KCCI Predicts Deficit for Four Consecutive Years

Korea Chamber of Commerce and Industry.

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[Asia Economy Reporter Dongwoo Lee] The Korea Chamber of Commerce and Industry (KCCI) is expected to record business losses for the fourth consecutive year. Although KCCI has established itself as a representative of the business community during the Moon Jae-in administration, serving as a bridge between the government and the economy, the scale of its deficit has increased significantly due to a sharp reduction in government subsidies for its core workforce development projects.

According to the business community on the 17th, KCCI's net loss for last year is expected to reach around 10 billion KRW. The scale of KCCI's losses increased from 380 million KRW in 2016 to 1.36 billion KRW in 2017, and 5.31 billion KRW in 2018.

This coincides with the period during which government subsidies for KCCI's workforce development projects have decreased over the past three years. The budget KCCI received from the Ministry of Employment and Labor dropped from 45 billion KRW in 2017 to 34.8 billion KRW in 2018, and further down to 26.6 billion KRW last year, a 40.8% decrease. Considering that KCCI's total annual workforce development project budget is around 60 billion KRW, last year's project budget was reduced by about one-third.

KCCI's workforce development projects aim to cultivate specialized personnel with field-centered skills reflecting the demands of regional industries and individual companies. These projects are currently operated in eight major regions nationwide, including Seoul, Busan, Incheon, and Gwangju.

In response to the decrease in government subsidies for workforce development projects, KCCI sought new solutions through a consulting firm early last year. As a result, it decided to temporarily close two workforce development centers starting this March: the Chungbuk Workforce Development Center (Okcheon-gun) and the Gangwon Workforce Development Center (Hongcheon-gun). Initially, the Jeonbuk Workforce Development Center (Gunsan-si) was also planned to be closed, but it was excluded after Jeonbuk Province and Gunsan City agreed to provide 2 billion KRW in support over two years.

Some in the business community speculate that the reduction in government subsidies for KCCI's workforce development projects is due to the government's expansion of job creation budgets. While the proportion of workforce ‘training projects’ within the government’s job budget has decreased, direct ‘support projects’ have expanded, resulting in a reduction of subsidies to KCCI.

KCCI expressed concerns that if the scale of business losses continues to increase annually, it may have to temporarily close additional remaining workforce development centers in the future. This is because, with decreasing government support, it can no longer bear fixed expenses such as labor costs.

However, the Seoul Chamber of Commerce and Industry, which manages key finances such as membership fees and rental income from regional chambers, cannot fully cover KCCI's deficit structure because KCCI and the Seoul Chamber are legally separate entities.

The Seoul Chamber is also facing financial difficulties. Although it has not disclosed its annual revenue, the vacancy rate of the Seoul Chamber's building in Jung-gu, Seoul, was reportedly maintained at around 10% last year. Additionally, the Sustainability Growth Initiative (SGI) research institute established in 2018 requires an annual budget of 3 to 4 billion KRW, which is also a financial burden.

KCCI plans to negotiate with the Ministry of Employment and Labor to reduce the deficit as much as possible. A KCCI official stated, “The government has recognized the seriousness of this issue this year and has expressed intentions to partially increase subsidies. We plan to expand subsidies by increasing the number of students through replacing workforce development center programs from traditional industries to IT, robotics, and other fields.”

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