By Lee Hyo-sik
Staff Reporter
One out of every five companies operating in the country has failed to generate profits as they spend more for wages, transportation and marketing activities amid fierce competition at home and abroad. Also, an increasing number of local firms are boosting their presence overseas for new business opportunities, while seven out of 10 businesses have adopted an annual salary-based payment system.
According to the National Statistical Office (NSO) Wednesday, the number of companies capitalized at over 300 million won with over 50 employees totaled 10,786 at the end of last year, down 1.1 percent from 2005.
Their combined revenues increased 6.4 percent to 1,221 trillion won during the one-year period, but the ratio of operating profits to sales, a key indicator of corporate profitability, came to 5.8 percent, down 0.8 percentage point from 2005, as their operating expenses jumped 7.3 percent.
Companies' average operating profit reached 6.7 billion won, down 5.7 percent, while ordinary profit came to 7.1 billion won, down 3.3 percent.
Excluding financial services and insurance businesses, the number of firms making profits came to 8,603 in 2006, down 3.1 percent from a year ago. A ratio of businesses in the black to the total dropped to 81.4 percent from 83.1 percent. Companies that incurred losses numbered 1,969, up 8.7 percent from 2005.
Among 214 financial firms and insurers, 183 businesses realized profits last year, down 3.7 percent from a year ago, while the remaining 31 sustained losses, up 29 percent.
Meanwhile, a growing number of companies advanced into overseas markets as the domestic financial and other services sectors have reached saturation point. Also, many manufacturers have shifted factories to China and other Asian economies in search of cheaper labor and easier access to emerging markets.
The statistical office said the number of firms operating subsidiaries in foreign countries totaled 5,113 last year, up 11 percent from 2005. About 71.2 percent of overseas affiliates were located in China and other Asian nations, followed by 14.8 percent in North America and 9.7 percent in Europe.
Also, 7,263 companies, or 67.3 percent of the total, adopted an annual salary-based payment system last year, up 3.2 percentage points from a year earlier. The number of firms introducing the performance-based wage system rose 12.4 percent to 5,671.
The number of businesses undertaking research and development (R&D) activities increased 2.2 percent to 5,280 in 2005, with total spending reaching 21 trillion won.