KDI: S. Korea would follow footsteps of Japan without restructuring

January 16, 2014 Leave a comment

KDI: S. Korea would follow footsteps of Japan without restructuring

Chun Beom-joo, Lee Hyun-jung

2014.01.15 17:43:19

South Korea’s economy would remain trapped in anemic growth without across-the-board corporate restructuring, said a public think tank Korea Development Institute (KDI). This is a wake-up call that as one out of three conglomerates cannot even repay interest with their earnings, a failure to execute pre-emptive restructuring could aggravate corporate profitability further, propelling all of them to collapse. “Deleveraging is inevitable to weather through the global financial crisis, and cutting debt ultimately boils down to restructuring,” said KDI president Kim Joon-gyung during Maeil Business Newspaper’s ‘economist club’ event held Tuesday. “With both household and corporate debt exceeding the critical point that hinders economic growth, there is an urgent need for restructuring.”
Among the top 70 larger firms, the number of those below one time interest earned (TIE) shrank sharply from 43 in 1998 to eight in 2007 and thereafter the number skyrocketed to 11 in 2010 to 15 in 2011 and 20 in 2012.
He claimed Korea should learn from the case of Japan’s failure of restructuring efforts, in which small and mid-sized businesses (SMBs) were excluded.
“Japan’s Abenomics will be unable to fire its third arrow of restructuring and ultimately end up with a failure due to populism,” the KDI’s president said. “In order for Korea to avert losing two decades like Japan, Korea must deal with potentially insolvent companies, encourage starting business, loosen regulations and open the market immediately.”

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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