As South Korea's economy rebounds, small businesses struggle with tighter coronavirus curbs

When Park Sang-jun heard that his country's economy was continuing its rebound from a slump brought on by the Covid-19 pandemic, the owner of a small coffee shop in a city south of Seoul felt as if he must be living on another planet.

South Korea's exports rose 4 per cent in November from a year earlier to reach US$45.8 billion, according to data from the trade ministry. Growth, meanwhile, was stronger than estimated in the third quarter, with the Bank of Korea reporting a 2.1 per cent increase in gross domestic product compared with the previous three months - better than the 1.9 per cent in earlier calculations.

The stock market is also booming, with the country's benchmark Kospi index gaining more than 80 per cent over the past nine months as authorities cut interest rates and poured money into the financial system in a bid to prop up the economy amid the pandemic.

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But such positive economic indicators mean little to Park, who said his business had been struggling since March - when South Korea was hit by its first major outbreak of Covid-19, centred on the secretive Shincheonji Church of Jesus in the southeastern city of Daegu.

Health workers disinfect a school in Daegu on November 26. Photo: EPA alt=Health workers disinfect a school in Daegu on November 26. Photo: EPA

"Things were bad enough throughout the year but they became worse after the new round of distancing regulations," said the 56-year-old, referring to rules brought in on November 24 that required restaurants to close at 9pm and coffee shops to only serve orders for takeaway, among other curbs on nightclubs, karaoke bars, religious services, weddings, funerals and public transport.

"Many customers who used to visit my shop to drink coffee after having dinner at nearby restaurants have now stopped coming," he said.

Park estimates that sales at his 32-seat coffee shop in Ansan, a city 30km south of Seoul, have fallen to about one-third of what they were before the new regulations were introduced - yet he still has to pay 1.5 million won (US$1,367) in rent each month for his shop, on top of the 8,590 won (US$7.83) in hourly wages he pays to each of his four part-time employees.

Daily infection numbers in South Korea have been hovering around the 500 mark since November 25, though health authorities have warned that this figure could easily rise to between 700 and 1,000 within weeks if social distancing regulations are not followed.

"I'm on the horns of a dilemma as I can't fold [my business] or continue on with it," Park said, explaining that he had been unable to find a prospective buyer for his shop and would have to pay a lot of money to restore its interior to its original state if he did decide to close.

"I just hope vaccines will become available soon and the virus is gone. Otherwise, I'll go completely belly-up by next spring or summer," he said.

It was a similar story in Seoul's normally bustling Daehangno neighbourhood, where a karaoke bar operator in his 40s said he had seen an 80 per cent drop in customer numbers since the new restrictions came into force. "Most of my customers came late in the evening, but what could we expect now with the streets almost deserted at night?" he said.

A few kilometres to the south, the venues surrounding Sinsa subway station in the Korean capital's prosperous Gangnam District are also struggling. Many of the cafes, nightclubs and bars that would ordinarily be packed with office workers enjoying after-work drinks have already closed their doors, and those that have not are almost empty.

Pedestrians crowd a street in Seoul's Gangnam District on November 21, before the new restrictions were announced. Photo: EPA alt=Pedestrians crowd a street in Seoul's Gangnam District on November 21, before the new restrictions were announced. Photo: EPA

Kim In-soo, who operates a restaurant in the area, said sales had fallen to one-tenth of what they were before the new restrictions, "as we must stop taking orders by 8pm at the latest in order to close at 9pm".

Staff at cafes and restaurants further complain of difficulties in getting sometimes uncooperative customers to scan QR codes upon entry, a requirement that South Korea introduced in June in a bid to track coronavirus cases and prevent further spread of the disease.

Well over a million of the country's small-time shops, restaurants, motels, bars, bakeries, coffee shops, cram schools, beauty parlours, gyms and other similar businesses are expected to have closed for good by the end of this year - up from the 850,000 that folded in 2019.

Those that stayed open have been forced to lay off employees and take bank loans, with an additional 9 trillion won in the three months to the end of September pushing up small-business borrowing to a record 388 trillion won (US$354.55 billion).

On Wednesday, South Korea's parliament approved some US$2.7 billion in fresh subsidies as a third round of economic relief for small business owners and self-employed workers hit by the recent resurgence of Covid-19 in the country. This was included in the 2021 budget, which at US$504 billion is the biggest in the nation's history.

That relief came on top of a 7.8 trillion-won package approved in September to provide small-time business owners with a one-time payment of up to 2 million won each, and an earlier tranche of 14.3 trillion won in subsidies passed in May for the benefit of all households.

And it is not just small businesses that are suffering: youth unemployment is also on the rise. The jobless rate in South Korea among those aged 15 to 29 hit 8.3 per cent in October - up from 7.2 per cent a year before.

Which has made Park Jeong-beom's year-long quest to find work all the more difficult.

"It was always difficult to find employment, especially for those who majored in non-technical subjects, but the pandemic has made it worse," said the 29-year-old graduate with a degree in business administration from Utah State University in the United States.

"All I hope is that the virus is put under control, things get back to normal and the window for jobs is wide open next year."

This article originally appeared on the South China Morning Post (SCMP).

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