Economy

Korea's usable forex reserves rise to $64.23 bil.

Korea's  usable foreign exchange reserves surged to a new high of $64.23 billion as of Aug. 15th, up $250 million from the end of July, the Bank of Korea (BOK) said Aug. 16th. The nation's total foreign exchange reserves, or usable foreign currency reserves plus BOK deposits at local banks's overseas branches, fell to $64.76 billion as of Aug. 15th from $64.94 billion at the end of July.

The central bank attributed the jump mainly to the repayment of local banks's foreign currency borrowing from the BOK and the central bank's purchase of the proceeds from Hanvit Bank's overseas depositary receipt (DR) issue.  BOK's deposits at domestic banks's overseas branches declined to $320 million as of Aug. 15th from $770 million at the end of June. The slight decline in Korea's total foreign exchange reserves was ascribed to the decline in BOK's deposits at overseas branches of domestic banks.

Early this month, Hanvit floated DRs worth  $1 billion in overseas financial markets in a  bid to increase its net capital. Korea also paid back $970 million in interest and principal for the emergency loans from the International Monetary Fund this month, the central bank said. As of Aug. 15th, Korea owes the IMF $8.6 billion in bailout loans. Korea's usable foreign  currency reserves, which had dropped to $8.87 billion in December 1997, rose to $48.51 billion in December in 1998, $54.45 billion in March this year and $58.73 in May.

Korea may attain per capita income of $12,000 in 2002

As forecast by President Kim Dae-jung Aug. 15th, Korea may be able to attain $12,000 in per capita income around 2002 if the nation maintains an annual growth rate of 5-6 percent and the exchange rate remains stable, according to the Ministry of Finance and Economy. "These are not big 'ifs' considering the fast pace of economic recovery," a ministry official said. He said the calculation also assumes the gross national product deflator, which is similar to the inflation rate, will be kept at a 2-3 percent level each year.

The nation's per capita income will rise from $6,800 last year to $8,600 this year if the economy, as forecast by the Korea Development Institute (KDI), grows 7.5 percent, the gross national product (GNP) deflator is kept at 1 percent and the won-dollar exchange rate remains at 1,200. Per capita GNP will reach the pre-crisis level of $10,000 next year and $11,000 in 2001 if the key economic indices are maintained. "We will be able to recover pre-crisis national income levels within two to three years' time" the ministry official said. Korea's per capita gross national income (GNI) posted $10,823 in 1995, $11,380 in 1996 and $10,307 in 1997 before plunging to $6,823 last year.

KOSDAQ firms report 1st-half net profit of 906.9 billion won

The 217 domestic companies registered on the KOSDAQ stock market posted a combined net profit of 906.9 billion won in   the first half, an impressive turnaround from     a net loss of 736.9 billion won during the same period last year, according to the Korea Securities Dealers Association.

The association attributed the switch to the companies  efforts to cut costs, a drop in interest rates that lessened their interest payment burden and asset sales. The firms, combined sales revenues, however, fell 1.9 percent to 11.4 trillion won, according to the association, and noted that the average debt-to-equity ratio of the companies fell to 182.2 percent from 280.5 percent a year earlier. By company, Industrial Bank of Korea reported the largest net profit at 324.8 billion won, followed by Peace Bank with 146 billion won and Hyundai Heavy Industries Co. with 139.6 billion won.

Seoul to list KOGAS on stock exchange

The government is seeking to list the state-run Korea Gas Corp. (KOGAS) on the domestic stock market, the Korea Stock Exchange, within this year. "We are negotiating with the Ministry of Commerce, Industry and Energy on the issue,"  said an official at the Planning and Budget Ministry. Before taking the corporation public, the government will increase its capital to 200 billion won through two rights offerings. KOGAS wanted to increase capital by 25 percent through the attraction of foreign investments but this failed due to differing opinions as to the extent of participation among bidders.

Foreign investors demanded KOGAS buy back their shares if their prices failed to reach an agreed upon level in a given time. The government plans to sell part of its stake in KOGAS to foreign investors after next year.  Along with KOGAS, the government plans to list Korea Tobacco and Ginseng Corp. (KTGC) on the Seoul bourse in the second half.  It plans to sell off 15 percent of its stake in KTGC after listing it on the stock market and sell an additional 15 percent stake by issuing overseas DRs the official said. He added the sales of the government stakes to foreign investors will be flexibly adjusted now that foreign exchange reserves have been adequately replenished and in consideration of inflation and the state of the stock market.

Review due on top-5 chaebol's debt cut efforts

The Financial Supervisory Commission will soon assess  the top-five chaebol groups progress in carrying out their capital structure improvement accords with creditor banks. The financial watchdog will examine the creditor banks, evaluation of the five chaebol's efforts during the first half of the year geared to strengthening their capital structure.

The commission will focus on the top-five groups  debt-to-equity ratios. It will check whether the debt ratios announced Aug. 16th by the Korea Stock Exchange were calculated correctly, a commission official said. It will also examine records of foreign capital attraction, re-capitalization, asset sell-offs and reform of corporate governance structure. According to banks  assessments of the top-five groups performance during the first half, the Samsung Group has already attained the 200-percent debt-to-equity ratio target. Samsung posted a debt-to-equity ratio of 188 percent at the end of June and expects to pull it down further to 150 percent by the end of the year.

Export districts to be changed into free trade zones

Starting next year, existing free export zones in Korea, housing primarily manufacturing companies, will be re-designated as "free-trade zones  where distribution and trading companies can import finished products for storage and labeling and then re-export them without paying Korean taxes. The Ministry of Commerce, Industry and Energy (MOCIE) said Aug. 17th that it is to completely revise existing regulations to allow the changes and will submit the new plan for parliamentary approval later this year.

Currently at free export zones, only raw materials or partly finished goods that are used for the manufacture of export products are allowed free entry. Following the new changes, though, the government will allow distribution and trading companies to operate inside the free-trade zones without having to report their export activities or pay local import taxes. For companies seeking to move to the free trade zones, the ministry said it also plans to ease import-export regulations, taxes on construction costs, and existing barriers on the types of businesses allowed there. Given first priority for entry will be hi-tech industries, the ministry said.