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Many Small Business Owners Struggling

Posted July. 11, 2006 03:25,   


The main street of Myeongdong, Seoul’s massive shopping Mecca, was very crowded with young people when Dong-A Ilbo reporters visited on last Friday afternoon. However, there was stagnant mood in shopping mall spreading behind a noodle shop Myeongdonggyoja. Empty stores and clearance sale signs were frequently noticed. Mun Jae-seon, 51, who has been selling shoes here for 22 years, said, “No store earns profit in Myeongdong these days.” He also said, “Because of the recent recession, we don’t think about taking key money back and even run through deposits,” adding, “Except famous restaurants, almost all of the stores here are having a hard time making ends meet.”

Lee Jung-geun, (assumed name), 41, who used to work for a financial firm, an affiliate of a conglomerate, runs an agency for distributions of goods produced by small and medium-sized companies and changed his business cards six times.

Within this year, Lee changed his card three times because his customers went bankrupt that seriously damaged Lee’s business.

“I can no longer bear this situation,” Lee said. “I am thinking of opening a bakery in my home town after wrapping up all business here.”

In fact, during the latter half of last year, the domestic market showed a little sign of economic recovery. However, the economic downturn is clearly noticed these days. Many self-employed business using officetels (small size offices in which residence is available) and small restaurants are seriously harmed and the number of articles sold at court auction has remarkably increased. The slump in self-employed business automatically led to the decrease of stores’ premium.

According to an announcement made by the Korea Restaurant Association yesterday, the number of its member decreased from about 440,000 last year to about 430,000 in June this year. Over a half year, as many as 10,000 restaurants were closed.

Heo Hong-gu, director of the Korea Restaurant Association, said, “Every week, about 1,000 students take restaurant opening preparation classes. If all students open their restaurants, the number of our member should be increased by about 40,000 every year,” adding, “However, since they don’t want to take a risk, the number is shrinking these days.”

In addition to this, with increasing numbers of the self-employed quitting business, the number of small offices sold by court auction has noticeably increased.

According to Digital Taein, a court auction information agency, the number of articles sold by court auction has more than doubled from 3,459 (during the first half of last year) to 7,117 (during the first half of this year).

The amount of store key money also is down.

According to Real Estate 114, a real estate information agency, the key money of stories located in Seoul and its adjacent area dropped by 1.72 percent from one quarter (January-March) to two quarters (April-June) of this year. In fact, the amount steadily decreased throughout last year. However, during one quarter of this year, the key money went up by 0.6 percent. Now, this is showing a downward tendency again and rent is also going down first time since last January.

Kim Jong-nyeon, a senior researcher of management strategy team of Samsung Economic Research Institute, said, “As the economy shows no sign of recovery, the self-employed are particularly hit hard,” adding, “Only when economic circumstances become favorable to businessmen can the self-employed find a way to overcome economic difficulties.”