[2022 National Audit] Marginal Companies Increased by 15% Under Moon Administration... Especially Many in the 'Real Estate Industry'

Han Mu-kyung, member of the People Power Party./Photo by Dongju Yoon doso7@

[Asia Economy Reporter Lee Ji-eun] The number of marginal companies, which struggle to cover even their interest expenses with operating profits, has increased by 15% over the past five years.

According to data submitted by the Bank of Korea to Han Mu-gyeong, a member of the National Assembly's Industry, Trade, Energy, Small and Medium Enterprises Committee from the People Power Party, the number of marginal companies rose by 14.8%, from 3,111 in 2017 to 3,572 last year.

So-called "zombie companies" refer to marginal companies whose operating profits have been insufficient to cover interest expenses for three consecutive years.

By size, large corporations surged by 40.6% to 537 companies, while small and medium enterprises increased by 11.2% to 3,035 companies. Representative Han explained, "Considering that the increase rate of marginal companies during the previous Park Geun-hye administration was 3.5%, the rise during the Moon Jae-in administration was significant."

By industry, real estate accounted for the largest share at 18.2%, followed by wholesale and retail at 9.3%, electrical and electronics at 6.4%, and automobiles at 5.8%.

Nevertheless, corporate restructuring has been insufficient. According to data received by Representative Han from the Financial Supervisory Service, the number of companies selected for credit risk evaluation grades (A~D) increased by 30.5%, from 2,584 in 2016 to 3,373 last year. However, the number of companies undergoing workouts due to insolvency decreased by half, from 200 to 100 during the same period.

Representative Han stated, "Increasing prompt restructuring and rehabilitation such as workouts for marginal companies is necessary to prevent the crisis from spreading throughout the entire industrial sector," and added, "It is urgent to extend the sunset clause of the Corporate Restructuring Promotion Act and to form a government-wide task force (TF)."

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