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Restructuring of ailing sectors will take toll on SMEs

By Korea Herald
Published : July 5, 2016 - 16:47
[THE INVESTOR] South Korea’s ongoing restructuring of financially troubled sectors like shipbuilding could put a damper on the country’s small and medium enterprises, a think tank’s report showed on July 5.

According to a report published by IBK Economic Research Institute, bank loans extended to SMEs in so-called “vulnerable industries,” designated by the government, amounted to some 62.5 trillion won (US$54 billion).

The government has singled out five industries -- shipbuilding, shipping, construction, steelmaking and petrochemicals -- as ailing sectors to initiate a sweeping restructuring drive.



Subcontractors and suppliers of the firms undergoing rehabilitation programs are likely to suffer from the financial troubles, the report said.

“The number of ailing companies will gradually increase during the second half of the year. There will be a clear sign of bipolarization in financial conditions of companies as banks will extend debts only to blue chip firms,” the think tank said.

Debts extended to SMEs, in which more than 30 percent of their sales come from large conglomerates subjected to the industry-wide restructuring, by Industrial Bank of Korea came to 5 trillion won.

Of the amount, some 1.9 trillion won was extended to the firms with corporate bond rating below “BBB.”

By Park Han-na (hnpark@heraldcorp.com)

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