By Kim Tae-gyu
Staff Reporter

No matter what policies the government adopts, Korea's education-conscious parents will not save money in teaching their children. At least, that is an assumption lurking beneath the phrase, ``the balloon effect.''

Market watchers point out that the Korea-specific phenomenon ― if the government tries to reduce private education costs in one area, the money will flow into another segment ― will offer a windfall to the country's education companies that have already chalked up fast growth over the past few years.

``Even though the Lee Myung-bak administration is looking to phase in a set of measures aimed at reducing private education expenses, they will rather help big education corporations,'' KB Securities researcher Jeong Seo-hyun said.

``For example, the plan to force private academic institutes to close before 10 p.m. is likely to encourage students to switch from offline institutes to online education programs,'' she said.

The administration wants to ban hagwon from offering lessons to students after 10 p.m. and urge schools to start after-school programs.

Investors seem to side with Jeong over the belief that the steps will cause pupils to move from hagwon to online education programs ― as demonstrated on the Seoul bourse.

Ever since President Lee asked related ministries to go all-out in order to curb rising private education costs on June 23, the stock prices of education companies have been jumping with few exceptions.

Business bellwether Megastudy racked up a 5.5-percent rise in its share price last week, while those of Daekyo and Woongjin ThinkBig also rose 7.4 percent and 9.7 percent, respectively.

Exponential Growth

Education companies have posted exponential growth in recent years, according to Meritz Securities.

Meritz said Monday that Korea's education sector shares, which include Megastudy, Daekyo and Woongjin, saw their combined market capitalization jump more than 10 fold since 2002.

Their market values stood at 254 billion won at the end of 2002 but the figure snowballed to 3.65 trillion won last January ― and they even negated the financial crisis last year.

In the midst of the turmoil their sales rocketed 20.78 percent, from 1.7 trillion won in 2007 to 2 trillion won last year.

``The education corporations are no longer neighborhood hagwon. They are now big companies with strong sales and operating profits,'' a Seoul analyst said.

``They were on a fast growth path thanks to Korean parents keen on education. In addition, the planned measures of restricting hagwon opening times will offer them fresh momentum,'' he said.

voc200@koreatimes.co.kr