Corporations Increased Amid COVID-19? Question Mark Over Busan's Economy

Increase in Newly Established Corporations Amid COVID-19 Crisis
Total of 2,761 New Corporations by End of May Sets Record High
Surge in Corporations Established to Evade Regulations in Real Estate Leasing and Others

Trends of Newly Established Corporations in the Busan Area Over the Past Year.

[Asia Economy Yeongnam Reporting Headquarters Reporter Kim Yong-woo] While almost all economic indicators are showing downward signals due to COVID-19, a peculiar phenomenon is occurring in the Busan economy where the number of newly established corporations is uniquely on the rise. It is increasing alone.

On the 29th, the Busan Chamber of Commerce and Industry announced through the ‘Analysis of Newly Established Corporations in Busan Region in May’ that the number of newly established corporations in the region has been increasing for nine consecutive months compared to the same month last year since September of last year.

The total number of corporations newly established in Busan by the end of May was 2,761, with 527 established in May alone. This is a figure that increased by as much as 22.1% compared to the same period last year, which set a record high.

Even based on the number of reportable days, the average daily number of newly established corporations recorded until May this year was confirmed to be 27, which is more than 5 higher than last year's 22.

By industry, newly established corporations increased in most sectors such as manufacturing, construction, distribution, and real estate.

Manufacturing saw a total of 302 newly established corporations by the end of May, an increase of 33.6% compared to the same period last year; construction had 315, up 15%; distribution had 586, up 2.4%; and real estate and equipment rental businesses increased by a whopping 96.1% to 800.

Looking deeper into this trend of increasing newly established corporations, it is not entirely something to be welcomed. This is because it is concentrated on small-scale startups.

In fact, 78.2% of the corporations established by the end of May are small-capital corporations with capital of 50 million KRW or less, and among them, 29% are micro-corporations with capital less than 10 million KRW.

Among the 499 newly established corporations increased by the end of May this year compared to the same period last year, about 80%, or 392, are real estate rental businesses. This appears to include a significant number of corporations established to avoid recently strengthened real estate regulations.

Even in May alone, 160 were newly established, accounting for the largest proportion. It was found that in these types of corporations, sometimes one person establishes multiple corporations, and there are several cases where the capital size is less than 1 million KRW.

The proliferation of corporations for real estate rental purposes is also confirmed in recent real estate sales transactions. According to statistics from the Korea Real Estate Board, the total number of apartments purchased by corporations in Busan from the beginning of this year to May was 1,003 units, which is more than five times the 198 units last year.

Manufacturing startups, which can be considered the backbone of the local economy, are also steadily increasing. A total of 302 corporations were newly established by May this year, showing a 33.6% increase compared to 226 last year, and in May alone, 64 new manufacturing corporations were established, showing a 39.1% increase compared to the same month last year.

A representative from the Busan Chamber of Commerce and Industry said, “The current situation where the number of newly established corporations is increasing due to a temporary rise in real estate rental businesses is clearly difficult to view as normal,” adding, “However, the steady increase in the establishment of manufacturing corporations that create stable jobs and increase regional added value can be positively evaluated in a situation where economic contraction is feared due to the COVID-19 crisis.”

This content was produced with the assistance of AI translation services.