S. Korean conglomerates control nearly twice as many overseas affiliates as local ones

South Korea’s 43 major family-controlled conglomerates controlled nearly twice as many overseas affiliates as domestic ones last year, as they seek to expand their businesses in foreign countries.
The number of overseas affiliates of the conglomerates, known as chaebol, stood at 2,693 as of the end of 2012, compared with 1,508 affiliates based in South Korea, according to data compiled by a financial watchdog’s online regulatory filing system.
Samsung Group has 446 affiliates in foreign countries — the largest number among its peers, according to the data. In comparison, the top South Korean chaebol ran 76 affiliates in South Korea as of 2012. Samsung’s businesses include Samsung Electronics Co., the world’s top maker of smartphones.
Samsung is followed by Hyundai Motor Group, the world’s fifth-largest carmaker, with 233 foreign affiliates. Hyundai Motor Group held 57 units in South Korea.
SK Group, South Korea’s third-largest conglomerate whose businesses range from mobile communications to oil refinery, took third place with 218 units in foreign countries. Meanwhile, the number of domestic affiliates held by SK Group stood at 81, according to the data.
Companies set up overseas units as they seek to make inroads into foreign countries, though some of their overseas affiliates came under suspicion of allegedly being used for money laundering. Suspicion grows when chaebol set up their units in foreign tax havens.
The latest finding on chaebol’s overseas units came as prosecutors launched a massive probe into CJ Group, South Korea’s food and entertainment conglomerate, for allegedly creating a massive overseas slush fund and sneaking the money into South Korea and evading taxes.
“We cannot say it’s wrong if companies set up units in tax havens for the purpose of tax saving, but it would be a different story if they take advantage of tax havens to create slush funds,” said Kim Kab-lae, a research fellow of the Korea Capital Market Institute.
(June 5, 2013)