Top 10 business stories of the year in 2022

Economy

Published: 28 Dec. 2022, 19:47 Updated: 28 Dec. 2022, 20:48

Top 10 business stories of the year in 2022

Hyundai Motor Group Executive Chair Euisun Chung shakes hands with U.S. President Joe Biden during his visit to Seoul in May. [HYUNDAI MOTOR]

1. U.S. IRA impacting Korea Inc.

The Inflation Reduction Act (IRA) was passed in August, directly threatening local car manufacturers and battery makers, which have a limited presence in the United States in terms of manufacturing.

Buyers of Hyundai Motor and Kia vehicles do not qualify for a $7,500 subsidy under the “Made-in-America” electric vehicle (EV) rules as they are made outside the United States.

Hyundai and Kia both make EVs in Korea. Hyundai is currently building its first EV-dedicated factory in the United States, in Georgia, but mass production does not start until 2025.

Hyundai Motor’s EV sales in the U.S. have fallen since the passage of the IRA.

Korea's three largest battery makers — LG Energy Solution, SK On and Samsung SDI — have also found themselves on the edge of a precipice as they are heavily dependent on China for manufacturing or for the supply of materials and components. The law restricts subsidies for purchases of EVs made with Chinese minerals or components.

Those minerals, like lithium, nickel and cobalt, can also be mined in many other countries, such as Indonesia, Canada and Australia, but they have to be processed in China, as 70 percent of the world's facilities for refining the materials are in China.

The U.S. Treasury Department announced recently that it has delayed the battery mineral and component rules for three months. The rules, which were scheduled to go into effect on Jan. 1, will be issued in March.

Bank of Korea Gov. Rhee Chang-yong at the Monetary Policy Board meeting held in central Seoul on Nov. 24. [NEWS1]

2. Rising interest rates and the decline of stock and property prices

The Bank of Korea raised the base rate by two percentage points this year to 3.25 percent. The central bank maintained a hawkish stance throughout the year to tame inflation and stabilize the foreign exchange market.

Inflation peaked at 6.3 percent in July as a result of the rise in global raw material prices and slowed to 5.0 percent in November. The central bank projects inflation to stay at around 5 percent for the time being, but expects inflation to gradually fall next year. The won fell around six percent this year against the dollar.

Stock and property prices weakened under the hawkish monetary policy. The Kospi is down around 20 percent since the beginning of the year, while apartment prices nationwide fell 1.02 percent on year in November, according to KB Land.

The central bank said on Dec. 23 that it will prioritize reducing inflation in its monetary policy operation next year, indicating that the increases of interest rates may continue.

The Bank of Korea Gov. Rhee Chang-yong said that Korea might be nearing a recession. The central bank projects Korea’s economy to grow 1.7 percent next year.

Kakao co-CEO Namkoong Whon announces his resignation on Oct. 19 at Kakao's office building in Pangyo, following a massive service blackout. [WOO SANG-JO]

3. Blackout of Kakao apps

Major Kakao services, including Kakao Talk, Kakao T and Kakao Bank, went down on Oct. 15 due to a fire at a data center in Pangyo. The disruption lasted five days until full recovery, making daily communication near impossible for many, and forcing a temporary halt to businesses running on the apps and some financial activities. The blackout also exposed the tech company’s poor capability to respond to glitches and unexpected risks, since the services of other internet companies were restored quicker than Kakao’s despite their servers being affected in the same incident.

Kakao executives said the company was not properly prepared for a disruption on such a large scale — where all 32,000 servers housed in a data center were cut off from power. They also admitted that the slow recovery is attributed to the fact that major tools and systems used by developers were not dualized.

Kakao co-CEO Namkoong Whon resigned to take the responsibility while the company compensated users, both those that paid and those that used free services, like KakaoTalk.

To prevent a recurrence, the company promised to spend more on server infrastructure. It aims to complete its own data center in Ansan, Gyeonggi, by 2024 and another one in Siheung, Gyeonggi.

Samsung Electronics Chairman Lee Jae-yong speaks at the company's chip plant in Pyeongtaek, Gyeonggi, in May when U.S. President Joe Biden visited Korea. [NEWS1]

4. Lee Jae-yong becoming chairman at Samsung Electronics

Lee Jae-yong, grandson of Samsung Founder Lee Byung-chul, was appointed executive chairman of Samsung Electronics on Oct. 27, two years after the death of his father, Lee Kun-hee.

The company said that the decision is formalizing Lee's current leadership role while the board of directors, which voted to grant Lee the title, said that the appointment would ensure stability and improve decision-making processes.

The change came after Lee, 54, received a presidential pardon in August. He was pardoned for bribing former President Park Geun-hye in 2017, but he still faces other charges for violating accounting rules and spreading false information to investors. Following the announcement, Lee vowed to make effort to win public admiration for the company.

The decisions about pardon and chairmanship divided civic groups and business associations.

Business lobbying groups welcomed the moves, saying that they could stabilize management at the company, which exerts an out-sized influence on the Korean economy. Critics said that the appointment emphasized the leniency toward a convicted businessman and one still facing charges.

Unionized truck drivers stage a strike in Gyeonggi on Dec. 6. [NEWS1]

5. Trucker strike fails

Truck drivers in Korea went on a nationwide strike on Nov. 24, causing major logistics disruptions across the country. The Cargo Truckers Solidarity under the Korean Confederation of Trade Unions (KCTU), demanded a soon-to-expire minimum safe freight rate system be made permanent and extended to other industries.

As the trucking strike hit major industries in Korea, the government took a hardline approach, issuing a back-to-work order first to cement truckers on Nov. 29 after cement shipments decreased by about 90 to 95 percent compared to normal. The order was the first to be issued since the relevant law was enacted in 2004.

A week later, the government ordered striking steel and petrochemical truckers to return to work immediately, citing huge losses for the businesses. On Dec. 10, the Cargo Truckers Solidarity Union voted to call off the strike. But the union is to continue its minimum wage campaign, as the government and the People Power Party (PPP) are weighing its options and may break the promise to extend the freight rate system for another three years.

An electronic display board shows a rapid fall of the price of Bitcoin at Bithumb office in southern Seoul on Dec. 20. [NEWS1]

6. Crypto winter

TerraUSD and Luna lost almost their value following a $40 billion crash in May. Their failures have devastated traders globally, while some investment firms cashed out early.

The crash coincides with the plunge of Bitcoin, which lost more than half of its value from the beginning of the year.

The ‘crypto winter’ was aggravated by the collapse of major cryptocurrencies, the delisting of Wemade’s Wemix and the bankruptcy of FTX crypto exchange.

Interpol has issued a "red notice" for Do Kwon, the mastermind behind the Terra-Luna cryptocurrencies, requesting law enforcement agencies worldwide to locate and arrest Kwon. He is currently reported to be in Serbia. Prosecutors sought an arrest warrant for Daniel Shin, the company’s co-founder.

The confidence in crypto market was again shaken by the bankruptcy of FTX, in November. The collapse was caused by a liquidity crisis related to the company’s token, FTT. FTX has more than 100,000 creditors and liabilities in the range of $10 billion to $50 billion.

Wemix's price plummeted earlier this month and is down by more than 90 percent since its peak last November. The value was lost as trading was suspended at Korea’s four largest crypto exchanges — Upbit, Bithumb, Coinone and Korbit. They took issue with the differences between the number of tokens that was to be distributed according to company disclosures and actual number outstanding.

A sign at the Legoland Korea Resort in Chuncheon, Gangwon, on Nov. 15 shows it is closed. [YONHAP]

7. Liquidity crunch triggered by Legoland default

A company connected to a Legoland theme park developer defaulted in September, triggering a liquidity crunch in the construction and property markets.

Korean companies struggled to refinance maturing debt following the default and an insurer's decision not to redeem perpetual bonds.

Gangwon province announced in September its plans to apply for corporate rehabilitation for Gangwon Jungdo Development, which is owned by the province and developed the Legoland Korea Resort, to reduce the local government’s debt.

In November, Heungkuk Life Insurance made a convention-breaking announcement that it would not redeem $500 million of perpetual bonds issued in 2017, further rattling debt markets that were already on edge about rising rates and weak corporate credit.

The insurer did an about-face and announced a fund raising through connected parties and a redemption of the bonds.

The credit squeeze pushed up the yields of even the highest-rated corporations, making it difficult to borrow money for smaller firms. The yield for AA- corporate bonds was 5.203 percent on Wednesday compared to 2.460 percent at the beginning of the year.

The Bank of Korea announced measures to stabilize the market in December, promising to buy up to 2.5 trillion won ($1.97 billion) of repos to help some financial institutions make their contributions to a market stabilization fund, just two months after it announced a 6-trillion-won repo purchase program.

SPC Chairman Hur Young-in apologies for the death of a 23-year-old worker on Oct 21 [YONHAP]

8. Death of an SPL worker and the consumer boycott

A 23-year-old employee working at a bread factory died on Oct. 15 after getting caught in an industrial mixer.The bread factory belongs to SPL, which is owned by Paris Croissant, which itself is wholly owned by Hur Young-in and his family. Paris Croissant operates Paris Baguette.

Collectively, they are known as SPC Group.

The incident led to a public outrage as the factory ordered its employees to work at the scene of their colleague’s gruesome death the following day.

While the incident itself was a tragedy, the news made headlines due to the factory's follow-up actions, which led to a boycott of all related companies, including Paris Baguette.

SPL is being investigated under alleged violation of the Serious Accidents Punishment Act.

Serious Accidents Punishment Act covers businesses with 50 or more employees. Under the law, owners of companies, managers and the corporation itself can be charged if they failed to properly implement safety practices. Those found to have violated the act can be jailed for more than a year or fined up to 1 billion won ($703,000).

A series of other safety-related accidents occurred throughout the year. A fire broke out at Hyundai Premium Outlet in Daejeon, killing seven people and injuring one person. A follow-up investigation found that the shopping mall's sprinkler system failed to work during the fire, making it possible for the case punishable based on the new act.

A subcontracted worker at Posco and another are Hyundai Steel died on industrial sites earlier this year. The Labor Ministry took the case to the prosecution for an alleged violation of the safety act.

The Korea Space Launch Vehicle-II, or Nuri, takes off from the Naro Space Center in Goheung County, South Jeolla, on June 21. [KARI]

9. Successful launch of Nuri and Danuri

Korea successfully launched its first domestically-developed rocket in June and its first lunar orbiter in August, a significant leap forward in the country’s space exploration.

On June 21, the Nuri rocket — formally named Korea Space Launch Vehicle-II — blasted off from the launch pad at the Naro Space Center in Goheung County, South Jeolla. The three-stage, liquid-fueled rocket carried a 1,500-kilogram payload, including a performance verification satellite, to the targeted altitude of 700 kilometers above ground.

With the successful launch of Nuri, Korea Aerospace Research Institute became the seventh space agency to succeed in putting a satellite weighing more than 1 ton into space, following those of Russia, the United States, the European Union, China, Japan and India. It was the second test launch of the Nuri rocket, after the first attempt on Oct. 21, 2021, which ended in a partial success. The rocket is scheduled for a third launch in May.

Started March 2010, the 1.96-trillion-won Nuri project involved over 300 private companies, including Hanwha Aerospace.

Danuri was launched on Aug. 5, carried by a SpaceX Falcon 9 rocket from the Cape Canaveral Space Force Station in Florida.

It marked the country's first step into true space outside the Earth’s gravitational field.

Danuri achieved the target orbit around the moon on Dec. 27. Its one-year mission to collect data related to lunar resources and search for a lunar landing location will begin in Feb. 2023.

Following landmark achievements this year, the Yoon Suk-yeol government promised to achieve a lunar landing by 2032 and Mars landing by 2045.

President Yoon Suk-yeol visits Doosan Enerbility's headquarters in Changwon, South Gyeongsang on June 22. Doosan Enerbility is the only domestic company that manufactures key components for nuclear power plants, such as reactor vessels and steam generators, [NEWS1]

10. Comeback of nuclear power

Korea signed a contract in August to participate in a nuclear plant project in Egypt and potentially another in Poland, backed by the government's active support.

The Yoon Suk-yeol government, which has been adamant about scrapping the Moon Jae-in administration’s nuclear phase-out policy, aims to sign 10 overseas nuclear power plant deals by 2030. In August, state-run Korea Hydro & Nuclear Power (KHNP) signed a 3-trillion-won contract with Atomstroyexport (ASE), a subsidiary of Moscow's state-owned Rosatom, as the subcontractor and supplier for turbine islands at Egypt's first nuclear power plant, in El-Dabaa, 300 kilometers northwest of Cairo.

As part of the $30-billion nuclear power plant project, ASE will build four reactors rated at 1.2 gigawatts. KHNP will oversee the construction of the main and auxiliary buildings on the turbine islands at the El-Dabaa plant.

KHNP was picked as the sole bidder for the Patnow nuclear power plant in Poland.

On Oct. 31, the company signed a letter of intent with Poland’s Zespol Elektrowni Patnow-Adamov-Konin and state-owned Polska Grupa Energetyczna for the 1.4-gigawatt Patnow project.

If Korea wins the project, it will be the country’s first full nuclear power plant sale overseas in 13 years since the Barakah nuclear power plant project in the United Arab Emirates.

Korea submitted a bid for the $6 billion Dukovany nuclear power plant in the Czech Republic as well.

BY PARK EUN-JEE,JIM MIN-JI,SARAH CHEA,SHIN HA-NEE,LEE JAE-LIM,SEO JI-EUN,[kjdbusiness@joongang.co.kr]