[Weekly Review] LH Drops 3 Grades in One Year from Management Evaluation A to D

[Sejong=Asia Economy Reporter Son Seon-hee] Korea Land and Housing Corporation (LH), which sparked public outrage over land speculation in new town districts, received a 'Poor (D)' rating, the fifth out of six total grades, in the government's evaluation of its management performance last year. This marks a drop of three grades in just one year compared to the A grade it received in 2019.

On the 18th, the Ministry of Economy and Finance held the 7th Public Institution Management Committee meeting chaired by Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki to review and approve the 2020 public institution management performance evaluation results and follow-up measures. LH executives' performance bonuses were completely cut, and payments to employees were fully suspended until the investigation results are finalized. Additionally, if further misconduct is revealed, the evaluation results for the relevant year will be revised, and already paid performance bonuses to executives and employees will be reclaimed.

Furthermore, the number of institutions receiving the lowest rating (Very Poor, E), which was only one in the 2019 management performance evaluation, increased to three in the 2020 evaluation (Korea Racing Authority, Korea Post Logistics Support Group, Korea Childcare Promotion Institute).

Deputy Minister Ahn Do-geol of the Ministry of Economy and Finance held a briefing regarding this evaluation result, stating, "This year, especially in light of LH's misconduct, we conducted a stricter evaluation of ethical management than in the past," and explained, "Strict penalties were imposed on illegal and improper acts such as real estate speculation, power abuse, and sexual misconduct, and the evaluation actively reflected the results of the Anti-Corruption and Civil Rights Commission's integrity and anti-corruption policy assessments as well as the Board of Audit and Inspection's findings."

Regarding the economic policy direction to be announced soon for the second half of the year, various policies targeting the youth in their 20s and 30s are expected to be included, such as measures to boost consumption vitality like 'credit card cashback.'

First Vice Minister Lee Ok-won of the Ministry of Economy and Finance explained, "We are considering a method of providing cashback in the form of a refund at a certain rate for credit card usage amounts that exceed the usual increase compared to past reference points," and added, "We also plan to set a cashback limit per individual to ensure benefits are distributed evenly to all citizens." Specific details such as the cashback rate, individual caps, and eligible usage locations will be announced in the second half economic policy direction after further review and consultation. Additionally, a plan to issue an extra 5 trillion won worth of local currency is expected to be included.

Moreover, a 'Youth Income Deduction Long-term Fund' aimed at helping asset formation for the 20s and 30s generation is also expected to be launched. Eligibility is limited to young people aged 19 to 39 with an annual total salary of 45 million won or less. Benefits will be given to subscribers of installment-type funds investing at least 40% of their contributions, with an annual contribution limit of 12 million won. For example, a young person with a total salary of 45 million won or less (taxable income bracket with a 15% rate) can invest the maximum limit of 12 million won in the fund and receive a 4.8 million won income deduction, resulting in a total income tax refund benefit of 792,000 won. This is equivalent to an interest effect of about 6.6% if converted to bank deposits. However, tax benefits require a minimum subscription period of five years. Since the income deduction long-term fund must invest at least 40% in domestic stocks, there is a risk of principal loss.

On the morning of the 17th, a foreign exchange dealer is working while watching news related to the U.S. Federal Reserve in the dealing room of the Hana Bank headquarters in Euljiro, Jung-gu, Seoul.
[Image source=Yonhap News]

Last week, the most attention in the financial market was on the Federal Open Market Committee (FOMC) meeting of the U.S. Federal Reserve (Fed). The Fed maintained the current 'zero interest rate' but advanced the timing of two interest rate hikes expected by 2023.

Following the U.S. FOMC meeting, on the morning of the 17th, the Bank of Korea held a 'Monetary and Financial Measures Team' meeting chaired by Deputy Governor Lee Seung-heon, stating, "The FOMC results were evaluated as somewhat more hawkish than expected," and added, "In the international financial market, U.S. long-term interest rates rose significantly, stock prices fell, and the U.S. dollar strengthened." The government assessed that "the market reaction was not far from expectations, with relatively limited volatility," and emphasized that "the government's capacity to respond is sufficient."