too Important to Throw the Book At : Asia: The <i> chaebol </i> have been the dominant force in the country’s economy for 20 years, and few predict severe punishment.

The Korean chaebol , or conglomerates, are so huge that the 30 biggest ones produce total sales equivalent to three-quarters of South Korea’s gross national product.

The business groups are so clannish that the founders or their families hold more than three-quarters of all chaebol positions of managing director and above.

They are so diverse--Samsung, for instance, makes everything from ships to semiconductors to shampoo--that they produce three-quarters of South Korea’s top 122 manufactured items.

They have helped transform South Korea from an impoverished farming nation to an export powerhouse, lifting the average annual income from $100 to $10,000 in just three decades.

And, according to South Korean prosecutors, many of them are corrupt.

Now eight chairmen, from the wheeler-dealer Kim Woo Choong of Daewoo to Lee Kun Hee, the head of powerful Samsung, are under indictment for allegedly building their businesses through millions of dollars in bribes to government officials. Another 18 chaebol are accused of paying bribes but were spared indictment.

Despite revelations that chaebol chairmen gave more than $300 million in bribes to former President Roh Tae Woo for such favors as preferential loans and construction contracts, virtually no one believes the government will throw the book at them. To the South Korean economy, the chaebol is simply too important.

“In the last 20 years, the chaebol has been the single most important, prime force behind the Korean economy,” said Jonathan Dutton, senior analyst with S.G. Warburg Securities Ltd. in Seoul. He called it unthinkable that the government would seriously curtail chaebol business activities and crimp economic growth in the face of National Assembly elections next April.

The sprawling, family-controlled groups have invested billions of dollars overseas, from an oil refinery in Hungary to an entertainment venture in Hollywood. They are major global suppliers of semiconductors, computers, steel, cars and ships. Due to their spectacular rise, some are even becoming household names to Americans: Hyundai, Samsung, Lucky-Goldstar, Daewoo.

All told, 61 conglomerates with hundreds of affiliates met South Korea’s legal definition of chaebol in 1993: business groups with combined assets of more than $500 million.

They were particularly nurtured by the late President Park Chung Hee, the military general schooled in Japan who believed that South Korea needed giant business groups similar to Japan’s Mitsubishi and Sumitomo to create the export industries needed for growth.

There are key differences between the Japanese and South Korean conglomerates, however. Japan’s business groups are often organized around a bank, while the chaebol are legally barred from owning more than 8% of a financial institution--rendering them far more dependent on government largess in gaining access to capital. And more than 70% of Japanese conglomerates are run by outside professionals rather than family members.

In exchange for developing Park’s pet industries--steel and shipbuilding, for instance-- chaebol received access to foreign capital, preferential loans and the all-important government approvals to enter new businesses.

But the forbidding general also held them to strict production and export targets.

Daewoo, for instance, was founded as a textile exporter in 1967, with four employees and initial capital of $18,000. By 1993, it had expanded into a global enterprise with total annual sales of $26.6 billion and 20 affiliates.

Park and successive presidents encouraged Daewoo’s growth, extending subsidized loans to help it take over ailing businesses involved in heavy machinery, shipbuilding, autos and construction. And when Daewoo faced bankruptcy in 1989 following massive shipbuilding losses, the government bailed it out.

But Daewoo’s globe-trotting, aggressive Kim was one of two chairmen singled out by name in Roh’s arrest warrant for allegedly giving a $13-million bribe in exchange for a submarine base contract. Some speculate that Kim may be forced to surrender some of his control over domestic business operations and focus on overseas activities.

In fact, a growing number of critics are calling for the chaebol themselves to be weakened because of the overwhelming grip they have on South Korea’s economy. Concerned that the behemoths could be snuffing out too many smaller firms, the government has begun to impose investment and credit restrictions on them in recent years.

Despite calls for reform, many South Korean officials still view the chaebol as indispensable to the nation’s economic growth and its expansion into high-frontier fields, such as aerospace. “Korea can’t afford to prosecute key leaders in industry, or it will greatly affect the credibility of Korean companies,” said Jang Song Hyon, an international business consultant.