Evaluation Focuses on Social Values
The Ministry of Economy and Finance and the National Assembly Budget Office announced on July 19 that South Korean public institutions’ total debts increased by 21.4 trillion won to 525 trillion won in 2019 whereas the amount of increase stood at 8.5 trillion won in 2018. In addition, their debt-to-capital ratio increased by 1.1 percentage points to 156.3 percent last year. The ratio, which had reached 220 percent in 2012, continued to fall until 2018 and rebounded last year.
The increase in debt was led by Korea Electric Power Corp. (KEPCO) and Korea Hydro & Nuclear Power (KHNP). KEPCO’s annual net profit dropped from 7.14 trillion won to negative 2.26 trillion won from 2016 to 2019. KHNP’s annual net profit fell from 2.47 trillion won to 240 billion won during the same period.
According to experts, the deteriorating financial conditions of those institutions are because the current government’s evaluation of their management has focused on social values such as job creation and contribution to co-prosperity rather than business performances. This is in stark contrast to the previous administration’s policy that concentrated on debt reduction.
They also point out that the government needs to pay heed to those institutions’ debts not included in national debt calculation. “The national debt on a cash basis was 680.5 trillion won in 2018, when the general government debt including that of non-profit public institutions and the public-sector debt including that of non-financial public enterprises amounted to 759.7 trillion won and 1,078 trillion won, respectively,” the National Assembly Budget Office explained, adding, “South Korea’s national debt-to-GDP ratio reached 38 percent last year and is estimated to reach an all-time high of 43.5 percent this year, and yet the figure does not include the public-sector debt.”