Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Major state firms see debts jump over W40 tril. under Moon administration
Korea Electric Power Corp. (KEPCO) is one of the debt-ridden state-companies that was rated “fair” despite their money-losing business operations. Korea Times file
By Yi Whan-woo
By Yi Whan-woo
The nation's state-run companies have seen their collective debts rise by more than 40 trillion won ($33.5 billion) during the Moon Jae-in administration, dealing a blow to their financial soundness and business capabilities, recent data shows.
According to the government's open data site, All Public Information in One (ALIO), the combined debt shouldered by 10 major public firms between the end of 2017 and the first half of 2021 increased by 40.5 trillion won to 392.2 trillion won. That boils down to an average monthly increase of 964.6 billion won.
The government's debt under the Moon administration more than doubled compared to the term of the previous president after rising at the fastest pace of 400 trillion won over the past five years.
Industry sources said that the snowballing debt is the direct result of the administration's “self-contradictory” policies in its pursuit of cleaning up deeply-rooted irregularities.
The public enterprises in general were deeply affected by that objective. They have been criticized for being chronically loose in management and losing money, while doling out high salaries to executives.
Korea Electric Power Corp. (KEPCO) and other state-run energy companies saw their balance sheets deteriorate after Moon took office five years ago as global energy prices soared, while the government froze energy fees due to fears of rising inflation and mounting burdens on living expenses.
Despite their deteriorating financial health, the aforementioned firms received fair scores in terms of overall performance rated by the government. The government evaluation of the public enterprises affected the salaries of their employees.
This was made possible because, under the Moon administration, the proportion of their “financial condition” diminished in the evaluation criteria, while “contributions made to society” accounted for an additional 50 percent compared to the previous government's assessment in evaluating the performances of state-run enterprises.
For instance, KEPCO was rated “fair” despite posting an operating loss of 208 billion won in 2018 and 1.27 trillion won in 2019, because it was at the center of the Moon administration's Renewable Energy Policy (REP).
The measure is designed to lessen the financial burden on power plants in producing renewable energy, with KEPCO covering the corresponding expenses, estimated to be 2 trillion won annually for the past five years.
The ironic circumstance of debt-ridden companies receiving good evaluation scores led them to continue their clumsy operations.
Such irregularities included salary increases as witnessed at Korea National Oil Corp. (KNOC), Korea Resources Corp. (KORES) and Korea Coal Corp. (KOCOAL), which all have impaired capital.
“The worsened financial health will be detrimental for the next government,” a source familiar with state-run companies said, noting their expenses increased too much for them to keep under control.
“This means the companies will inevitably seek financial support from the government, which will increase spending amid soaring national debt.”
The accumulated federal budget deficit has exceeded 1 quadrillion won. Taking this into account, another source viewed it could hover at around 1.5 quadrillion by the end of 2022 under the worst-case scenario, if the government bears expenses to pay off debts held by the state-run enterprises.