Death toll in ferry sinking tops 150 as hope dwindles

State firms expected to increase fees

State firms expected to increase fees

Enterprises blame rate caps for poor performance

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Published : 2013-12-12 20:09
Updated : 2013-12-12 20:09

The full-scale debt restructuring of Korea’s state-run enterprises, including 12 companies under tight government scrutiny, would likely lead them to increase public utility, transportation and other service fees, analysts said.

This comes as state-run companies will be required to wind down by 2017 their debts that have ballooned due to overexpansion and overspending. Should companies show a lack of progress in debt reduction in their midterm evaluation, the government would remove their chief executives, Deputy Prime Minister and Finance Minister Hyun Oh-seok warned.

The 12 companies are Land & Housing Corp., Korea Electric Power Corp., Korea Deposit Insurance Corp., Korea National Oil Corp., Korea Gas Corp., Korea Coal Corp., Korea Resources Corp., Korea Water Resources Corp., Korea Expressway Corp., Korea Railroad, Korea Student Aid Foundation and Korea Rail Network Authority.

An increase in public fees such as electricity, water and highway tolls is expected to help them recover their production costs.

State-run enterprises, especially in the fields of utility and transportation, called for fee hikes, arguing that low public fees made it difficult for them to see returns on their investments.

They were, therefore, unable to get back the money they spent for production, maintenance and operations.

However, analysts expected that an increase in fees would face a political uphill battle as lawmakers have been reluctant to approve the move as it could affect the livelihoods of the mid- and low-income families.

The outstanding debt of the 12 state-owned enterprises reached about 412.3 trillion won ($400 billion) at the end of last year, up from 187 trillion won in 2007, according to a Finance Ministry report.

The increase in the 12 targeted state-run enterprises’ debt led to daily interest payments of some 21.4 billion won on average last year, according to the report.

LH and KEPCO’s debt, which increased to more than 50 trillion won over the last five years, accounted for almost 60 percent of the total debt by the 12 public companies, the report further noted.

The outstanding debt of some 680 public enterprises reached 566 trillion won at the end of last year, 120 trillion won higher than the central and regional government’s debt, the Korea Institute of Public Finance warned.

The Finance Ministry said that it would strengthen its disclosure rules for its state-run companies, which will have to publicly report its finances periodically, including executive pay, bonuses and other welfare benefits.

By Park Hyong-ki (hkp@heraldcorp.com)

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