S. KOREA TO ENCOURAGE SPECIALIZED CONGLOMERATES

S. KOREA TO ENCOURAGE SPECIALIZED CONGLOMERATES

South Korea said it would implement a plan to encourage the nation's top 30 conglomerates, or "chaebol," to specialize from next year.

The trade ministry said the top 10 conglomerates in terms of assets would be encouraged to select up to three industries upon which they would focus their business efforts.The 11th to 30th largest chaebol would be urged to concentrate on a maximum of two sectors for specialization.

The ministry said the top 30 chaebol would be granted incentives if they abided by the plan.

The top 30 chaebol have two months to file their intended list of core sectors to the ministry.

Under the plan credit controls for specialized chaebol affiliates would be relaxed and they would be granted easy access to funds for technological development and for the purchase of plant sites.

The ministry said the chaebol would designate their core companies, in line with guidelines set by the government, after selecting their core business lines.

To be eligible for core industrial sectors, chaebol companies are required to have sales that account for more than 10 percent of the total in any sector, the ministry said.

The plan would replace an existing system in which the chaebol were permitted to have a maximum of three core companies, which are granted special government favors regardless of their specialization or whether rival groups specialize in the same fields.

Ministry statistics show the top 10 business conglomerates do business in an average of 11 industrial sectors, while the smaller groups of the top 30 operate in an average of six or seven sectors.

The ministry said the number of the business lines operated by South Korea's chaebol was higher than the average of five by Japan's top 40 business groups.

The ministry said the 74 core companies at South Korea's industrial heart took a 9.9 percent share of all bank loans last year. That percentage would be maintained after the ministry's new plan was enforced, he added.

President Kim Young-sam, who took office in February, pledged to halt the increasing diversification of the chaebol and encourage the development of small- and medium-sized businesses.

The chaebol are credited with powering South Korea's leap to industrial strength from the 1960s but are now accused of inefficiency because of their

size and spread.