F :
+82-31-783-6132
KOREA REPORT - JULY, 2018.
SKorea government on
1st delivered its opposition to the Trump administration¡¯s gestures to up
tariffs on imported cars, claiming the tariff hike may negatively boomerang on
the US economy, undermining the mutually beneficial trade environment, fostered by
the Korea-US FTA. In May, President Trump ordered to investigate auto imports
for potential cases of trade penalties, hinting at the possibility of a 25%
tariff at maximum. Currently, the Korean car industry has invested more than
$10 bil in the US, creating more than 110,000 jobs.
SKorea officially
dropped its maximum workweek to 52 hours from 68 in an effort to improve the quality of life among its citizens. The
new law, which was a campaign promise by President Moon, went into effect on
1st for businesses with more than 300 employees, state-run agencies and
government offices. Under the law, workers in Korea will be allowed to work 40
hours and an additional 12 hours of overtime. Those who make their employees
work more than 52 hours weekly now face up to two years in prison or a fine of
up to KW20 mil ($17,960).
Minimum Wage Council on
14th set next year¡¯s legal minimum wage hike rate at 10.9%, raising the hourly
amount to KW8,350 ($7.40) from current KW7,530. Though the increasing
rate was a slowdown from previous 16.4% hike and from the Moon administration¡¯s
target timeline of raising the wage to KW10,000 per hour by 2020, the change
added labor cost pressure upon small-sized businesses here. Federation of Korea
Trade Unions on 16th complained the lower-than-expected increasing pace,
suggesting the average wage hike rate for the next two years at 15.3%. On the other hand, Owner-operators and
small-sized businesses vowed to boycott the new legal wage, citing excessive
personnel costs, and demanded a phased hike.
NK continued to call on
SKorea and the US to declare an end to the Korean War through its state-run
media as it started to dismantle a key missile-engine test site. Rodong
Sinmun said ¡°As the issue of the declaration of the end of the war is one of
the agreements stipulated in the historic Panmunjom Declaration, NK and SKorea
have a duty to implement it and the US enthusiastically supported it.¡± It urged
SKorea¡¯s active role in bringing a formal end to the war.
The Korean Armistice
Agreement was signed 65 years ago on 27th, wrapping up negotiations that
spanned 158 meetings over two years and 17 days, the longest negotiated
armistice in modern history. During the negotiation period, UN forces suffered
140,000 casualties and the US lost 8,000 soldiers. Yet the resulting agreement
has kept relative peace on the Korean peninsula for six decades, and enabled
SKorea¡¯s remarkable rise to prosperity. By 1953, the Korean conflict threatened
to escalate into a third world war, US military commanders, including President
Dwight D. Eisenhower, had come to favor an armistice as a second-best solution.
On July 27th, military authorities from China, NK and the US signed an
agreement that ended hostilities. SKorea
was not itself a signatory to the agreement as President Syngman Rhee refused
to sign a deal that left Korea divided. But the US and SKorea signed a
formal mutual-defense treaty within months of the ceasefire. It is this treaty
that has provided the strategic foundation for the security and political
relationship between the US and SKorea on basis of ideal on the democracy and
freedomt.
President Trump made it
clear he would not seek the early denuclearization of NK, dashing
hopes for a prompt, permanent resolution of the issue heightened by his
historic summit with Kim Jong-un. He had pledged time and again he would not
repeat the mistakes of past US administrations. He accused his predecessors of
allowing the North to buy time to build up its nuclear arsenal and missile
capability. Trump and his aides said the ¡°strategic patience¡± policy of the
Obama administration was nothing but inaction and that it was over. The latest developments show, however, that
the world now is witnessing a sort of ¡°Trumpian patience.¡±
It is under growing
criticism for squandering taxpayer money to cope with the unintended effects of
its income-led growth policy, which has resulted in reducing jobs and earnings
particularly for low-income households. Country¡¯s tax revenue
amounted to KW255.6 tril ($226.6 bil) last year, up 9.5% on-year. Taxes
collected from companies increased 13.5% on-year to KW59.2 tril, accounting for
nearly a quarter of the total revenue. About 40% of corporate taxes last year
was shouldered by manufacturing firms. Korea¡¯s tax revenue amounted to KW140.7
tril in the first five months of this year, up KW16.9 tril on year. Moon
administration drew up a KW11 tril supplementary budget shortly after Moon took
office last year and another one worth KW3.8 tril this year to help create more
jobs and increase welfare benefits. The 2018 national budget set at KW428.8
tril marked a 7.1% rise from 2017.
HHI reported that its 2Q result (consolidated basis) logged
KW3.1244 tril of revenue and KW175.7 bil of operating loss. Revenue
expanded by 2.7% from 1Q, while operating loss rate deepened by –5.6%. While
offshore revenue saw a decrease with NASR 2 project entering into the final
phase, increasing sales of mid and large size marine engines and orders from 1H
2017 going into action, with the favorable exchange rate, led the overall revenue
growth. Shipbuilding business made KW144
bil of operating loss, which was stemmed from rising material price, reserve
for exchange loss, and compensation for retirees. Offshore business logged
KW14.5 bil of profit thanks to change order approval of Bergading project and
Baronia project in Malaysia. Engine business also logged KW7.1 bil of profit,
181% on-year improvement. An HHI official commented that market is showing
signs of recovery with increasing ship price and inquiries, adding that there is
still pressure left such as rising material price and lack of orders. HHI so
far achieved 60% of its yearly goal, $13.2 bil.
HMD announced that its 2Q operating profit (on a separate basis)
was KW13.97 bil ($12.3 mil), representing a 63.1% on-year decrease.
The revenue in the period logged KW555.73 bil, down by 19.5% on year. Net loss
recorded KW33.525 bil, turning to the red from the net profit of KW140.3 bil in
the second quarter of 2017.
SHI announced that the company posted revenue of KW1.3466 tril ($1.19
bil), but saw a KW100.5 bil operating loss for the second quarter of 2018. The revenue
saw a 8.5% increase on quarter, representing the first upturn for the first
time in the last five quarters. SHI expects to see a slight increase in its
revenue for the third and fourth quarters also. From April to June,
however, SHI saw a KW100.5 bil operating loss, which is worsened than a KW47.8
bil loss posted in the first quarter. The company explained that the loss
results from fixed cost burden and additional KW39 bil loss related to delay in
the delivery of one drillship for Ocean Rig. As of the end of June, SHI's debt
reaches KW1 tril in total, with a debt-to-equity ratio of 105%. Compared to the
end of 2017, the ratio saw KW2.1 tril and 33%p decreases, respectively.
It turned out that about 30 LNG carriers were newly ordered in the
first half only. Global shipbuilding industry saw 16 new LNG carrier orders in the
first quarter, followed by eight units in the second quarter. In addition to
them, two FSRUs and two LNGBVs were newly ordered in the first half of this
year. There were new LNG entrants such as Minerva Maritime of Greece and BOTAS
of Turkey. It also emerged that Korean shipyards tool all the new orders
excepting for the LNGBVs. Korean Big3 have filled all their LNG carrier slots
scheduled until 2020, with nine units which are slated for delivery from 2021
to 2022. LNG carrier price surpasses $185 mil apiece depending on vessel
specifications, up from a $180 mil level reported early this year.
SKorea
government opposed Trump administration¡¯s trade war [p.2]
The US started to implement heavy duty on Chinese products,
threatening trade partners [p.2]
A dam
under construction by SK E&C in Laos flooded [p.4]
A heat
wave in SKorea had killed at least 27 people [p.4]
SKorea
dropped its max workweek to 52 hrs from 68, and raised min wage by 10.9% [p.5]
Choo
Shin-soo's on-base streak for the Texas Rangers has come to an end at 52 games
[p.7]
Jim
Rogers said NK's opening will create huge chances for gains by SKorea [p.7]
NK
continued to call on SKorea and the US to declare an end to the Korean War
[p.8]
USA
insists granting NK rewards after substantial denuke, while NK demanded earlier
rewards [p.8]
President
Trump confirmed not to seek early denuke of NK, overthrowing his earlier
promises [p.9]
NK¡¯s
economy contracted at the sharpest rate in two decades in 2017 [p.11]
Seoul
cuts its growth estimate to 2.9% this year from 3.0% [p.12]
President
Moon¡¯s welfare expenditure grows [p.13]
Samsung
Electronics was placed 12th on the list of the top 500 global companies [p.13]
Performance
of conglomerates in second quarter [p.14]
SKorean biopharmaceutical companies expects a boost in
their products exports to NAmerica [p.16]
SKorean
soju brand Jinro became the best-selling distilled liquor in the world [p.16]
HMC
signed sponsor partnerships with AS Roma and Hertha Berlin [p.17]
Trade and
currency war between USA and China made KOSPI and KWon unstable [p.18]
SKorea's
foreign exchange reserves came to an all-time high of $402.45 bil in July
[p.18]
HHI, HMD
and SHI¡¯s performance in second quarter [p.19]
Korean
shipyards took all of LNG carriers newly ordered [p.20]
Creditors
of DSME slows down the disposal process of the yard [p.23]
Sinokor
MM continued to order newbuilding at Daehan and SWS [p.24]
Korea
Ocean Business Corporation officially started its operation on 5th [p.24]
-------------------------------------------------------------------------------------------------------
ATTACHMENT: Korea Report - July 2018 (PDF FILE)
Please let us know if you have difficulty opening the file.
