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S. Korea: Public Firms' Huge Debts to Dent Fiscal Health |
| Source: |
http://www.koreatimes.co.kr |
| Source Date: |
Sunday, April 21, 2013 |
| Focus: |
ICT for MDGs
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| Country: |
Korea (Republic of) |
| Created: |
Apr 23, 2013 |
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Twenty-eight public firms saw their outstanding debts reach an aggregated 393 trillion won ($357 billion) last year with their debt-to-asset ratio exceeding 190 percent.
According to regulatory filings, Sunday, their combined debt increased by 8.7 percent from 361.4 trillion won the year before, compared with the government’s debt of 445.2 trillion won.
The filings come amid concerns that the administration’s 17.3 trillion won supplementary budget will further erode the nation’s fiscal health, increasing sovereign debt to more than 500 trillion won by 2015.
While the firms’ debts were rising, their combined total assets slightly decreased from 206.8 trillion won to 206.7 trillion won. Thus, their debt ratio, a financial ratio indicating the percentage of assets that are provided via debt, jumped from 174.7 percent to 190.1 percent.
Eight firms accounted for 92 percent of the total, or 361 trillion won. They are Korea Land and Housing (LH), Korea Electric Power Corp. (KEPCO), Korea Gas Corp., Korea Expressway, Korea Hydro and Nuclear Power Corp., Korea National Oil Corp., Korea Railroad (Korail), and Korea Water Resources Corp. (K-water).
Seven of the eight saw their debts grow last year. K-Water was the only exception.
Most of the debt accrued is as a result of the firms carrying out state projects.
LH tops the “debt ranking” — its debt rose by 5.8 percent to 138.1 trillion won last December with a debt ratio of 466 percent. Like the rest, it has witnessed the increase in the process of executing long-term projects including constructing low cost, long-term-lease apartments for low income earners and the construction of new cities in regions where government agencies currently in Seoul will be relocating to.
K-water’s debt of 13.7 trillion won was mainly from large projects including refurbishment of the four major rivers and construction of the Ara Waterway between the Han River and the West Sea.
KEPCO’s debt was more than 95 trillion won. It has reported deficits since 2008, with electricity rates set at about 90 percent of current production costs.
Experts say the public firms’ growing debt could threaten the state’s fiscal soundness, saying some firms have potential default risks.
The Korea Institute of Public Finance recently cautioned against big projects and the high state subsidization of production costs of public services. “Excessive expansion of projects should be stopped. Citizens should also be prepared for a higher level of public service fees to resolve the debt issue,” its report said.
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S. Korea: Public Firms' Huge Debts to Dent Fiscal Health Twenty-eight public firms saw their outstanding debts reach an aggregated 393 trillion won 357 billion last year with their debt-to-asset ratio exceeding 190 percent
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