The Korea Times

Underground economy accounts for 17% of GDP

By Kang Seung-woo The size of the country’s underground economy has been reducing in past years thanks to improving transparency in financial transactions, a government report said Friday. According to the Korea Institute of Public Finance (KIPF), the untaxed portion of the economy accounted for around 17.1 percent of the gross domestic product (GDP) in 2008, down from around 29 percent in 1990s and 24 percent in the 2000s. In describing the so-called underground economy, KIPF refers to tax-related irregularities and below-the-radar economic activities that aren’t included in official economic statistics, such wealth generated from unlawful business operations related to drugs and product smuggling. The state-funded tax research center estimated that business entities in the country hid up to 29 trillion won ($25.9 billion) worth of revenue in 2008, equal to 3.1 percent of the country’s overall economic size. The KIPF said that a series of measures to boost transparency of financial transactions, including a scheme for real name-based financial transactions, helped

Feb 13, 2011By Kang Seung-woo

Companies

Seoul bourse falls to 1,977 on foreign selling

By Kang Seung-woo Even the central bank's rate freeze failed to stop the Seoul bourse from suffering a plunge Friday as foreign investors continued to sell shares due to concerns on inflation and monetary tightening. The local currency also tumbled against the U.S. dollar. The Korea Composite Stock Price Index (KOSPI) fell 31.31 points or 1.56 percent to 1,977.19, stretching a losing streak to a fourth session. The benchmark index dropped below 2,000 for the first time this year, falling to its lowest level since Dec. 8 last year in terms of closing prices. “Foreign investors felt pressure about possible monetary tightening and a need to lock in profits,” said a Seoul-based economist. “Hiking the key interest rate could have resolved some uncertainties in the market, but it wasn't positive enough to boost chilled market sentiment.” Foreigners posted a net selling of 614.8 billion won, compared with about 1.1 trillion won on Thursday. The Bank of Korea (BOK) kept its key interest rate on hold at 2.75 percent Friday as domestic and overseas uncertainties are feared

Feb 11, 2011By Kang Seung-woo

Companies

Will household debt crush economy?

By Kang Seung-woo Heavily indebted Korean households will be relieved as the Bank of Korea (BOK) kept the benchmark interest rate at 2.75 percent Friday. Market watchers point out that this feeling will be short-lived as the debt level poses a threat to the nation’s overall economy. According to the central bank, household loans stood at 770 trillion won as of the end of the third quarter of 2010, up from a year before and 581 trillion won in the same period of time in 2006. It is likely to grow this year as the BOK is ready to hike key interest rates, which ends up raising the borrowing costs of commercial banks. Last month, the BOK increased its key interest rate by 25 basis points to 2.75 percent, the third hike since July 2010, in its attempt to curb escalating inflationary pressure. Although the central bank froze them this time around, the market consensus is that it will further move up the rates in the near future. “Although the nation’s household debt has not crossed the critical line yet, it is getting close. The level is too high compared with ma

Feb 11, 2011By Kang Seung-woo

Companies

Deutsche Bank faces suspension of operation

By Kang Seung-woo The nation’s financial regulator has decided to suspend operations of the securities unit of Deutsche Bank in Korea. The move is in response to alleged stock manipulation and illegal transactions, a source told The Korea Times Thursday. But the source said that the severity of the punishment has yet to be decided. “It is certain that the operation of Deutsche Bank’s securities unit will be suspended, but for how long has not been decided on,” said the source on condition of anonymity, as the case is still ongoing. According to him, a six-month suspension is the highest administrative sanction. His remarks on the Financial Services Commission’s (FSC) punitive action came as the issue was discussed by the capital market disciplinary committee on the same day. A final decision on how to penalize Deutsche Bank’s unit will be made in the higher disciplinary decision-making committee later this month. The biweekly Securities and Futures Commission meeting is scheduled for Feb. 23 following the preliminary committee meeting. The FSC said last month that the

Feb 10, 2011By Kang Seung-woo

Companies

IFEZ listens to opinions of foreign residents

By Kang Seung-woo The Incheon Free Economic Zone (IFEZ) is listening to the voices of expatriates there by conducting a survey on their living conditions between Jan. 19 and Feb. 13. According to the IFEZ, one of the nation’s six free economic zones, the ongoing inquiry aims to gather and evaluate a variety of opinions of foreigners residing in Songdo about the living conditions there. The survey analysis will be used as data to formulate its policies and improve community services, the IFEZ noted. The IFEZ, comprised of Songdo, Cheongna, and Yeongjong Island, was officially designated as Korea’s first free economic zone in August 2003 by the Seoul administration and the self-sufficient living and business district is intended to become the hub in Northeast Asia for logistics, international business, leisure, and tourism based on its air and sea transportation. Incheon is Korea’s No. 2 port city and Yeongjong Island accommodates the country’s top international airport. The poll is divided into six categories: general living condition in Songdo, habitation, transportati

Feb 8, 2011By Kang Seung-woo

Companies

Foot-and-mouth disease bumps milk ads

By Kang Seung-woo Domestic milk producers have recently stopped advertising on television and radio. They have failed to meet higher demands for their product, affected by the devastating foot-and-mouth (FMD) disease, according to the dairy industry Tuesday. With about 5 percent of the total cows in the country falling prey to the animal epidemic, the production output of companies has shrunk by 5 to 20 percent, and the industry estimates that they are likely to face a bigger shortage in March, when school starts and demand for milk grows fast. They expect that a supply shortage will spike in May if FMD continues to spread nationwide. Seoul Milk, the nation’s largest dairy producer, aired an advertisement featuring Korean international footballer Cha Du-ri until the end of last month. But it has not produced another since his contract expired. “We plan to consider resuming advertisements after we see how the situation develops,” said an official of the firm. Maeil Dairies, which saw its sales skyrocket after casting figure skating star Kim Yu-na in its advertisement,

Feb 8, 2011By Kang Seung-woo

Companies

Public services charges rise drastically in Jan.

By Kang Seung-woo Koreans are likely to see the charges of some public services to surge in the near future, experts said Sunday. This in turn is expected to add to inflationary pressures. According to the Ministry of Strategy and Finance and Statistics Korea, the average prices at the country’s 32 providers of public utilities, including gas and tap water, advanced 0.9 percent last month from December, representing the biggest monthly jump since September 2006 when the corresponding charges rose 1.3 percent. Gas prices leaped 4.7 percent across the country, while tap water prices expanded 0.9 percent. Medical service prices also jumped, with costs for Oriental Medicine treatment adding 4.6 percent from a month ago. The figure factored into a 4.1 percent year to year increase in consumer prices, surpassing the government’s target band of between 2 and 4 percent. The government launched a package of anti-inflation measures in January, pledging to keep tight control on electricity, gas and other public services charges during the first half. “Although the governme

Feb 7, 2011By Kang Seung-woo

Companies

US beef imports jumping amid FMD spread

By Kang Seung-woo U.S. beef is enjoying a huge turnaround in Korea. Its imports to the country made a sharp leap thanks to the devastating foot-and-mouth (FMD) outbreak here, according to industry data, Sunday. The U.S. Meat Export Federation said that Korea imported 84,822 tons of U.S. beef in 2010, up 42.6 percent compared to the previous year. This bettered the nation’s overall increase in beef imports of 16.2 percent. American beef accounted for 32.5 percent of the nation’s imported beef market last year, up from 26.5 percent the preceding year. It trimmed the deficit with market-leading Australian beef, whose share was 53 percent in the same year. It is a strong comeback for U.S. beef. Korea prohibited the import of American beef in 2003 after a case of mad cow disease was discovered and the ban remained in place until 2008. The decision to resume imports triggered two months of huge demonstrations, inflamed by biased television reports portraying U.S. beef as a possible transmission vector for the human variant of mad cow disease. The industry attributed th

Feb 6, 2011By Kang Seung-woo

Companies

Top financial regulator seeks capital market deregulation

By Kang Seung-woo Kim Seok-dong, the newly-appointed chairman of the Financial Services Commission (FSC), declared to reevaluate the country’s Capital Market Consolidation act. He claims it is failing to live up to its promise of sparking new growth in the financial sector. Retooling the regulations will be crucial for further pushing for deregulation in capital markets and creating an environment that could nurture homegrown global financial players, he said in an e-mail interview with reporters. The act, which went into effect in February 2009, absorbed 14 capital market-related laws that had separately governed sectors such as securities trading, asset management and future exchanges. By consolidating these activities under the categories of banking, insurance and investment, policymakers aim to eliminate traditional business boundaries and expand the share of the local financial market. Kim said that the effects of the law so far have been disappointing, as the country has yet to see the first signs of a locally-spawned global investment bank. Kim is now discounti

Feb 6, 2011By Kang Seung-woo

Companies

Consumer prices surge 4.1% in January

By Kang Seung-woo The consumer price index again broke the 4 percent mark in January due to increasing food and energy prices, posing a threat to the nation’s economic recovery, a government report said Tuesday. The government has pledged to keep inflation in the 3-percent range. Statistics Korea announced that the country’s consumer prices soared 4.1 percent last month from a year ago. The number is up from the 3.5 percent gain in December, and matching the 4.1 percent surge for October. The government attributed the inclement weather conditions and the ongoing spread of animal disease to the surge. “The prolonged cold spell, outbreaks of foot-and-mouth disease (FMD) and rising oil prices contributed to the stronger-than-expected rise from the supply side,” said Yoon Jong-won, head of the finance ministry’s economic policy bureau. “Farm product prices are not expected to stabilize until the end of the first quarter. But they should see some stability next month as supply shortage problems could ease somewhat,” he added. According to the state-run agency, prices o

Feb 1, 2011By Kang Seung-woo

Kang Seung-woo

Read more

Underground economy accounts for 17% of GDP

Seoul bourse falls to 1,977 on foreign selling

Will household debt crush economy?

Deutsche Bank faces suspension of operation

IFEZ listens to opinions of foreign residents

Foot-and-mouth disease bumps milk ads

Public services charges rise drastically in Jan.

US beef imports jumping amid FMD spread

Top financial regulator seeks capital market deregulation

Consumer prices surge 4.1% in January

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