As of June 2013, the government funds provided to 295 designated public institutions in fiscal year 2012 amounted to KRW 46.5 trillion. During the same fiscal year, the amount of debt held by public institutions stood at KRW 493.4 trillion, which is 111.2% of the government debt of KRW 443.7 trillion.
Public institutions perform services as stipulated by law based on income from various sources, ranging from equity investments, contributions, and subsidies from the government to user charges and income from carrying out specific services consigned or mandated by the government to their own sources. However, the National Assembly's review of their accounts mainly focuses on their businesses carried out with the government's equity investments, contributions, and subsidies. In this regard, a more comprehensive approach is needed to effectively evaluate their annual performances of public services carried out with government support or their own income.
Among the key findings of this Report, through 2012, Korea Land and Housing Corporation and nine other public institutions with short-term liquidity problems held total financial liabilities of KRW 218.9 trillion, and the amount of cash generated from their operating activities stood at KRW 6.9 trillion, which pales in comparison to the KRW 38.5 trillion in bond maturation in 2012. In particular, in 2012, Korea Land and Housing Corporation, Korea Gas Corporation, Korea Electric Power Corporation, Korea Railroad Corporation, Korea Resources Corporation, and Korea Coal Corporation ran a combined operating loss of KRW 524 billion, but the interest expenses on their financial liabilities amounted to KRW 7.6 trillion. In this regard, there is a need for the government to come up with numerous institutional arrangements to improve public institutions' poor short-term liquidity conditions.
In addition, since 2008, Korea National Oil Corporation and Korea Gas Corporation have invested USD 23,213 million in their projects to explore potential oil and gas reserves abroad. According to the net present value evaluation of the projects, they are estimated to have a low level of profitability and will likely suffer losses in the future.
Below are the evaluation results of individual public agencies:
Korea Finance Corporation provides on-lending to corporations. Placing the highest priority on recoverability, it provides loans primarily to financially robust small- and medium-sized companies. So there is a need for the institution to introduce a credit risk sharing system so that its loans can be equally available to small- and medium-sized companies with less solid credit.
In the case of Kangwon Land, it was found that its ongoing water park construction project in High1 Resort lacks economic feasibility and its E-City project, which has left Kangwon Land with KRW 25.5 billion in losses in the last four years, also lacks feasibility. As a result, it is necessary for Kangwon Land to thoroughly review whether or not to continue with the E-City project and to work actively to enhance the feasibility of the water park construction project.
Korea Agro-Fisheries & Food Trade Corporation takes on loans for its 27 funding projects. Of the loans, 14.1% (KRW 126.7 billion) are securitized with the same amount of its savings and deposit accounts, which are found to be utilized by beneficiary corporations as a source of financial income. Therefore, the institution needs to refrain from offering its savings and deposit accounts as collateral in carrying out funding projects.
Public institutions perform services as stipulated by law based on income from various sources, ranging from equity investments, contributions, and subsidies from the government to user charges and income from carrying out specific services consigned or mandated by the government to their own sources. However, the National Assembly's review of their accounts mainly focuses on their businesses carried out with the government's equity investments, contributions, and subsidies. In this regard, a more comprehensive approach is needed to effectively evaluate their annual performances of public services carried out with government support or their own income.
Among the key findings of this Report, through 2012, Korea Land and Housing Corporation and nine other public institutions with short-term liquidity problems held total financial liabilities of KRW 218.9 trillion, and the amount of cash generated from their operating activities stood at KRW 6.9 trillion, which pales in comparison to the KRW 38.5 trillion in bond maturation in 2012. In particular, in 2012, Korea Land and Housing Corporation, Korea Gas Corporation, Korea Electric Power Corporation, Korea Railroad Corporation, Korea Resources Corporation, and Korea Coal Corporation ran a combined operating loss of KRW 524 billion, but the interest expenses on their financial liabilities amounted to KRW 7.6 trillion. In this regard, there is a need for the government to come up with numerous institutional arrangements to improve public institutions' poor short-term liquidity conditions.
In addition, since 2008, Korea National Oil Corporation and Korea Gas Corporation have invested USD 23,213 million in their projects to explore potential oil and gas reserves abroad. According to the net present value evaluation of the projects, they are estimated to have a low level of profitability and will likely suffer losses in the future.
Below are the evaluation results of individual public agencies:
Korea Finance Corporation provides on-lending to corporations. Placing the highest priority on recoverability, it provides loans primarily to financially robust small- and medium-sized companies. So there is a need for the institution to introduce a credit risk sharing system so that its loans can be equally available to small- and medium-sized companies with less solid credit.
In the case of Kangwon Land, it was found that its ongoing water park construction project in High1 Resort lacks economic feasibility and its E-City project, which has left Kangwon Land with KRW 25.5 billion in losses in the last four years, also lacks feasibility. As a result, it is necessary for Kangwon Land to thoroughly review whether or not to continue with the E-City project and to work actively to enhance the feasibility of the water park construction project.
Korea Agro-Fisheries & Food Trade Corporation takes on loans for its 27 funding projects. Of the loans, 14.1% (KRW 126.7 billion) are securitized with the same amount of its savings and deposit accounts, which are found to be utilized by beneficiary corporations as a source of financial income. Therefore, the institution needs to refrain from offering its savings and deposit accounts as collateral in carrying out funding projects.