Lee Hyo-sik is Finance Desk editor at The Korea Times. He manages finance-related stories on macroeconomics, banks, stocks, bonds, crypto etc. He is passionate about covering what's happening in Korea's financial industry and explaining it to both Korean and non-Korean readers. You can reach him at leehs@koreatimes.co.kr. Your insights and feedbacks are always appreciated.
Deficits at 22 Public Firms Surpass 200 Tril. Won
By Lee Hyo-sik
Staff Reporter
The combined debts of 22 public enterprises here surpassed 200 trillion won last year, raising concerns over deteriorating financial soundness in the public sector.
Inefficient management and excessively generous compensation packages for executives and some employees, despite suffering huge financial losses, have been blamed for the elevated debt levels of public firms.
Additionally, many state-run companies were mobilized to prop up the sagging economy in the aftermath of the global economic slump. Some of them borrowed money to implement large-scale infrastructure development projects on behalf of the government to create jobs in the public sector.
Others have been forced to refrain from raising electricity and other utility service charges, chipping away at their bottom line, as part of the government campaign to help stabilize the livelihoods of the low-income bracket.
According to sources Thursday, the outstanding debts of 22 publicly-run enterprises reached 211.7 trillion won as of the end of 2009, up 20.6 percent from 175.6 trillion won a year earlier. Liabilities have been growing by an average of 20.6 percent from 2004 through 2008.
But their combined capital inched up 4.6 percent to 138.8 trillion won last year. The average debt-to-equity ratio rose to 152 percent from 132 percent over the one-year period, lagging far behind listed companies in financial soundness.
Debts of 565 listed firms rose only 3.6 percent in 2009 from 2008, with their capital jumping 12 percent. The average debt-to-equity ratio fell to 95 percent from 103 percent.
Korea Gas Corp. and six other public companies saw their debts decline in 2009, but the remaining 15 firms outspent earnings.
Korea Land & Housing Corp. had the largest liability of 109.2 trillion won, up 23 trillion won from 2008, with its debt-to-equity ratio surging to 524 percent. Korea Electric Power Corp. saw its debt increase by 3 trillion won to 29 trillion won.
The combined revenues of 22 state firms reached 95.4 trillion won, up only 0.2 percent from 2008.