Category: Korea-Business

The Moon administration needs money for all their lofty plans for North Korea, so this should be a warning to all international corporations operating in South Korea that the taxman is coming:

Starbucks Korea is being investigated over allegations of tax evasion, mostly via overpricing goods and services imported from its head office in the U.S., according to industry and tax administration sources, Thursday.

Officials from the National Tax Service (NTS) Seoul Office’s international trade investigation department have seized accounting records and data preserved online at the global coffee giant’s office in the capital, following multiple searches that began in mid-May.  

The Korean office allegedly sought to inflate the cost of raw materials such as coffee beans and others products for sale or needed for maintenance at its over 1,370 branches here, in what is widely known as “transfer pricing.”

Korea Times

You can read more at the link.

It will be interesting to see what the demand for travel is going to be in June:

Korean Air Lines Co., South Korea’s biggest carrier by sales, said Thursday it will reopen dozens of its international routes next month amid signs the coronavirus epidemic may have passed its peak.

Korean Air plans to resume flights on 19 international routes on June 1 as the country’s top flag carrier strives to offset a sharp decline in passenger travel demand with an increased demand for cargo deliveries, the company said in a statement.

Korea Times

You can read more at the link.

Asiana was already having a tough time financially before the current pandemic, it will be interesting to see if the airline is able to survive this:

Korea’s second-largest airline has indefinitely extended mass furloughs of its employees, requiring more than 8,000 workers to take unpaid leave 15 days each month as the carrier struggles to stay financially afloat.

Asiana Airlines announced Sunday that it would require all staff to take at least 15 days of unpaid leave during the month of May, and every subsequent month “until business normalizes.” Last month, it announced the same policy for April.

In an industry with massive fixed costs such as leased planes and airport fees, airlines have been struggling to keep their employees on the payroll as the coronavirus pandemic wreaks havoc on international travel. The number of travelers using international flights in and out of Korea during the first week of April has plummeted by 97 percent on-year.

Joong Ang Ilbo

You can read more at the link, but Asiana Airlines said the pandemic has caused 70% of their workforce to have nothing to do.

Not every industry is apparently suffering during the current coronavirus pandemic:

Despite the end in sight for the pandemic in Korea, some companies are jumping on the Covid-19 bandwagon, from conglomerates to underwear makers.

They are looking for the corona boom to continue, or to export to where the outbreak is not yet under control. 

Some are hoping that outbreak-related products, such as masks, become more permanent accessories in our wardrobes and style will become as important as function.

The trend is especially evident in the apparel industry, which has been struggling as the business has been weak for some time.

LF’s Hazzys in late March released a mask with a replaceable filter. 

Joong Ang Ilbo

You can read more at the link.

The younger brother has successfully held off his older sister of “Nutrage” fame of removing as head of the family Chaebol:

Hanjin Group Chairman Cho Won-tae was reappointed as an executive director of Hanjin KAL, the group’s holding company, Friday, defending his management rights of the logistics-centered business group amid a sibling feud with his elder sister and group heiress Cho Hyun-ah.

During the holding firm’s shareholders meeting, the incumbent chairman defended his board seat by garnering 56.67 percent approval.

Cho Won-tae has been in fight for control of the group with a three-party anti-chairman alliance led by his sister. 

Hyun-ah, a former vice president at Korean Air who is backed by local activist fund Korea Corporate Governance Improvement (KCGI) and mid-sized builder Bando Engineering & Construction, has called for the need to replace the leadership to improve the group’s financial status and shareholder value. 

A day ahead of the shareholders meeting, the National Pension Service (NPS) announced its decision to vote for the reappointment of the group’s incumbent chairman as an executive director.

The state pension fund, which holds a 2.9 percent stake in Hanjin KAL, was considered to hold a casting vote in determining the chairman’s fate. 

Korea Times

You can read more at the link, but it makes you wonder what if any backroom deals were agreed upon with the National Pension fund to keep Cho Won-tae as CEO?

South Korea’s most hated Chaebol family member, Cho Hyun-ah is definitely not going away any time soon as she makes a bid to wrest control of Hanjin Group from her brother:

Cho Hyun-ah, 45, whose family control the Hanjin group that includes flag-carrier Korean Air, made headlines worldwide with her furious reaction when she was served nuts in a bag instead of a plate in first class.

A series of scandals centring on abuse of subordinates rapidly made the Chos the South’s most vilified billionaires.

But now her struggle against brother Cho Won-tae could mark a watershed moment for the family-controlled conglomerates known as chaebols that dominate business in the world’s 12th-largest economy.

She has joined forces with an activist investment fund, Korea Corporate Governance Improvement (KCGI), which says better chaebol management will improve efficiency, employee engagement, and shareholder returns.

Cho Won-tae inherited the chairmanship of the conglomerate’s holding company Hanjin Kal after the siblings’ father Cho Yang-ho — who led the successful bid for the Pyeongchang Winter Olympics — died last year.

But “you can’t just run a company because you happen to be a grandson of its founder”, said Lee Seung-hoon, KCGI’s head of global business.

AFP

You can read more at the link, but Cho Hyun-ah also has other family members and Delta Airlines backing her to take over Hanjin Group from her brother. However, she claims she will not take over the President spot and instead install a professional to run the conglomerate.

I take that this news is only going to further pummel air travel on Korean Air:

A Korean Air flight attendant has tested positive for the novel coronavirus, the South Korean airline announced on Tuesday. 

Korean Air “is creating a structure to work very closely with the Centers for Disease Control and Prevention Korea (CDCK) to prevent the spreading of the virus,” a representative for the airline told Business Insider. 

The airline is disinfecting aircraft, asking flight attendants with symptoms to self-quarantine, and installing thermal cameras at Korean Air’s operations locations.

The confirmed case also prompted Korean Air to temporarily shutter its office near the Incheon International Airport, the main airport in the South Korean capital, Seoul, so it could be disinfected.

Business Insider via a reader tip

You can read more at the link.

If there wasn’t enough problems for Samsung dealing with the coronavirus outbreak, now Iran is making threats against the smartphone maker:

An Iranian official on Tuesday warned Samsung Electronics that it is planning to restrict the use of the tech giant’s mobile phones in the country, accusing the company of bowing to pressure from the United States.

The official’s statement is a response to Samsung’s decision to limit app purchases for Iranian users of its Galaxy Store, for which it cited issues with converting Iranian currency. The policy is set to take effect beginning in late February.

But Iranian news outlets have reported the move as a response to U.S. sanctions against the country and have suggested the restriction will widen to free apps as well next month. Samsung is the dominant smartphone producer in Iran, with more than 50 percent market share.  

Mohammad Jafar Na’nakar, a government official who heads the legal department at Iran’s Ministry of Information and Communications Technology, delivered the warning to Samsung during an interview Tuesday with Press TV, an Iranian state-run news outlet.

“The list of measures against Samsung is ready,” Na’nakar said.

Joong Ang Ilbo

You can read more at the link.

Asiana Airlines was struggling even before this coronavirus outbreak which is making things even harder for the airline:

Asiana Airlines Inc., South Korea’s second-biggest airline, on Tuesday said all of its employees will take unpaid leave as air travel demand has plummeted due to the spreading coronavirus outbreak.

Some of about 10,500 employees are set to take 10 days of unpaid leave starting Wednesday. Others will join the cost-cutting measure later in a way that does not affect flights.

Asiana had 4,078 crew members as of Feb. 1, accounting for 39 percent of its total workforce of 10,538, according to the airline.

Asiana Airlines also said it will cut wages of its CEO, executives and heads of departments by 40 percent, 30 percent and 20 percent, respectively.

“We are desperately trying to come up with and implement measures to overcome a crisis of a massive operating loss this year,” Asiana Chief Executive Han Chang-soo said in a statement.

For 2019, Asiana’s net losses widened to 672.6 billion won (US$565.3 million) from 96.2 billion won a year earlier, due mainly to a sharp decline in travel on Japanese routes.

Korea Times

You can read more at the link, but it is interesting that Asiana Airlines is losing money before the coronavirus crisis from a sharp decline on Japanese travel routes. The Korean government has been promoting anti-Japanese sentiment that is in turn destroying one of their biggest airlines.

This shows the power of the taxi unions in South Korea when competitors face being thrown in jail by taking them on:

This week is being cast as the do-or-die moment for Korean mobility services – ride sharing, van hailing and the like. It is also seen as an inflection point for the sharing economy, and more generally for innovation. 

On Monday, the National Assembly will begin discussing revisions to the transportation law that could render Tada all but illegal. It has become known as the “Tada Ban Law.”  

Another decision awaits the van-hailing service, with the Seoul Central District Court scheduled to announce its decision on Tada’s legality on Wednesday. 

Prosecutors are calling for one-year sentences for Lee Jae-woong, the CEO of Socar, and Park Jae-wook, the CEO of Tada operator VCNC, for violating the existing motor vehicle law. 

Joong Ang Ilbo

You can read more at the link.