Day: March 22, 2024

Savings banks in South Korea posted a combined net loss of 555.9 billion won (US$418.8 million) in 2023, data showed Friday.

It compared with a combined net profit of 1.56 trillion won the previous year, according to the data from the Financial Supervisory Service (FSS).

The decline came mostly from a dip in interest income, while the banks were forced to boost their loan loss reserves amid growing concerns of risks stemming from real estate project financing (PF) loans, the FSS noted.

The banks’ interest income came to 5.4 trillion won last year, down 1.3 trillion won from a year before, while their outstanding loans plunged 9.6 percent on-year to 103.9 trillion won as of end-December.

The savings banks’ total assets were valued at 126.6 trillion won at end-December, down 12 trillion won from a year earlier, according to the financial regulator.

Their average loan delinquency ratio came to 6.55 percent as of end-December, up 3.14 percentage points from a year earlier, while their average capital adequa
cy ratio also climbed to 14.35 percent from 13.15 percent over the period.

Source: Yonhap News Agency

The delinquency ratio on real estate project financing (PF) loans slightly rose in the fourth quarter, data showed Friday, amid concerns of possible risks stemming from such loans.

The delinquency ratio on real estate PF loans came to 2.70 percent as of end-December, up 0.28 percentage point from 2.42 percent three months earlier, according to the data from the Financial Supervisory Service (FSS).

The total value of outstanding loans climbed to 135.6 trillion won (US$102 billion) from 134.3 trillion won over the cited period.

Real estate PF loans have become a major risk factor of the financial sector amid a prolonged slump in the property market due to price hikes.

Taeyoung Engineering and Construction, the country’s 16th largest builder, was forced to apply for a debt restructuring program in late December after it faced a liquidity shortage due to real estate PF loans.

“The delinquency ratio on PF loans rose slight to 2.7 percent as of end-December, compared with 2.42 percent tallied at end-Septemb
er, but it generally continued to remain stable,” the financial regulator said in a press release, adding the government is considering and pushing for “various policy steps” to help stabilize the market.

In the latest of such efforts, FSS chief Lee Bok-hyun held a meeting with senior officials from local lenders and construction firms Thursday, where he called for swift and all-out efforts to minimize the potential fallout from real estate loans.

Source: Yonhap News Agency

Former U.S. National Security Advisor John Bolton has said that former President Donald Trump wants Americans to treat him the way North Korean leader Kim Jong-un is treated in the reclusive country.

Bolton, who served as national security advisor under Trump from 2018-2019, made the remarks against the presumptive Republican presidential nominee in a social media post. He is known to have been at odds with Trump over major foreign policy issues while in office.

“Donald Trump wants Americans to treat him like North Koreans treat Kim Jung Un. Get ready,” he wrote on X, formerly Twitter, on Tuesday.

Bolton has voiced sharp criticism of Trump, including through his memoir, “The Room Where It Happened.”

In a new edition of the memoir published in January, Bolton warned that Trump, if reelected, could attempt to reach a “reckless” deal on North Korea’s nuclear program that would alienate South Korea.

Source: Yonhap News Agency

Perils of hasty policy shift

President Yoon’s plan to ditch current policy on appraised property value needs more preparation

In recent years, many Korean homeowners have come under overwhelming pressure over soaring property taxes, due partly to the previous Moon Jae-in administration’s controversial real estate policy to increase the state-led declared prices of properties to 90 percent of market value by 2035.

President Yoon Suk Yeol announced in a town hall meeting on Tuesday that the government will abolish the “reckless” declared real estate price policy, openly criticizing Moon’s policy that resulted in sizable jumps in property and other related taxes.

Each year, the government annually announces declared prices of apartments and other types of real estate through a survey nationwide. The appraised prices are widely used by public officials and organizations, as they form the basis for 67 administrative policies and systems, including property tax, comprehensive real estate tax and health insuran
ce premiums.

In November 2020, Moon offered an ambitious road map to rationalize the appraised prices of real estate aimed at narrowing the gap between the declared prices and real market value, but the policy backfired as the pace of increase in declared prices was irrationally fast.

“During the five-year period of the Moon administration, the declared prices surged by an average of 10 percent per year,” Yoon said. “The artificial increase in the declared prices generated enormous side effects and made people greatly suffer.”

Yoon did not hide his negative view of the policy, claiming the “misguided” real estate policy only increased the housing burden on ordinary people and worsened living conditions.

Yoon argued that the Moon administration had attempted to rein in skyrocketing house prices, which resulted from its own policy failures, by imposing “punitive” taxes, referring to the fast-paced increase in declared prices.

Yoon’s critical remarks are not groundless. The appraised prices jumped 19.05 per
cent in 2021 and 17.2 percent in 2022, dramatically higher than the 4-5 percent annual rise between 2016 and 2020.

The Moon administration’s plan to raise declared property prices, incidentally combined with the booming property market, translated into an explosive hike in taxes on home ownership, increasing the number of those who had to pay comprehensive real estate tax and prompting strong complaints from people hit by unexpected high property taxes and other related taxes.

In response to surging taxes, critics raised the issue of a “property tax bomb,” and the government collected a record 3.3 trillion won ($2.5 billion) in comprehensive real estate tax, compared to a mere 400 billion won in 2018.

To abolish the current declared price policy, the related law should be revised. Yoon said the government will push ahead with various tools to generate the same effect, even before legislation is completed.

The overall direction of the reform proposed by Yoon seems reasonable. But there are a host of critic
al issues that he has to address. First, there are opinions from experts and the public that the gap between declared prices and market value should be narrowed at a steady pace in the long term. Too wide a gap could distort the market mechanism.

Second, Yoon might commit the same mistake as Moon in hastily pushing for the abolition of the declared price road map. Moon stoked great backlash by abruptly introducing the controversial plan without collecting enough public opinions and analyzing the property market conditions thoroughly.

The government said last year it would review the problems with the declared price policy and announce the final result of the state-led assessment on the issue in November 2024. Yoon’s announcement Tuesday, in other words, has artificially shortened the policy preparation period by about seven months to come ahead of the April 10 general election that will determine the composition of the National Assembly.

Changing assessment standards involving property taxes is a critical
issue, potentially affecting a wide range of other taxes and state policy systems. The government should take more time to prepare its policy and seek ways to set optimal declared prices.

Source: Yonhap News Agency

Follow AMCHAM’s advice

Reform urgent to attract more global firmsing a negative interest rate policy, the Bank of Japan raised the lending rate for overnight borrowing to 0 to 0.1 percent from minus 0.1 percent on Tuesday. The rate hike was the first since February 2007. It came as part of Japan’s attempts to shift away from its ultra-lax monetary policy. Market watchers interpreted Japan’s move as tantamount to a declaration of its exit from the “lost 30 years.”

Japan had been desperate to address the long-standing deflation with the negative rate policy coupled with other measures to inject money into the economy to boost workers’ wages and increase employment. Many Japanese companies have been benefitting from enormous amounts of grants from the United States amid the escalating rivalry between the U.S. and China. Japan has also taken audacious deregulatory measures to induce investments from leading foreign companies while exploring future growth engines in cutting-edge areas like semiconductors, for i
nstance.

In contrast, it is a pity to see Korea still struggling despite opportunities to make the most of the exodus of global firms from China. It needs to attentively listen to the admonishment by the American Chamber of Commerce (AMCHAM) in Korea. It said the “China exodus” by global companies will provide Seoul with precious opportunities to become a business hub of the Asia-Pacific. AMCHAM surveyed around 800 member companies active here, which showed Korea being the second most favored country for establishing their Asia-Pacific headquarters, following Singapore.

In explaining their preference for Korea, they highlighted factors such as reasonable living costs, the influence of Hallyu (the Korean wave), and the convenient industrial and transportation infrastructure, which position Korea as a viable alternative to China as the prime candidate for hosting their headquarters. Concerning the reasons global firms avoid Korea, AMCHAM cited a comparatively lower level of labor flexibility, such as the 52-h
our work system, paired with an excessive punitive regime against employers represented by the Serious Disaster Punishment Act, heightening the legal accountability risks for CEOs. They also cited hefty corporate taxes and digital-related regulations.

The Organisation for Economic Co-operation and Development recently forecast Korea’s potential economic growth to fall to 1.7 percent this year, although it climbed to 2.3 percent in 2020. Due to the declining fertility rate and rapidly aging population, the nation is projected to enter a phase of near-zero growth in the foreseeable future. Against this backdrop, Korea’s emergence as the Asia-Pacific hub for global companies could offer a breakthrough from the protracted low growth phase. In particular, attracting major global firms and talented people will facilitate Korea’s bid to sharpen its competitive edges in areas such as finance and information and technology.

Singapore has some 5,000 Asia-Pacific headquarters, largely boosted by its policy of curtaili
ng 5 to 10 percent of corporate taxes. In comparison, Korea has less than 100 headquarters.

The Yoon Suk Yeol administration and the political parties should double down on efforts to speed up pension, education and labor reforms. They should also focus on reforming corporate and inheritance tax systems. These are necessary to proactively induce foreign investments and prop up the growth momentum.

AMCHAM was set up in 1953 in the aftermath of the Korean War. This marks the first time it has published such a goodwill policy report since its inception. It can be taken to tell Korea that it faces the last chance to leap forward again. The admonishment is essential for Korea at a time when its growth momentum sputters. The government and the political parties, regardless of their ideological inclinations and political stances, should combine efforts to do away with the diverse regulations that hinder investments by global companies.

Source: Yonhap News Agency

Diplomacy swayed by domestic politics

Lee Jong-sup, Korea’s ambassador to Australia, returned home Thursday to “attend a meeting over defense cooperation.” He made the decision exactly 11 days after his departure for Canberra amid controversy over his alleged exercise of pressure over an investigation into the suspicious death of a Marine on a rescue mission last year. Neither the government, which hurriedly let Lee, a suspect, leave Korea, nor the Corruption Investigation Office for High-ranking Officials, which protracted its probe of Lee, can avoid responsibility. The episode revealed the bare face of our diplomacy subjugated to domestic politics.

In another strange development, it was People Power Party (PPP) interim leader Han Dong-hoon – not the Ministry of Foreign Affairs, the Ministry of National Defense or the Ministry of Trade, Industry and Energy – that first announced the return of the ambassador. Thirty minutes after Han’s announcement, the Foreign Ministry hastily issued a press release confi
rming his arrival. Has an interim leader of a governing party ever served as the mouthpiece of the government like this? The episode suggests diplomacy is being exploited for domestic politics.

The Foreign Ministry said Lee returned home to participate in a defense meeting. But no urgent issues have broken out over the past 11 days since Lee’s departure. If there really was an urgent issue to deal with, Lee could leave the country after attending the defense meeting on March 25. Korean envoys participated in the past two defense meetings via video conference. A defense meeting of six ambassadors in Seoul is unprecedented.

That’s not all. A meeting of all Korean ambassadors in foreign countries was already scheduled for April 22. The defense meeting on Monday was most likely intended to save Lee from his judicial risks. Some embassies even got the information about Monday’s defense meeting from news reports, not from the Foreign Ministry. If the government really had to bring him in, he could quietly return
on his own, instead of using five other ambassadors as sidekicks.

This kind of abnormality is not new. On Feb. 14, President Yoon Suk Yeol abruptly canceled his state visit to Germany for unspecified reasons, just four days before his scheduled departure. The decision was probably made due to the need to mitigate deepening public sentiment against the first lady’s suspicious reception of a luxury handbag from a pastor. If diplomacy is exploited by domestic politics, that constitutes diplomatic discourtesy.

Lee said he would not resign as ambassador. But if diplomacy is not to be disgraced by domestic politics, he or the government must make a decision before it’s too late.

Source: Yonhap News Agency

South Korean poet Kim Hye-soon won the prestigious National Book Critics Circle Award for her work “Phantom Pain Wings,” the organizer said Thursday (U.S. time).

The annual American awards recognize outstanding books published in English across six categories: fiction, nonfiction, biography, autobiography, poetry and criticism.

“Phantom Pain Wings,” depicting the memory of patriarchy and war trauma, marks the 13th book by the 69-year-old poet.

Originally published in 2019, the poetry collection was translated by Choi Don-mee and released in English by New Directions Publishing last year.

Source: Yonhap News Agency

The National Pension Fund (NPF) has decided to vote in favor of a nomination for chief executive of South Korea’s dominant cigarette maker, KT and G Corp., at an upcoming shareholder meeting, according to the fund Friday.

Appointing a new chief executive, which would mark KT and G’s first leadership change in nine years, and an outside director are two main agenda items for the company’s annual shareholder meeting set for next Thursday.

A committee that monitors investments by the NPF held a meeting Thursday and decided to vote for KT and G’s chief executive nominee, Bang Kyung-man, who has served in various capacities at the company since 1998, according to the fund.

The NPF also decided to vote for former judge Sohn Dong-hwan as a new board member of KT and G, it said. The fund holds some 6.2 percent stake in KT and G.

State-run Industrial Bank of Korea, which holds some 8 percent stake in KT and G, has opposed the nomination of Bang, citing falling profitability and dubious business practices during h
is tenure as a board member.

Sohn is a director candidate proposed by the state-run bank.

Source: Yonhap News Agency

South Korean poet Kim Hye-soon won the prestigious National Book Critics Circle Award for her work “Phantom Pain Wings” on Thursday (U.S. time).

The National Book Critics Circle (NBCC), an American nonprofit association, announced her as the winner in the poetry category of this year’s awards.

The annual NBCC Awards recognize outstanding books published in English across six categories: fiction, nonfiction, biography, autobiography, poetry and criticism.

“Phantom Pain Wings,” depicting the memory of patriarchy and war trauma, marks the 13th book by the 69-year-old poet.

Originally published in Korean in 2019, the poetry collection was translated by Choi Don-mee and released in English by New Directions Publishing last year.

The poet “pushes the poetic envelope into the farthest reaches of the lyric universe. In her new collection, Kim depicts the memory of war trauma and the collective grief of parting through what she calls an ‘I-do-bird-sequence,’ where ‘Bird-human is the ‘I,'” the U.S. publisher said
about her book.

It was chosen as one of the best poetry books of 2023 by the New York Times.

Among the five finalists in the award’s poetry category, Kim’s book was the only translated work.

Source: Yonhap News Agency

North Korea’s ruling party delegation has arrived in Beijing on a three-nation tour, state media reported Friday, in a move seen aimed at strengthening ties with countries sharing the socialist ideology.

The delegation, led by Kim Song-nam, director of the international department at the Workers’ Party, was greeted by the assistant to the head of the International Liaison Department of the Chinese Communist Party at an airport Thursday, the Korean Central News Agency (KCNA) said, without providing details on the purpose of the trip.

It marked Kim’s first known overseas trip since he was appointed to the post in 2021. Kim, who served as an interpreter for North Korea’s late founder Kim Il-sung and former leader Kim Jong-il, is known as a China expert.

This year marks the 75th anniversary of the establishment of diplomatic ties between North Korea and China. The North declared 2024 as the year of North Korea-China friendship, a designation first introduced in 2009 to mark the 60th anniversary of the diploma
tic relations.

Meanwhile, Wang Huning, a member of the standing committee of the political bureau of the Chinese Communist Party, met with Kim on Thursday, according to the website of the Chinese Embassy in North Korea.

Wang voiced China’s willingness to promote bilateral ties with Pyongyang and proposed that the two nations work together to create a “peaceful and stable external environment,” read a statement uploaded by the embassy. In response, Kim expressed hope that the two countries could promote exchanges and cooperation in various fields in the landmark year.

In a separate dispatch, the KCNA said the tour will take the North Korean delegation to Vietnam and Laos.

Kim’s trip came as North Korea appears to be resuming diplomatic activity with the Association of Southeast Asian Nations (ASEAN), following years of Pyongyang’s COVID-19 border shutdowns.

Laos plans to host the ASEAN Regional Forum (ARF) and other ASEAN-related meetings as this year’s chair country. The annual ARF is the sole regional f
orum joined by North Korea.

ASEAN comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Thailand, Singapore and Vietnam.

Source: Yonhap News Agency