South Korea

As Korea finds itself dragged into a disastrous vortex of faltering exports, collapsed consumer spending and spiraling debt, government officials appear at a loss on how to prevent the country’s fragile recovery from derailing, The Korea Times reported. But they could do much worse than starting from eliminating corruption and cronyism from the bureaucratic veins, according to a number of economists here. The subduing economy pretty much ensures that President Lee Myung-bak is going out on a whimper.

Things are going from bad to worse for large discount store chains these days as consumers have further tightened their wallets amid renewed concerns over the worldwide recession triggered by the eurozone debt crisis, The Korea Times reported. E-Mart, Home Plus, Lotte Mart and other discount store operators are also facing tightening regulations, chipping away at their bottom line, as the government and political parties target them to garner support from those running small mom-and-pop shops.

Loan default rates at major credit card firms have surpassed the 2-percent mark for the first time in three years, prompting concerns that financial soundness in the card sector is deteriorating, The Korea Times reported. This is the result of the financial regulator’s measures to curb commercial lenders from extending credit to households, which has forced many low-income earners to resort to secondary banking institutions, such as plastic issuers and savings banks.

Chinese shipper Sinotrans Ltd. said Wednesday that the board of Grandstar Cargo International Airlines, a freight forwarder jointly owned by a unit of Sinotrans and Korean Air Lines Co., has approved plans to liquidate the carrier amid mounting losses and lackluster prospects in the air-freight market, The Wall Street Journal reported. Sinotrans said Grandstar Airlines, which has already suspended flight operations, had a net loss of 340.1 million yuan dollars ($53.8 million) in 2011, widening from losses of 20.7 million yuan in 2010 and 94.3 million yuan in 2009.

A group of Elpida Memory bondholders opposes Micron Technology's offer to buy the bankrupt Japanese chipmaker and has reached out to South Korea's SK hynix and U.S.-based GlobalFoundries to ready a potential alternative plan, a source with direct knowledge of the matter said, Reuters reported. SK hynix, which had dropped out during the second and final round of bidding for Elpida, is interested in the memory chipmaker's Taipei operations, while GlobalFoundries is interested in its Hiroshima operations, said the source, who asked not to be identified.

The Korea Housing Finance Corporation (HF) confirmed that more and more seniors are turning to reverse mortgages, an arrangement in which a homeowner borrows against the equity in his or her home and receives monthly payments from the lender, The Korea Times reported. It could be argued that reverse mortgages are a financial tool tailored made for Korea, which struggles to cope with a prolonged housing market slump, decaying employment situations, spiraling family debt and stagnant income. This has resulted in millions of over-50 Koreans marching blindly into retirement poverty.

While financial authorities continue to push forward their efforts to clean up Korea’s messy secondary banking sector, it remains to be seen whether they could properly finish what they started, The Korea Times reported. In its latest attempt to purge secondary lenders that were crippled by exposure to the country’s toxic property sector, the Financial Supervisory Service (FSS) suspended the Solomon Savings Bank, Mirae Savings Bank, Korea Savings Bank and Hanju Savings Bank Sunday. This extended the list of savings banks shelved by financial regulators to 20.

The prosecution said Thursday it will launch an investigation into savings banks subject to business suspension as early as next week. Now, up to four savings banks are expected to face administrative measures imposed by the Financial Supervisory Service (FSS), prompting concerns over another bank run, The Korea Times reported. “Basically, we will launch a probe at the request of the financial regulator after they announce the list of savings banks for business suspension,” a prosecutor said.

All countries are unequal, but Korea seems to be among those that are more unequal than others, The Korea Times reported. And as the scourge of inequality worsens by the day, the nation appears to be at a loss in attacking the problem: Policymakers here are reluctant to introduce dramatic changes to the country’s tax and benefit systems, claiming that the risk would be a bankrupt government, while schools and businesses continue to be woefully inept at educating and training a quality workforce.

Six out of 10 families in Seoul are indebted with the mountain of debt owed by households surpassing 200 trillion won (about $178 billion) last year, official figures showed Sunday, The Korea Times reported. According to the Seoul Development Institute (SDI), a think tank operated by the Seoul Metropolitan Government, the capital’s households owed more than 204 trillion won to financial companies as of last November, which represented an annual 4.8 percent rise. About 60.9 percent of the households were in debt at the end of December, up 0.8 percent from the third quarter.