ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintTitle ChevronIcon Twitter
Coronavirus

From K-pop to cars, coronavirus hits South Korea business

Travel ban spat with Japan is latest blow to economic activity

In better times: Fans of South Korean K-Pop group Super Junior attend a concert in Shanghai.   © Reuters

SEOUL -- The morning commute into Seoul from the nearby suburb of Ilsan used to take as long as an hour and a half by car. Now the trip can be made in about 30 minutes.

Empty roads are just one sign of how severely the coronavirus crisis disrupting business -- and everyday life -- in the country.

Smaller companies are taking some of the hardest hits.

Last week, Choi Jong-koo, CEO of budget airline Eastar Jet, sent a letter to employees explaining why the company was only able to pay them 40% of their wages.

"Corona-19 has pushed our company into its worst crisis. We tried some measures, such the government's emergency fund and financial institutions' aid, but they were not enough to resolve our problems," Choi said.

Eastar was already on rocky ground, with analysts predicting the company had fallen to a loss in 2019 after seeing profit plunge 88% the year before. On Monday, Eastar Holdings sold its 51.17% stake in the airline to Jeju Air, South Korea's largest budget carrier, for 54.5 billion won ($45.8 million), far lower than the expected price.

A spat over travel bans between the Japanese and South Korean governments has only darkened the outlook for airlines and other businesses. Tokyo announced on Thursday it would ban foreign visitors from the hardest-hit areas of South Korea and Iran. Seoul on Friday said it will consider "reciprocal" measure in response.

Asiana Airlines, South Korea's No. 2 full-service carrier, said it is considering cutting flights to Japan in response.

"It is a very serious situation. Japan still matters to us, even though its share decreased last year due to the political tensions between the two countries," said a spokesman for the airline. Sales from Japanese routes accounted for 10% of its passenger business revenue in the third quarter.

South Korean soldiers in protective gear sanitize a shopping street in Seoul on March 4.   © Reuters

K-pop band Super Junior, meanwhile, announced on Friday that it is postponing indefinitely two concerts in Japan originally scheduled for late March due to the Japanese government's travel restrictions.

Even South Korea's economic giants are not immune to the impacts of the coronavirus, which had infected nearly 6,300 people in South Korea, the most outside of China, and killed 42 as of Friday.

Samsung Electronics, South Korea's biggest conglomerate by market capitalization, moved the venue for its general shareholders' meeting to a convention center in Suwon from its Seoul office to minimize risks to its business. The company also adopted an online voting system for the meeting to help shareholders exercise their rights without visiting the meeting in person.

Samsung also had to shut down its smartphone factory in Gumi, North Gyeongsang Province, on Saturday, after an employee there was confirmed to have been infected by the virus. The company resumed production on Sunday evening after authorities quarantined the production line.

Hyundai Motor, the largest automaker in the country, closed its second factory in the southeastern city of Ulsan, which mainly produces sport-utility vehicles, on Friday after an employee was confirmed to have the virus. The automaker said it resumed production from Monday. But Hyundai, along with other automakers, is also suffering from parts shortages as they import many auto parts from China.

The South Korean economy relies heavily on Samsung Electronics and Hyundai, whose combined sales account for one-fifth of the country's gross domestic product.

Disrupted production at these or other major companies would not only be blow for South Korea.

"Increasingly there is a chance that production inside [South] Korea is disrupted given the rise of infection cases," said Trinh Nguyen, an economist at French bank Natixis. Nguyen warned that such disruptions could impact other Asian countries and territories, such as Vietnam, Hong Kong and Singapore, as they depend on South Korean optical instruments, electronic parts and semiconductors, "meaning that the disruption to South Korea is similar to China and will reverberate most in the electronic supply chain."

The stock market has also taken a beating from the outbreak. The benchmark Kospi fell 3.87% on Feb. 24 on the news that the country's coronavirus infections had soared over the weekend, marking the biggest single-day fall in 16 months. The Kospi rebounded this week, gaining 2.24% on Wednesday, after the U.S. Fed announced a rate cut of 50 basis points.

While companies struggle to cope with falling demand, factory closures and other challenges, the outbreak is also prompting changes in South Korea's work culture.

SK Telecom, the No. 1 telecom company in the country, said that it will extend work-at-home policy to March 15 to fight the spread of the coronavirus. The company is using its own online solutions, including cloud computing and group calls, to deal with the disruption.

KT, the No. 2 telecom player, said last week that half of its employees will be working at home from Feb. 26 to March 6.

These moves represent a major change in a country known for spending long hours in the office. South Korea's working culture had become so notorious that the government passed a law two years ago cutting the maximum number of hours employees could work each week to 52 from 68.

School closures by the government have added pressure for companies to let employees work from home. The Education Ministry has shut down all kindergartens, primary and secondary schools until March 23, and has also advised colleges to offer online lectures for students until the coronavirus epidemic ends.

While few students are complaining about an unexpected holiday, however, the situation is causing serious headaches for working parents, many of whom are struggling to find someone who can take care of their children. More than seven parents out of 10 said they are in need of childcare help due to the school closures, according to a survey conducted by job search firm Incruit.

"I asked my mom to take care of my two children as I can't work at home," said a 42-year-old officer worker in the tech industry who asked to be identified only by her surname Lee. "This is crazy. I just wish it ends as soon as possible."

As parents slam the government for its apparent indifference to their plight, President Moon Jae-in in a cabinet meeting on Tuesday ordered the education minister to take steps to resolve the issue.

Beyond business, the coronavirus outbreak is also affecting social and religious life in South Korea, a country where 28% of the population identifies as Christian.

More than 80% of confirmed cases in South Korea have occurred in the southern city of Daegu and its surrounding North Gyeongsang Province. A minor Christian church called New Heaven and Earth, or Shincheonji in Korean, was the epicenter of the outbreak, according to the health authorities.

A man wearing a mask holds a Bible and a wooden cross as he preaches at a shopping district in Daegu, the epicenter of the coronavirus outbreak in South Korea, on March 4.   © Reuters

Lee Man-hee, head of the church, apologized to people and the government on Monday, bowing two times, but asked people to stop criticizing the secretive denomination.

His apology did little to assuage people's anger against the sect: More than 1.2 million people have filed a petition with the presidential Blue House accusing the New Heaven and Earth church of causing the virus outbreak in Daegu and demanding it be dissolved.

Churches in general are also under pressure to suspend their gatherings. Most of the big churches temporarily halted their Sunday worship and are asking their followers to worship at home via online channels. Seoul is home to some of the world's biggest mega churches, including Yoido Full Gospel Church with 460,000 members.

Daegu, meanwhile, continues to see the number of cases rise. The number of confirmed cases in the city jumped to 4,006 with 24 deaths as of Wednesday, up 405 from a day ago.

The fourth-largest city in South Korea, with a population of 2.4 million, was once a major industrial hub. Samsung originally started its business in the city 80 years ago, though it now has only baseball club, the Samsung Lions, there.

The city's industrial importance has weakened over recent decades as many textile companies moved their factories out of the city to China or Southeast Asia where labor costs are lower.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more