National Local Public Enterprises' Debt Ratio in the 30% Range for 6 Consecutive Years... "Maintaining Fiscal Soundness"

Government Announces '2023 Settlement Results' of Local Public Enterprises Nationwide
108 Debt-Focused Management Institutions and 22 Debt Reduction Target Institutions Designated

Last year, local public enterprises nationwide maintained their debt ratio at around 30%. The government believes that financial soundness has been stably maintained in the 30% range for six consecutive years. However, some investee companies, funded institutions, and public corporations have been designated as debt-focused management institutions and will be subject to concentrated management in the future.

On the 28th, the Ministry of the Interior and Safety announced the '2023 settlement results' for 411 local public enterprises nationwide, including directly operated water and sewage companies, local public corporations, and public organizations.

The Ministry of the Interior and Safety has operated a debt-focused management system since 2014 to strengthen the financial soundness of local public enterprises. In particular, to enhance the effectiveness of debt management, the debt-focused management system was completely reorganized last year to include multi-year financial indicator evaluations and management according to financial risk levels.

Looking at the settlement details, in 2023, local public enterprises recorded assets of KRW 238.8 trillion, liabilities of KRW 65.5 trillion, capital of KRW 173.4 trillion, and a net loss of KRW 2.6216 trillion. The asset size increased by KRW 7.2 trillion (3.1%) compared to the previous year (KRW 231.6 trillion), mainly due to capital increases in directly operated enterprises and increased liabilities related to development projects of local public corporations.

The scale of liabilities increased by KRW 4.2 trillion compared to the previous year (KRW 61.3 trillion), with the largest cause being the increase in borrowings for the third phase of new town public housing projects by development corporations. Accordingly, the debt ratio rose by 1.8 percentage points from 36.0% last year to 37.8%. The net loss increased by KRW 640 billion compared to the previous year (KRW 1.98 trillion), mainly due to low rates relative to costs in directly operated water and sewage companies and urban railway corporations.

By type of local public enterprise, the debt of 252 directly operated enterprises, including water and sewage and public development, was KRW 6.4 trillion, down KRW 200 billion from the previous year (KRW 6.6 trillion), and the debt ratio was 5.4%. Their net loss increased by KRW 827 billion from the previous year to KRW 2.2894 trillion, attributed to the low rate realization of water and sewage fees and decreased land sales in public development projects.

The debt of six urban railway corporations increased by KRW 600 billion from the previous year to KRW 9.7 trillion, with a net loss of KRW 1.2622 trillion.

The debt of 16 metropolitan city corporations rose the most sharply. It increased by KRW 2.9 trillion from the previous year to KRW 45 trillion, with a net profit of KRW 855.9 billion. The increase in debt was mainly due to the rise in financial liabilities such as new borrowings related to the third phase of new town public housing projects in the metropolitan area (KRW 2.8 trillion). The net profit slightly decreased by KRW 6.4 billion compared to the previous year (KRW 862.3 billion), mainly due to a decline in land sales.

The debt of public enterprises designated as debt-focused management institutions totaled KRW 53.7 trillion, with a debt ratio of 124.3%. The average financial indicator evaluation score was around 8 points (out of 20), about 7 points lower than that of non-designated institutions. The Ministry of the Interior and Safety plans to have 108 designated institutions establish and disclose a five-year financial debt management plan, including debt reduction measures, profitability improvement, and local government support plans, and will monitor these semiannually.

Han Soon-gi, Director of the Local Finance and Economy Office, stated, "We will continue to comprehensively support local public institutions to secure financial soundness through ongoing structural reforms and management efficiency efforts, and based on this, provide high-quality public services to local residents."

Financial Status by Type of Local Public Enterprises. [Data provided by the Ministry of the Interior and Safety]