Skyscrapers in downtown Seoul
SEOUL, Nov. 10 (Korea Bizwire) – South Korean companies’ operating profitability relative to their assets has nearly halved over the past two decades, a report showed Monday.
According to the report by the Korea Chamber of Commerce and Industry (KCCI), the operating return on assets (OROA) of the country’s top 1,000 companies by sales fell from 4.2 percent in 2004 to 2.2 percent in 2024.
OROA, calculated by dividing operating income by average total assets, measures how efficiently a company uses its assets to generate earnings from core business operations.
The data indicates that 100 million won (US$68,700) in assets generated 4.2 million won in profit in 2004 but only 2.2 million won in 2024.
“Given the significant fall in corporate profitability, it is necessary to closely examine whether the government’s support policies have actually helped strengthen the growth capabilities of local companies,” said Joo Ji-hwan, a researcher at the Korea Institute for Industrial Economics and Trade.
“If this trend persists in the long term, it could lead to a decline in the overall vitality of the economy,” he added.
The KCCI proposed that the government redesign its corporate support policies to reward companies achieving both growth and profit in order to reverse the downward profitability trend and restore economic momentum.
“It is necessary to encourage companies whose profits are increasing, rather than protecting those whose profits are declining, to boost growth rates,” said Lee Jong-myung, head of the KCCI’s industry innovation division.
“It is time for a paradigm shift in corporate growth policies to eliminate the contradiction where companies choose to avoid growth due to tiered regulations.”
(Yonhap)
