The combined debt held by state-controlled companies is snowballing as some were found to have maintained conventional management practices, such as reckless borrowing, irresponsible overseas projects and excessive incentives for executives.
According to the public agencies’ management information provider Alio, nine major state-run firms saw their collective debt surge 5.2 percent or 17.8 trillion won in six months.
Their outstanding debt came to 358.5 trillion won ($325 billion) at the end of June, up 5.2 percent from 340.7 trillion won at the end of 2012.
The nine firms were Korea Land & Housing Corp., Korea Electric Power Corp., Korea Gas Corp., Korea National Oil Corp., Korea Resources Corp., Korea Expressway Corp., Korea Railroad Corp., Korea Water Resources Corp. and Korea Coal Corp.
Alio showed that the nine firms’ debt accounts for about 70 percent of the 493.3 trillion won in outstanding debt held by all domestic public firms.
Further, debt is snowballing more quickly, with the 17.8 trillion won accumulated during the first half of 2013 worth 71.6 percent of the 24.8 trillion won accumulated throughout 2012.
The figure indicates that the yearly debt growth of the nine firms for this year could exceed the 24.8 trillion won of 2012.
Notably, the Korea Resources Corp. posted a 69.8 percent (or by 1.6 trillion won) debt increase during the first half to reach 4.3 trillion won.
The Korea Land & Housing Corp., or LH, the biggest debtor among the nine, saw its outstanding debt further increase to 141.7 trillion won by the end of June, up 2.6 percent (or 3.6 trillion won) from the previous half.
LH also had the largest debt-to-equity ratio with 433.9 percent, followed by the Korea Gas Corp.’s 377 percent and the Korea Resources Corp.’s 250.1 percent.
Earlier this month, Deputy Prime Minister and Finance Minister Hyun Oh-seok issued a warning against some public firms, demanding a full-fledged restructuring to reduce their debt obligations incurred from aggressive overseas expansion for energy resources and excessive domestic infrastructure spending.
Hyun said that chief executives of state-run companies that do not make progress in debt reduction in their mid-term evaluation will be held responsible and removed from their posts.
“The government will freeze wages of executives of the state-run firms should they fail to meet its standards,” he said.
By Kim Yon-se (
kys@heraldcorp.com)
