[Opinion] Korean Corporate Debt

Up until 10 years ago, Korean enterprises were criticized for their “insolvent financial structure" and “management on borrowing” because of their debt rates (self owned asset against the whole amount of debt) that rose up to thousands of percent. But it turned out that the debt rate as of the end of last year of Samsung Electronics, Hyundai Motors and 16 other Korean enterprises known worldwide was 99.5 percent on average. Their debt rates have come down below the level of major global enterprises such as IBM and GM whose debt rates are around 200 percent. This gives us enough reason to call this country an advanced nation in terms of the financial structure of enterprises.

It seems, however, that the low debt management is not all applaudable, considering the suggestion that avoiding investment with conservative management is one of the causes of the downfall in the enterprises’ debt rates, and that the shrinking investment is weakening the growth potential of this nation. Experts point out that the reasons the thriving enterprises keep back from investment is because “uncertainty has grown with the hard-to-predict government policies and the growing regulations on big enterprises.” They also suggest that the tendencies of the entrepreneurs that favor safety in enterprising rather than expanding into new businesses are becoming more distinct due their fear of the intervention by foreign capital into domestic enterprises.

With the circumstance being thus, the Ministry of Justice made an advance announcement on the legislation of the Commercial Law amendment bill that contains many details opposed by enterprises, such as the enactment of double derivative suit and the prohibition of the usurpation of corporate opportunity. On the other hand, the demands by the enterprises such as protection devices for the management right were all omitted. As the Korean saying "No tomb is without an excuse," the regulation makers must have had their own reasons for making them, but it is also true that the regulations are no good for “building enterprise friendly environments.” It is not surprising any more that this government is not just unhelpful towards enterprises and gives many obstacles to business, but the regulations are driving the situation out of the frying pan into the fire.

Choi Sang-ryeol, an auditing officer in the enterprise inconveniency report center of the Board of Audit and Inspection of Korea has published a book tilted: “When the Entrepreneurs Drop Tears,” accusing the regulations and the administration opportunism. Here are some points he has made. “The passive attitude of the public servants in executing the tasks for enterprises should be seen as a type of corruption.” “What would the nation look like when the government cries out the slogan that the enterprise is the nation, while at the same time giving hardships to them with regulations and controls.” “The government has its own limitations in creating jobs, so it should leave it to the private sector to do what can be done.” These words, I hope to hear from the mouths of the President and the Minister of Finance and Economy.

Heo Seung-ho, Editorial Writer, tigera@donga.com