More than four out of 10 South Korean conglomerates plan to cut back on their investment both at home and abroad this year amid a global economic slowdown and worsening market conditions, a survey by the state-run trade agency has showed.
According to the recent survey by the Korea International Trade Association (KITA), 47 percent of 1,327 companies having overseas sales of US$500,000 or more last year forecast that business circumstances will deteriorate this year. Some 16.9 percent of the respondents expected a turnaround.
Over such a gloomy outlook, 29.5 percent of the companies decided to reduce investment at home in the new year and 27.5 percent to slash overseas investment.
Of large-sized companies, 43 percent said they will scale down their investment both at home and abroad, the survey showed.
By sector, 45 percent of the semiconductor firms surveyed, or the largest share among all sectors, said they will slash fresh investment in 2023, according to the survey.
“The fall in investment by large conglomerates could hurt the country’s overall exports performance and corporate competitiveness in the global market. It is needed to swiftly implement various tax incentives and other measures to revitalize investment sentiment,” a KITA official said.
South Korea has been struggling with weakening exports momentum and growing trade deficit in recent months on high energy prices, supply chain disruptions and a global economic downturn over aggressive monetary tightening.
In 2022, the country’s exports rose 6.1 percent on-year, but it suffered the largest ever yearly trade deficit. For December, exports fell 9.5 percent, extending the losing streak to the third consecutive month.
The government said exports are forecast to mark a 4.5 percent decline in 2023. The Bank of Korea projected in November that the national economy would grow 1.7 percent in 2023.
Four animals rescued from Lee Ki-young’s home on Dec. 29 (KARMA)
Murder suspect Lee Ki-young’s four pets have all been adopted, avoiding the alternative of euthanasia.
All three cats and a dog left in Lee’s residence were sent to their new families, who had watched reports about the pets and applied for adoption, according to the Paju, Gyeonggi Province, city government and the Korea Animal Rescue and Management Association.
The pets were rescued from Lee’s home in Paju on Dec. 29, three days after Lee was apprehended on suspicion of murdering a taxi driver and hiding the body in his closet.
KARMA was able to rescue and protect the pets thanks to police who secured them from Lee, the legal owner of the pets, during the investigation.
But the animals had been at risk of being put down as unadopted animals are generally put to death 10 to 20 days after being placed on waiting lists in South Korea.
Lee had kept the pets since he was with his former live-in girlfriend, whom he also confessed to murdering in August.
It’s unclear whether the animals had been abused, but a local media outlet broadcast video footage showing Lee laughing as he put a leashed Siamese cat into a pool.
Meanwhile, Korea Animal Rights Advocates on Monday called for the government to take action to protect pets left after crimes on a post on its Facebook page.
“As animals cannot express the abuse that they suffered in language, they are left in the cold without getting due protection even though they are found at the crime scene,” the animal rights advocacy group said.
By Lim Jae-seong (firstname.lastname@example.org)
Legoland Korea Resort, a theme park located in Chuncheon, Gangwon Province that opened in May in partnership with a local developer, does not plan to cut back on its operations and will fund any further expansion itself, regardless of the developer’s recent default, the UK-based attractions operator Merlin Entertainments told The Korea Herald last week.
“Any plans Merlin has for future investment are wholly financed by itself,” a spokesperson for Merlin said in an email.
But whether the company will lodge a legal complaint against Gangwon Province — which had allegedly tried to pull back from the partnership agreement without sufficient grounds, prompting the default — is still uncertain, because details of the deal could not be disclosed.
“Neither Merlin Entertainments Group nor its wholly owned subsidiary, LEGOLAND Korea Resort (LLKR) are at liberty to disclose details of the agreement with Gangwon Province as we are under a contractual obligation of confidentiality,” the Merlin spokesperson added.
Early in October, Gangwon Jungdo Development Corp, the local developer, defaulted on 205 billion won ($145 million) in bond payments due on Sept. 29, in a blow to market expectations for a government guarantee. The firm was set to enter into rehabilitation for fiscal austerity — a decision the Gangwon governor quickly went back on after being assailed for floating a “politically-charged,” half-baked plan since Kim Jin-tae, the first-term governor, had enough resources to make the deal work.
He hurriedly advanced the payment deadline to Dec. 15 from Jan. 29 next year, but the fiasco had already upended the bond and short-term money markets. Investors were rattled by what they saw as the transactional nature of a government guarantee. To restore market calm, the government, central bank and even the country’s banking giants upon the government request put together a funding backstop to contain the risks of growing liquidity stress.
“It’s like a bomb blast ripping through the markets because the top-rated asset-backed commercial papers instantly became junk. Who would have really thought that was possible? It’s an all-bets-are-off situation for investors now,” said Hwang Sei-woon, a senior research fellow at the Korea Capital Market Institute.
The fallout is palpable. According to the latest data that Korea Electric Power Corp. revealed Sunday, the top-rated state firm had failed to get enough bidders for its bonds last month for the first time in three years. The “Legoland crisis” was what had prompted the unexpected gap, the firm told Rep. Chung Il-young of the Democratic Party of Korea in a submission asked by the lawmaker sitting on the National Assembly’s trade committee.
Two other top-rated state companies — Korea Gas Corp. and Korea Hydro & Nuclear Co. — suffered more from a lack of bidders for their AAA rated bonds. They failed to find a single bidder for bonds worth 200 billion won and 100 billion won, respectively, also in October.
Rep. Chung, who also sits on the special committee on the government budget, rebuked the government for having done little to prevent the Legoland default from spilling over into the wider financial market. He called the government response “inadequate and amateurish.” Chairman Kim Joo-hyun of the Financial Services Commission, the top financial regulator, acknowledges that the government intervention came a little late.
Long-term profitability in doubt
But resurfacing worries over the theme park’s long-term profitability increasingly chips away at the government’s support and Merlin’s determination to run the park as planned. Such concerns, along with bureaucratic red tape, led to the opening being delayed by 11 years. The Chuncheon theme park is the first and only Legoland on an island. It is the largest in Asia and the second-largest in the world, after Legoland New York.
The attractions operator is also facing decreasing demand for the attraction, prompted by default rumors, which Merlin categorically denies as unsubstantiated. A more pressing concern is that an increasing number of people are debating whether their annual passes to the attraction are really worth the cost.
“It’s about a two-hour drive from Seoul to Chuncheon and the passes, one-day or annual, are not that cheap, considering all the attractions you see there are just for kids under 12. It’s worth a trip for a day, but a second run? I’m not really sure.” said Kim, a father of a preschooler who lives in Seoul and asked to be identified by his surname only.
Kim, 39, referred to “winter shutdowns” from January to March next year, when the park will be closed as part of annual safety checks. The park offers a free 90-day extension for annual pass holders, but Kim and many other local tourists holding the passes say they have to sacrifice too much.
“The extension doesn’t cut it. The reason we buy the passes is they allow us to make the trip ‘whenever we want’ at a lower price, and that’s without a doubt when kids are on winter or summer vacation. Why does it take three months to run safety checks? An extra 90 days are useless if we can’t take advantage of school vacation,” Kim said.
Merlin said its operating days and months are not only in line with local “weather conditions and climate” but is based on “Legoland’s 55 years of experience operating an outdoor amusement park for young children and their families,” highlighting safety concerns. A half-price ticket to Seoul’s Coex Aquarium will be given to those annual pass holders to make up for the winter suspension in addition to the 90-day extension, the park operator added.
“The thing is, I don’t see what being on rides at an attraction and seeing fish swimming in a tank have in common, really. If I can’t see it, kids certainly won’t.” Kim said.
By Choi Si-young (email@example.com)
In a survey conducted on 1,727 Zigbang app users from June 20 to July 4, 1,069 respondents (61.9 percent) said they expect the prices of houses in their neighborhood to fall, amid speculation over a sharper-than-expected rate hike the central bank is set to approve Wednesday to tame persistent inflation.
More people living in the nation’s capital Seoul and its surrounding areas of Incheon and Gyeonggi Province — where demand continues to outstrip supply, fueling soaring prices — bet on a drop in prices than others living elsewhere. More first-time home buyers forecast a housing price fall than those with homes.
Apartment prices in Apgujeong-dong, a wealthy neighborhood in Gangnam-gu, southern Seoul, dropped as much as 300 million won ($230,000) in June from the previous month. The fall is seen as a sign of a price slowdown.
Aside from repayment burdens, the respondents cited shrinking demand, an economic downturn and increased home supply prompted by relaxed property curbs as factors in a potentially cooling housing market in the months to come.
Meanwhile, more respondents expected to see a drop in the cost of “jeonse,” where tenants pay a lump-sum cash deposit to rent a home and receive it back once the standard two-year contract expires.
There are more jeonse landlords, and tenants are increasingly finding monthly rentals more appealing than the two-year deals, according to the survey. Monthly rentals were preferred over jeonse in January-May this year for the first time, according to the Land Ministry.
Zigbang said factors such as a rate hike, inflation, and a downturn would sap demand and bring home prices down. How the eased property curbs would affect the market remains to be seen, the property technology firm added.
By Choi Si-young (firstname.lastname@example.org)
S. Korean retailers on real estate shopping spree
Apartments in Yongsan-gu, Seoul (Yonhap)
South Korean retail companies have been on a shopping spree recently, purchasing real estate in Seoul’s major commercial districts and preparing for new business development.
According to data from Financial Supervisory Service, on May 31 fashion company CreaS F&C finalized the purchase of 1,950 square meters of land and a 9,338-square-meter building in Nonhyun-dong, within Seoul’s Gangnam.
Based on the deal worth 130 billion won ($103.6 million), the firm stated that it will expand its office space and launch new fashion brands.
Hyungkuk F&B, a beverage company that provides raw materials to Starbucks and Ediya, on Wednesday acquired 1,173 square meters of land and a 3,001-square-meter building in Samseong-dong, also in Gangnam-gu. The deal cost 62 billion won, which accounts for 46.9 percent of its total assets.
The company said it plans to move its Seocho-gu headquarters there and expects to raise additional profit by leasing office and commercial spaces.
Kopla, a plastic manufacturing arm under BGF retail, snapped up 779 square meters of land and a 417-square-meter building in Ichon-dong, Yongsan, Seoul. In a filing, the firm stated it will build a research and development center there.
Retail companies that have taken a big hit by shutting down offline stores due to the coronavirus pandemic seek business recovery by investing in real estate, according to experts.
“It’s a recent trend in the retail industry to buy or sell office and commercial buildings as a means to create funds and invest in new business segments,” said Kim In-man, head of the Kim In-man Research Center.
“Purchasing buildings in the upscale Gangnam area is a top choice for them. Also, many are considering Yongsan as an investment option, following the Yoon Suk-yeol administration’s decision to relocate the presidential office there.”
According to data from the Ministry of Land, a 21,273-square-meter building in Yeoksam-dong, Gangnam, was sold at 258 billion won in May. It ranked as the most expensive office and commercial building there during the cited period.
In Yongsan, the most expensive sales deal in May was a 441-square-meter commercial building in Itaewon, which sold for 25.6 billion won.
By Byun Hye-jin (email@example.com)