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| A Korea Development Bank (KDB) flag stands at the main gate of the state-run lender's headquarters in Yeouido, Seoul, in this photo taken in 2016. Korea Times file |
By Yi Whan-woo
The planned sale of Daewoo Shipbuilding & Marine Engineering (DSME) is prompting speculation that its main creditor, state-run lender Korea Development Bank (KDB), is moving fast to sell off tax-financed companies in accordance with the government's focus on curbing the national debt.
Announced on Monday, the KDB's plan has raised controversy that it is selling the debt-ridden shipbuilder for "a giveaway price," after overseeing the operations of the company for 21 years and injecting more than 7 trillion won ($4.87 billion) into it.
DSME is set to be acquired by Hanwha Group for 2 trillion won under a preliminary agreement signed between the defense-to-energy group and the KDB for a conditional sale.
The plan marks the first attempt to privatize a KDB-controlled firm after President Yoon Suk-yeol loyalist Kang Seog-hoon took office as the bank's chairman and CEO in June.
DSME, which is 55.7-percent owned by the KDB, has seen a surge in its debt ratio, which soared to 713 percent in June, up from 215 percent in 2018 and 368 percent in 2007.
Its aggregate market value amounted to 2.36 trillion won as of Sept. 23, dwindling from 3.66 trillion won in 2018 and 9.88 trillion won in 2007.
"The controversial sales plan hints that the KDB will shift away from spending massive amounts of taxpayer money even if it means no return on investment," a researcher at the Korea Institute for Industrial Economics and Trade (KIET) said on condition of anonymity.
Citing the government's recent plan to lower the national debt, the researcher added, "The KDB appears to be prioritizing faithfully carrying out of the Yoon administration's belt-tightening policy over making profits by selling companies it oversees."
The national debt is anticipated this year to surpass 1,000 trillion won and reach 1,068.8 trillion won, which will account for 49.7 percent of the gross domestic product (GDP).
The Yoon government plans to place a 3-percent ceiling on the ratio of the fiscal deficit to the GDP, as the fiscal balance went into the red under the previous administration that embraced a pandemic-era stimulus policy.
The fiscal balance came down to minus 0.6 percent in 2019, minus 3.7 percent in 2020 and minus 1.5 percent in 2021.
"Taking into account the grave nature concerning fiscal health, other KDB-controlled companies are anticipated to follow DSME's path, whether they are profitable or not," the KIET researcher said.
Among the KDB's potential sell-offs are shipping giant HMM and KDB Life Insurance.
The KDB holds a 20.7-percent stake in HMM and a 92.7-percent stake in KDB Life insurance.
HMM has been performing impressively, recording a net profit of 2.9 trillion won in the second quarter, while its debt ratio fell to 46 percent in the cited period, down from 59.7 percent in the previous three months.
"HMM is fully normalized in its operation and it is subject to sale," Kang said recently.
Concerning KDB Life Insurance, the KDB chairman said the increase in the benchmark interest rate is adding to favorable conditions for the sale.
KDB Life Insurance underwent years of turbulent performance after the KDB acquired its predecessor, Kumho Life Insurance, in 2010 and renamed it.
But it saw its net profit up 402.2 percent year-on-year to 77.07 billion won in the first half of 2022.
