BUSINESS

Korea's conglomerates' internal trade edges down in 2016

By Yonhap
  • Published : Sept 21, 2017 - 13:23
  • Updated : Sept 21, 2017 - 13:23

Transactions among affiliates of South Korea's large business groups fell slightly in 2016 compared to a year earlier amid government pressure to root out unfair practices, the country's corporate watchdog said Thursday.

A total of 152.5 trillion won ($134.7 billion) worth of inter-affiliate deals by units of 27 conglomerates were made last year, down 7.1 trillion won from a year earlier, according to the Fair Trade Commission. But the deals accounted for 12.2 percent of all business contracts inked last year, up 0.5 percentage point from the previous year.

The number of business groups subject to the tough FTC surveillance fell to 27 from 47 over the one-year period as the watchdog raised the asset criteria to 10 trillion won in September last year from 5 trillion won. The business groups' equity investments and inter-affiliate loan guarantees are overseen by the FTC.
 

(Yonhap)

"The overall value of internal trading dropped as the FTC raised the minimum ceiling last year, but the percentage went up," the watchdog said in a release. "The FTC will keep monitoring such practices and take stern action."

The current law forbids inter-affiliate trading within a business group whose owner and family hold more than 30 percent of the shares in an affiliate. Such trading is blamed for allowing owner families to easily net large profits by having subsidiaries award lucrative contracts to each other, undermining the principle of fair competition.

Hyundai Motor Group, South Korea's second-largest conglomerate by assets, reported the largest intra-affiliate deals, with a value of 30.3 trillion won, followed by SK Group with 29.4 trillion won and Samsung Group with 21.1 trillion won.

At the same time, such transactions by leading steelmaker POSCO accounted for 38.5 percent of the total, while Hyundai Heavy Industries came next with 37.4 percent and SK Group with 36.6 percent.

The latest data also showed that 849, or 83.2 percent, of the 1,021 affiliates belonging to the 27 conglomerates engaged in intra-group trading of some sort. Of these, 390 affiliated firms, or 38.2 percent of the total, reported inside deals making up more than 30 percent of their revenue. (Yonhap)