South Korean President Moon Jae-in entered office with a pledge to reform the country's family-run conglomerates —known as chaebols — but critics say that initiative has been sidelined as the government focuses its attention on North Korea.
Economic cooperation is a major element of Moon's peace initiative with North Korean leader Kim Jong Un, and chaebols play a defining role in that department. Investment from conglomerates will be crucial to establishing inter-Korea transport links and revitalizing an industrial park in the border region of Kaesong — two projects close to Moon's heart. On a visit to Pyongyang last month, the president was accompanied by the heads of major chaebols who were present to assess potential business opportunities in the reclusive state.
With those corporate behemoths now at the center of Moon's plans for inter-Korea partnerships, strategists say it's unlikely the president will push them on reforms that many consider essential to the economy's competitiveness.
"President Moon is dependent on chaebols for economic cooperation between the two Koreas so given the circumstances, I don't think it's realistic to expect any fundamental reform of chaebols," said Sangin Park, a chaebol expert at Seoul National University.
Even before the first inter-Korea summit in April, the administration did not lay out any concrete measures, added Park. "It is very disappointing."
Chaebols also potentially have a significant role to play in rejuvenating the country's tepid economic growth and lackluster job creation, with the unemployment rate hitting an eight-year high in August.
With North Korea and employment now the two most important policy areas for Seoul, "it is now very likely that President Moon has re-prioritized his policy agendas and sees chaebols, not as a subject of reform, but as an indispensable partner," said Woochan Kim, a finance professor specializing in corproate reform at Korea University Business School.
A spokesperson for South Korea's presidential office acknowledged that corporate participation was important to driving investments in North Korea but warned that "neither the extent of chaebol reform nor the priority placed on it will be diminished."