State firms' debts grow at alarming level

Debts owed by Korea's public companies surpassed the national debt last year, spawning concern such rapid debt growth may hinder the country's overall fiscal soundness, data showed Thursday.

The combined debts of 286 state-run firms here reached 464 trillion won ($409.2 billion) at the end of 2011, up 35 percent compared with three years earlier, according to the data by the Ministry of Finance and Strategy.

The figure is 43 trillion won higher than the country's total debt of 421 trillion won, accounting for 34 percent of the country's gross domestic product (GDP), the data showed.

Analysts said the increase in public companies' debts came as the majority of firms raised money to finance large-scale national projects such as railways and the Four Rivers Restoration Project, initiated by President Lee Myung-bak.

As the government pushed for a cap on public transportation fees and the local property market faltered, public companies have faced difficulties retrieving part of their investments, they added.

A series of economic stimuli conducted between 2009 and 2010 in the wake of the financial crisis following the collapse of U.S.-based investment bank Lehman Brothers also contributed to jacking up debts by state-run firms, analyst said. During that period, public debt increased by 83 trillion won (US$73.2 billion), according to the ministry.

"Public debts have grown to an alarming level, potentially threatening liquidity conditions," said Jeong Young-sik, an economist at Samsung Economic Research Institute.

With the population sliding and the number of the aged hiking, the government is tasked with dealing with public liabilities in a bid to secure the country's fiscal soundness, analysts said.

"We need to consider slimming down business projects for public firms and only pursue the essential ones so it won't harm their financial health," said Yoon Tae-beom, a professor at Korea National Open University. (Yonhap)