Lax management leaves public firms in deficit - Korea Times
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Lax management leaves public firms in deficit

State-run rail operator KORAIL was one of the public companies that suffered a net loss in 2020. Korea Times file
State-run rail operator KORAIL was one of the public companies that suffered a net loss in 2020. Korea Times file

By Yi Whan-woo

The country's public enterprises collectively reported a net loss last year, the first since the government began to announce their management data in 2016.

The deficit is attributed to elephantine operations, such as salary increases, among 36 state-run companies in general despite the economic fallout of the COVID-19 crisis.

According to All Public Information in One (ALIO), a government-affiliated website offering data on the government and public organizations, the 36 firms suffered a combined net loss of 600 billion won ($535.4 million) in 2020.

This is mainly because half of the 36 companies posted net losses. They include railroad operator KORAIL and overseas resources developer Korea Resources Corp. that have been sinking into the red for five consecutive years.

The 2020 figure marked a continued downtrend in the 36 firms' combined net profit ― 9 trillion won in 2016, 4.02 trillion won in 2017, 2 trillion won in 2018 and 1.2 trillion won in 2019.

Accordingly, their combined debt amounted to 400 trillion won in 2020, up from 397.9 trillion won in 2019.

Casino resort Kangwon Land suffered the most after closing down temporarily and restricting business amid the pandemic. It incurred a net loss of 275.9 billion won in 2020, down from a 334.7 billion won net profit in 2019.

Some money-losing companies saw their deficits widen between the 2019-20 period.

For instance, net losses at KORAIL swelled to 1.34 trillion won in 2020 from 46.9 billion won in 2019, Korea Resources Corp. saw losses widen to 1.35 trillion won from 563.8 billion won and Korea Western Power saw losses swell to 85.9 billion won from 46.6 billion won.

KNOC booked its first capital impairment last year due to snowballing losses from failed overseas projects.

Korea Coal Corp. has failed to find a breakthrough to escape its deepening losses as its plan to secure management rights for its Mongolian subsidiary fell through.

The subsidiary, set up in 2010 with 25.9 billion won in investments, has generated zero profit. Its liabilities exceeded its assets by 32.6 billion won in 2018 since it first fell into complete capital erosion in 2013.

Other firms that suffered deficits include Korea Racing Authority with a net loss of 436.8 billion won, Jeju Free International City Development Center which was 128.6 billion in the red, Incheon International Airport Corporation with a net loss of 422.9 billion won, Korea Airports Corporation which was 148.7 billion won in the red and Grand Korea Leisure which lost 64.3 billion won.

The Ministry of Economy and Finance viewed a dip in energy output and a standstill in the travel industry as major reasons for the poor performances of the public enterprises, noting many of them are related to energy, public transport and leisure.

But analysts disagreed, pointing out the 36 firms in general failed to cut costs to cope with the sales decreases.

"The pandemic can't be an excuse to explain the losses posted by the state-run companies," an economist from a private think tank said on condition of anonymity. "The CEOs and other high-level executives should be blamed for crippled management."

He added the annual salaries of executives as well as lower-level employees continued to rise.

Ju Won, chief economist at Hyundai Research Institute, said the state-run enterprises fell short of taking "fundamental measures" in contrast to private companies to minimize the fallout from the pandemic.

"For instance, private firms cut wages while raising the prices of their goods. But these measures were unheard of among the public companies," he said.

Yi Whan-woo


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