JPRS ID: 10241 KOREAN AFFAIRS REPORT

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• Content Type: REPORTS

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I~(11t ()i~{~I('IAI, t~til~: ()NI.Y
JPRS L/ 10241
7 January 1982
Korean Affai r~ Re ort
p
CFOUO 1/82)
~ FBIS FOREIGt~ BROADCAST INFORMATION SERVICE
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' N'OR OI~h'1('IA1. (ItiH: l)NI,Y
i
1
t JPRS L/10241
~ 7 January 1982
KOREAN AFFAIRS REPORT
~ (FOUO 1/82)
CONTENTS
SOUTH KUREA
~ ECONOMY
Role of Big Business Analyzed
(Yoshio Sakakibaxa; EKONONIISTO, 10 Nov 81) 1
Second Steel Mill Construction Reported
(EKONOMISTO, 2!~ Nov 81) 11
_ _ a _ [III - ASIA - 1.09 FOUO]
Gl1P (1G'~'i!'T A i i TCF (1NT V
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~ .
;
S. KOREA/~CONOMY
ROLE OF BIG BUSINESS ANALYZED
~ Tokyo EKONOMISTO in Japanese 10 Nov 81 pp 30-34
, [Article by Yoshio Sakakibara: "Kankoku no Zai;;:itsu"]
~ [Text] Intense Ups and llowns oi Big Business
On the midnight television news this pdst 30 September it was announced from
Baden-Baden in West Germany that a decision was made to hold the 19~;8 Olympics
- in oeoul. Chong Chu-,on, chairman of the Hyun llai Group, I:orea's number one
big business, could be seen :1n the group which had tried t~ ar.tract them to
~ Seoul, jumping for joy at the turnabout in the decision. What was going through
his mind was that this may be the opportunity to re.:~ore the mirac~e of Han
River.
' Korea's big businesses are being pressed for a major transformation by the Chun
government. For the past sev~ral years, big business has been denounced as the
ringleader causing a worsen.ing of.the fundamentals ~f Korea's economy through
inconstant surplus~investme:nts by the big business group. ~
Since the expansion of big.business by excessive competition cannot be perud tted
by the Chun government who:~e aiin is the efficient management of the economy, in
SeptemUer 1980 it set Fortl~ measures to strengthen the revamping of affiliated
enterprises of ti~e 26 big l~usinesses. That is, the government is forcing them
to devote tliemselves to reducing operations by discarding those affiliated en-
~ terprises which hcive difL-iculty continuing in business on their own. Although
there were complications, such as problems bound up with sales prices and foreign
capital, during this one year period the liquidation of 102 companies was dis- .
posed of. That number is equivalent to 16 percent of the total 631 affiliated
enterprises of tl~e 26 big businesses, and contrary to expectation, the liquida-
- tion seems to be progressing,
Tt~e domestic imagc of Korea's big businesses is not good at all. The view is
strongly Ileld that this is nothing but the result of big business' close ties
with tl~e government of the day and the improper accumulation of wealth because
of preferential treatment. Beyond this emphasis, the position of big business
as the nucleus of the economy, in the extreme, has developed to the point of be-
ing discussed as unwanted. Actually this drif t of argument is seen in some
circles.
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F'O~: 6)F'b'll'1 ~1 l'~t� l)\1 \
To begin with, in the developing nations big business is th~ group of enter-
prises which comes into existence for the purpose of possessing the power to
compete with the economic strength of the advanced nati~,ns; and in order to
enhar~ce industrial strength, this kind of enterprise group is indispensable as
the nucleus of the economy. Consequently, big business exists in o*her ccun-
tries to a greater or les~er extent; and a~ can be seen typically in many cases -
in Central and South American countries, they avoid mutual competitian and pro-
tect their :;wn exclusive society on friendly terms. Compared to them, Korea's ~
big businesses have repeated ups and downs within a fierce competition. This
difference i:s the main factor decisively characterizing the nature of Korea's
big businesses. ~
_ Next let us examine Korea's big business groups, in particular the role they
have played.
In general, Korea's big businesses were not started as industrial capital. Prior
to Japan's defeat in the war, it was under colonial control and the farmation of
native.:.apital was completely controlled. Because of that, the well-known .
Korean capital at that time was Seoul Spinning Company, which formerly stretched
all the way to Nanchuria, arid Whashin which spread its chain stores to all the
provinces, having as its nucleus department store operations which ranked with
Mitsukoshi Department Stor.es.
After liberation, even though a few big businesses began to form from the dis-
posal of property returned from Japan, almost all of them received a crushing
blow from the Korean~War which b.roke out in 1950; the start~ng point of the
formation of big business was the manufacture of the "three whites" (raw sugar,
cotton and flour) with U�S. aid after the cease-fire. That is, appropriate aid
commodities were sold monopolistically and a high profit was realized by means
of.low-scale processing.
The diversification of operations was planned by means of this kind of accumu-
lation of wealth, but the character of pursuing commercial profits as a busi-
nessman with special political connections seemed stronger. Society's criticism
is focused on this, but from the view of the historical situation of capital
accumulation, it seems this was something unavoidable in the transition.
At the level of industrialization de~~eloped from tlie processing of American
assistance goods as the nucleus, those that established positions as b3g busi-~
nesses were Sam Sung, Lucky, Sam Ho, Dae Han, Kae Pung, Na Rim, Ssang Yong
and Tong Yan~, and together with the two mentioned earlier, these were called
tl?e 10 large big businesse5 of the 1960's. . ,
Expansion With Industrialist's Spirit
At the beginning of the 1960's, Korea's per capita national income was less than -
$100, falling below Thailand and the Philippines. Twenty years later, it is
- more than $1,500. To what is the fact due that it has become influential as a
mid-level developing nation? With no natural resources and no capital accwnu-
lation, the main factor was solely the manpower resource.
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- rox uFF~tc�i.~L t~~t~.~o~t.~
~ 'Phe prerequisite for promoting the development of the economy in such conditions ~
was "to construct a cycle for reproduction o~.-~ a progressive scale." It is cer-
tain that the operation of relatively rational economic policies and the people's
diligence have the greatest importance.
However, even more than that, the constructive, forward looking intention of
- Korea's industrialists was the indispensable prerequisite as the motive power.
The fertilizer plant built in 1964 by Sam Sung was taken away by the government,
but at that timQ,the construction o~ ~'~e 330,000 ton urea fertilizer plant was
a large project equivaient to tl:~ present construction of the Chiba plant of
Kawasaki Steel Corporation.
~ ~ '
Even though Hyundai's 1 million t~r. dock, completed in 1974, was built on direct
_ orders from President Pak, Hyundai's fate depended on it. Moreover, even with
Daewoo's recently completed shipyard dock at Okpo, which prides itself on being
the world's largest at 1.2 million tons, it certainly can be said that it also
resulted from the hearty support of the government, but it could not have been
achieved without tl~e industrialists' insatiable desire. If~it had failed, the '
same fate may have been waiting as that of Mr Shin, the pioneer of private avia-
tion, who jumped into the Han River. It was a challenge under these conditions.
Chairman Lee Pyong-ch'ol of Sam Sung expressed the conviction, "for a greater
tomorraw" to Hanguk Ilbo, a leading publication, in 1964: he asked a question
in return, "LJhile we have our own high level spiritual civilization, why hasn't
the per capita national income progressed beyond the lowest level in the world?"
He also stated, "The re~uilding of the economy cannot be guaranteed with~ut a
radical switch to industrialization policies and their practical application.
Investment expansion is the greatest requisite condition for emerging from
poverty."
~ Likewise, in reference to the improper accumulation of wealth conduct, he coun-
� terargued, "Disregarding those who caused the nation to suffer by failing to
manage even though they inhei�ited the majority of the large and small enterprises
taken over from the Japanese or those who were unable to revive even one useful
factory or profit~ble operation even though they received bank loans and the
bless~r.g of American assistance funds, why punish as people who improperly
accumullt:ed we~iltt~ the many businessmen who conquered many roadblocks and con-
tributed ro the expansion of production and increased employment?"
It seems that Chairman Lee understood that in order for a country where the per
capita national income is under $100 to devel.op its economy, the sole condition
making development possible is not to decentralize but to centralize all business
resources. Certainly the Korean economy ha~ developed, adopting industrializa-
t~on measures with foreign capital as the lever; but if only small businesses had
been in existence, the introduction of foreign capital would not have been that
easy.
Moreover, deserving bf special mention is the fact that the prosperity of con-
sumer industries based on aid commodities reached their peak, and when the
state was reached where the heavy chemical industry was inevitable, the indus-
trialist's spirit showed even more of an uplift. Since the mid 1960's many
rising big businesses have surfaced with remarkable vigor, such as Hyundai, Han
Gin, Daewoo, Hyosung, Kolon, Sunkyong, OB, Kumho, and Daerim.
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And then the heavy chemical industry was actively dealt with in the 1970's. In
the course of this, it seemed measures were introduced.
That is, an expansion of operations wa~ planned by putting into the heavy chemi-
cal industry earnings from the light industry field, starting with the textile
= field. Of course, they had the backing of the government on loans for the heavy
chemical industry field, but some of the big businesses which could not de~l
with the trend of the times or the big businesses which had rapidly expanded
operations under a financial structure wherein they depended too much on out-
side funds and had little of their own capital, vanished.
Status of 20 Major Big Business (1980~
Unit: 1 million won (percent;
_ Tutal Liabil- Owned
Total liabil- ity capital
Rank GrouP name Sales Assets ities Capital rat.io ratio
" - (percent)(percent)
1 Hyun Dai . 3,262,100 2,984,021 2,344,039 267,765 ~66.27 21.45
2 Lucky 2,970,900 1,734y650 1,474,146 144,303 ~ 555.23 15.26
3 Sam Sung 2,905,000 2,012,057 1,730,760 197,715 615. 13.9
4 Sunkyong 2,669,287 1,501,220 1,434,837 131,890 2,151.45 4.42
5 Daewoo 1,613,232 1,774,594 1,417,677 254,776 397.20 20.11
6 Ssangyong 1,322,600 975,783 815,997 T9,657 510.67 16.38
7 Hyosung 1,191,724 1,051,520 942,110 861.08 10.4
- 8 Kukji Training Co 919,955 682,758 596,409 49,944 690.70 12.65
9 Hanjin 893,,861 1,037,503 360,939 69,O1.0 1,251,83 7.40
10 Tai Lin Industrial
Co 786,131 831,111 635,729 94,282 325.38 23.51
1] E:orea l:xplo:~ives .
734,78i ihl,Sti4 51.].,h61 39,374 1,023.90 8.89
12 Tonga Construc-
- tion Co' 640,185 524,324 375,070 27,945 251.30 28.47
13 Lotte ~565,209 525,346 385,594 136,813 275.91 26.60
14 Kolon 445,555 344,630 280,005 33,542 433.3 18.7
15 Kumho ~ 444,624 384,464 316,657 31,130 467.00 17.64
16 Korea Electric
Cable Co 403,248 438,870 350,471 5?,630 396.46 20.14
17 Sammi 398,276 376,302 336,239 25,900 839.28 10.65
~ 18 Doosan 385,382 640,121 535,195 43,434 510. 16.4
19 Dongkuk Steel
Mill Co 384,527 394,603 336,571 672,159 580. 14.7
20 Hanil Synthetic
~ Fiber Co 383,733 389,578 308,508 35,179 297.24 25.17
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Control of Mostof the Economy
However, the position the big business groups hold in the national economy rose
annually, conjointly with the department store formula aim of one set, nb mat-
' ter what it is.
As a result, the sales of enterprises affiliated with.the top 10 big businesses
in 1980 reached 55 percent of GNP at 19.3 trillion won. Likewise, in terms of
exports, the ratio the top 20 big business affiliated enterprises hold of total
exports was 43 percent with actual figures of 7.5 billion dollaxs.
_ The relative importance of the big business af.filiated enterprises in manufac-
turing industry production cannot be ascertair~d exactly, but speculating from
the mining and manufacturing industries census, in 1978 there seemed to have been
types of industries which had almost established an aligopoly--such as 85.percent
of the transportation equipment field, 75 percent of electronics and 60 percent
of textiles. Besides these, the share of completions in the construction industry
rose to 65 percent in 1979 with t?~~e ra~id expansion of overseas construction, and
the transportation warehouse industry share has reached 55 percent.
Next, looking at the role big business pla}rs in employment, the number of employ-
ees in the big businPSS affiliated enterprises is con~ectured to be about 1 mil-
lion, equivalent to 40 percent of the total employed population, and breaking
this down by big business g::oup, Hyundai leads with 125,000 employees, then
Sam Sung with 75,000 and Daewoo with 60,000.
~ One of the roles big business played in terms of employment was that i~ offered
the chance for employment to people of superior talent. Korea is widely known
to be zealous auout education from olden times, and it started industrialization
smoothly with a supply ~f talented people who could adapt to an industrial
society, but there were limited companies which could take them in. In such a
situation, big business was greatly effective in absorbi~zg a great number of
_ talented people.
The fact big business used the youthful energy of graduates, who sometimes are a
= chief cause of social unrest, in building an industrial nation must be highly
_ valued. The rearing of a business elite was the prelude to the appearance of a
new mi.ddle class in Korean society, and furthermore. was connected to a mass
production of a more widespread middle class.
On the other hand, that fact caused an enlargement in the income differential
with workers on the bottom scale. But it is a fact that in the process oi i:igh
level growth, a substantidl rise in pay in the big business aftiliated ente-:-
prises had the effect of lifting the bottom of the general pay scale and con-
tributed to a reduction in the differential between ~enterprises. The rise in
the work distribiition ratio of recent years backs this up and the fact that
- there are some big businesses which curtailed to a high degree personnel re-
ducti.ons at the time of the 1980 depression must be specially mentioned, given
tt~e nature of Korean enterprisea.
J Korea's high level growth L~ntil now has retained a relationship with excessive
competition like two sides of a coin and coexisted with it; but the big
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_ business group's department store f.ormula operation is obliged to amend its
track because of the slump.
The development of diversified operations which from the very beginning aimed
at a dispersion of risk could not demonstrate adaptability at the level of the
big business groups.
Certainly, even though the developnent of an enterprise and the competitive
motivation is always a contrary relationship, on the other hand the inclination
toward expansion which seems to be without any fixed principle is a primary
factor putting a strain on the buildup of industry at the national level. The
main reason why there is great criticism is that fields where big business ad-
vanced extend to many industry fields--from the heavy chemical in~ustry to the
service field--and they eat away at the special fielc~s of small to medium-sfzed
enterprises. The internalization of the external economy which restrains as much
as possible the general effect of the external economy and tries to restrict it
. within its own group should be avoided as much as possible.
In order to do so, naturally it is necessary for small to medium-sized enter-
prises to plan a high level development while accumulating thQ technology.in
small- to medium-sized enterprise products fields wY~ich until now big busaness
affiliated enterprises could not help but manufacture themselves; and perhaps
government support should direct itself to this.
In any event, the operation style where big business extends its tentacles is
sounding its end and there is a strong demand that its character be trans-
formed into a modern enterprise group. A same family operation often becomes ,
the target of criticism; and in the present situation where an existence as a
national enterprise is demanded, the separation of capital and management is a
? subject which should be sufficiently considered.
In the economic policies under the Chun government which advocate a switch to a
private leadership style, it is not an exaggeration to say that the nucleus en-
couraging Korea's industrial structure to be a.systematic structure befitting an
industrial nation is the big business group's manner of behavior.
Responsibility and Moderation To Be Strengthened
In Hyundai's heavy chemical industry, in terms of the technological require-
ments, it is necessary to make it large scale by means of a comprehensive .
systematization and diversification, and there is a strong tendency for the
necessary funds to be large, and perhaps it is big business which has that role
and which possesses the expertise to accomplish it. Likewise, the development
of internationalization will inevitably expand the move overseas along with the
liberalization of trade and capital, but that requires skill in international
enterprise operations. I~~ that case as well, for the time being it is only big
business which can be the nucleus. Therefore it can be said that the role which
big business should perform even more now tham in the past wi].1 become greater,
and the responsibility it has toward the national economy will become all the
greater. Moderation is demanded along with the continuation of the industrial-
ist enthusiasm.
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~
Pinally, let me present the profiles of four big businesses.
Hyundai Group
Different from many of Korea's big businesses which made their co~e light in-
- dustry, such as textiles, the Hyundai Group started with a move it.to the con-
struction business. It undertook the construction of airports and construction
for the U.S. military during the Korean disturbance, by and large consolidating
its operation base, and after the conflict, it rode the crest of the country's
recovery boom and worked on the expansion of its operations, such as cement and
concrete; and in the 1960's it participated to a large extent in the major high-
way construcrion f.or the entire country in accordance with the nation's develop-
~nent plan. in this process, it built up a firm position in the industry.
During that, time, it contracted to construct Thailand's highways in 1966; it
was the first to carry out overseas construction.
- Besides construction, it advanced into the machinery and trade business in 1962,
established Hyundai Motor Company with Ford Motor Company in 1967 and established
Hyundai Heavy Industries Company in the 1970's; and thus is seen the birth of its
four major strategic industries of construction, machinery automobiles and ship-
building. However, until that time, Hyundai's total strength ranked low in com-
parison with Sam Sung, Lucky and others.
After that, it joined the government promoted heavy chemical industry line and
worked closely with the Pak government; and the strengthening of its organiza-
tion became conspicuous. In particular, its advance into Middle East construc-
tion with the oil crisis as the opportunity was the motive force for tlte busi-
ness expansion of the group's various companies. The extensive growth of ~he
- four major main force industries establisned affiliated enterprises in such areas
^ as engines, ship paint, welding rods, carbide, furniture, cars, automobile parts
and service, electric power generation, engineering, building management and
shipping. Its unending sp?-zad with construction and heavy industry as the core
became a topic of conservation with the purchase in 1978 of Ir.chon Steel Companq,
a major steel company.
As a result, the number of affiliated enterprises reached 60 and it changed from
a construction plutocracy into an enterprise group representing the image c?f an
industrialized Korea. Creat t~ope is placed on this group in the future rebuild-
- ing of thc economy. The international competitive power of foreign construction
and shipbuilding is highly assessed from actual results and it can be said that
a high added value is hoped for through raw materials and production of inter-
mediary businesses.
Lucky Group
The Lucky Group which holds a place among the four major big businesses is a con-
servation topic since announcing its move into the United States with color tele-
visions, but its starting point was Lucky Chemicals Company, manufacturer of
pomade, established in 1947. Aft~rwards, it spread its hands into plastics,
soaps and toothpowder. The process whereby it attained its present greatness
- from the general merchandise business wor~d crowded with many minor businesses
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is somewhat different from the other big businesses' modus vivendi, but it had
the same character as other big businesses in laying the graundwork by relying
on system financing.
In 1959, it started Kum Sung Company, a wall and desic clock~company, and then
it was first to arrive in the home electric appliance field, such as radios.
' It acquired a monopolistic profit, riding the crest: of the home electric appli-
ance boom, and in 1967 it launched into oil refining with the establishment of
Honam Oil Refinery Company in joint partnership with Caltex. It became Korea's
largest oil refinery with a current daily production capacity of 380,000
barrels.
With the three main force enterprises of chemical products, oil refi~ning and
_ electric appliance as the scaffolding, in the field of electrical equipment,
it established Kum Sung Communications Company in 1969, jointly with Semens for
the production of telephones; it established Kum Sung Alps Company, a manufac-
turer of tuners and Kum Sung ~lectric Company, manufacturer of microwaves; and
in 1974, it set up Kum Sung Instruments Company, manufacturing meters and in-~
struments in joint partnership with Fuji Electric Machfnery Company, Ltd. Then
- in 1978, it purchased Shin Yong Electr:.c Company, manufacturer of elevators,
which was a joint venture enterprise w~th Mitsubishi; and it accomplished a
move into the con.~uter field by setting up Kum Sung Semiconductor Company in
1979.
_ In the petrochemical field, it set up Lucky Petrochemical Campany, a naphtha
cracking company, in 1978, and Lucky Polychemical Company, manufacturing poly-
ethylene, in 1979. These and its comprehensive trading company. Bando Trading
Company, and Lucky Development Company in the construczion field are the major
enterprise groups comprising the Lucky Group.
In a situation where big businesses s:~hich had invested huge amounts of money
into the heavy machinery field in a period of high level gYOwth agonized over
- raising funds, Lucky's burden there was small, and it seems its special char-
acter is that it aimed at an expansion of its business in cooperation with
_ foreign capital.
On the one hand it aims at being a worldwide synthetic chemical manufacturer in
. the future, and on the other hand it throws all its power into strengthening the
rearing of its semiconductor industry.
Sam Sung Group
After liberation, Sam Sung`s departure point was Sam Sung Corporation which
formed thc plan for a trading business established within the ruins of the
Korean conflict. After the c~asef.ire, it set up Jeil Sugar Company and Jeil
Wool Manufacturing Comp~ny wt~icl~ were Korea's first sugar producer and woolen
manufacturer. In 1958, t}ie flour milling division took its place alongside of �
sugar production at Jeil Sugar; and in the 1950's, the "three whites" industry
was complete. The aim in which the foundatioa of the industry was the substitute
for the import of the essential goods for life was on target, ~nd it leaped to
the top of Korea's hig businesses. After that, in the 1960's; starting with
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F'uk c~NN'ic't:u. cm1.~
tl~e fertilizer plaiit mentio~ied earl.ier, and besides moving into the field of
pap~r manufacturing, department stores, insurance, electrical equipment and
~ electronics, Sam Sung Corporation was organized, and under its banner, it set
' up institutions for the public good, such as Koryo Hospital, CHUNGANG NEWS, and
Tongyang Broadcasting Company, which was taken over by the government in acca~-
dance with the central~zation of *_he media under the Chun government.
~ As for principal companies, in the 197~'s it set up Jeil Synthetics Company,
- manu.facturer of polyester, Sam Sung Heavy Industries Company, a machinery
plant and a joint venture with Ishikawajima-Harima Heavy Industries Co., Ltd.,
- Sam Sung Petrochemical Company, a three company joint venture with the U.S.
Acom Company and Mistui Petrochemical Industries, Ltd., and Hotel Sinra; and
in the later half of the 1970's it estahlished a semiconductor and precision
instrument company, and undertook to set up Sam Sung Shipbuilding Company
and Sam Sung Comprehensive Construction Company.
Sam Sung Group's sp~cial characteristic within such diversified operations is
that there are many enterprises that have a high earnings and a high share of
sales. In a situation where the industry structure changed rapidly in the
_ 1970's, many of the so-called preferential treatment big businesses which were
said to have received the patronage of the former Lee Sung-man (Syngman Rhee)
government fe.ll, and the domain of big business changed greatly. The reason
Sam Sung maintained its position even while being out of favor with the Pak
government was that it diluted the nature of family controlled operations and
provided a system adaptable to changes in the export environment and the indus-
trialization of heavy chemicals.
The rati_o of both food prodticts and textiles, which was in excess of 50 percent
of sales and assets in the 1960's, has fallen to 10 percent at present, and the
relative importance of heavy chemicals has risen. And the expansion of the
electronics field, centered in televisions which exceeded a cumulative produc-
tion of 10 million sets seems especially remarkable.
Because it is facing a period where investments in the field of electronics, ship-
building, plants, precision machines and petrochemicals reach fruition, the role
- this group should play in the Korean economy, which has entered a period of
stable growth, is great. It will be the enterprise's activity to reach an
international level and promise prosperity for the national economy.
Daewoo Croup
- Daewoo CrouP syn~t,olizes Korea, an export state. Since starting the export of tex-
~ tile bssiness wit~t five emp.'�_oyees in 1967, it has become Korea's first $1 billion
export bu~i~iess in 1979. Looking at its growth proces~, it adopted a business
- expansion c~ntered iu the light industries with textiles at the core until the
mid 1970's, but after that, it developed operations emphasizing heavy industries.
- On account cf that, the affiliated enterprises extended over many industrial
' fields, but the main pillars are Daewoo Corporation, the parent company which
has many textile plants, Daewoo St~ipbuilding Company, Daewoo Heavy Industries
~ Com~~any, manufacturer of industrial machinery and the like, Sehan Motor Company,
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a joint venture with GM, and Daewoo Development Company, a construction firm.
With these five core en terprises as the axis, some 40 companies, such as elec-
- tronics, leather, cosme t ics, footwear, musical instruments and general merchandise,
are linked as affiliated enterpr~ses.
Getting out of textiles in the mid 1970's was its intent in .:ommon with other
big businesses. Rather than establishing a new enterp?-isa, the purchase of an
existing enterprise and expanding it was more advantageous in an environment
where rapid completion was required. In that sense, Daewoo's takeover of
Shinjin Group's main enterprises was the greatest factor making development pos-
_ sible in a short period of time.
Daewoo Heavy Industrie s Company, which was undertaken in 1976, was Korea's
machinery industry previously transferred from government management to the
Shinjin Group, and Sehan Motor Company which was taken over in 1977 was GM-
Korea under the management of the Industrial Bank of Korea due to a slump in
operations at that time and was the former Shinjin Motor Company. Likewise,
Daewoo Shipbuilding Comp any, taken over in 1978, was the Shipbuilding Public
. Corporation's Okpo shipyard. It is a famous story that it competed with Sam
Sung over the takeover. Besides that, there are many examples of Daewoo's
takeover of existing en terprises and there are f ew core enterprises which it
- established itself.
In this way, Daewoo, re ceiving the support of the Pak government, incorporated
heavy chemical industry plants into its own projects by means of takeovsrs.
It has been reported that Daewoo, while planning the stabilization of its ope-
ration base by means of amalgamation of main force eriterprises in the future,
plans to strengthen even more its overseas advance; it may be said that the ex-
pectation not only of the Chun government but also of the people relies on the
rapid progress of Daewoo which performs the role representing Korea, an export
state. ~
COPYRIGHT: Mainichi Shimbunsha 1981
9400
CSO: 4105/25
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f
~ S. KOREA/ECONOMY
SECOND STEEL MILL rONSTRUCTION REPORTED
Toky~ EKONUMISTO in Japanese 24 Nov 81 p 6
[Article: "Korea Plans Second Steel Mill Construction at Kwangyang Bay;
First Period Completion Expected in 1978, With 40 Percen:t Foreign Cap ital"]
[Text] Korea's second steel mill construction s ite has been f inally decided:
Kwangyang Bay, Yochu County, South Cholla Province. Situated in its vicinity
is the Yochu Petrochemical Complex. This steel mill is going to be a large-
scale industrial base second only in size to the petroleum complex in
Cholla Province. This decision was revealed on the Sth by the minist er of
construction, Kim Chu-nam, during a talk with th e members of the cons t ruction
counni.ttee of the National Assembly.
~ Asan Bay Reduced to White Paper
Construction of the second steel mill was once decided in July 1979 under the
Pak regime to be at Asan Bay on the border between Kyonggi Province and
Ch'ungch'ong Province. According to the plan then, a plant site at As an Bay,
990 million square meters in area, was to be prepared; 13.2 million s quare
meters of which were to be used for the construction of a steel mill and a li.arbor
facility capable of accommodating 200,000-ton class ships together wit h water
and railroad facil.ities necessary for the steel mill. However, further study
revealed that the range of the tide was considerably large at Asan Bay so that
a dock type construction was necessary if a harbor was to he construc t ed there.
- Moreover, the capital required was huge and a construction period of 6 years
- would be required.
Therefore, a total of seven bays in the vicinity of Kwangyang Bay and ~"ohang
were investigated as the candidate sites. Finally, by February this year,
the original plan was completely scrapped and the candidates were narrowed
down to Asan Bay and Kwangyang Bay and a feasibility study was carried out.
Of these two sites, the Ministry of Construction preferred Asan Bay f rom the
- viewpoint of effective national land utilization by a consolidated general
development, while the Consolidated Steel Mill preferred Kwangyang Bay because
the required development cost would be less. The Korean Government h 3red a
Frencti consulting firm to carry out the study and, as a result, Kwangyang
Bay was recommended because of more favorable harbor conditions and 1 ower
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construction cost. The Korean Government further took into consideration the
security factor in addition to the reco~endation and finally decided upon
Kwangyang Bay as the site after obtaining the approval of President Chon Tu-hwan.
According to the plan, the work related to reclamation of 8,925,660 square '
meters of plant site will begin in 1983, and by July 1987, the first period
- construction including the construction of a crude steel mill with an annual
capacity of 3 million tons is expected to be completed. By July 1989, the' ~
_ second period construction will be completed and th'e annual crude steel .
production capacity will have been increased to 6 millian tons; by January 1992, .
to 9 million tons, and further by January 1994, to 12 million tons. Moreover,
the harbor facility will be expan~ed to accommodate ships of 250,000-ton class.
The capital required for the first period construction is approximately 2 trillion
won ($2.7 billion) including the harbor construction cost of 1.434 trillion won.
Forty percent of the total capital is said to be foreign capital.
The second consolidated steel mill construction glan was studied by both government
- and the private f inancial circles as early as the spring of 1970, and a plan for .
the first period construction consisting of construction of a plant having an
annua,l crude steel production capacity of 5 million tons to be started in 1976 ~
was draf ted in th e summer.of 1973. However, this plan had turned into a.white
- paper due in part to the difficulties erico untered in raising the capital and it
was decided to expand the P'ohang Steel Mill after all.
The fourth period construction ~t P'ohang began in April 1979 and the work was
finished in February this year. As a result, the crude steel production has
been raised to 8.5 million tons a year. However, further expansion cannot be
expected. Therefore, Korea's steel self-support rate was considered to decrease
, rapidly toward the middle of the 1980's if the status quo was maintained, and ~
the second steel mill construction plan surfaced once mare in the summer of 1977.
The plan was brought to a conclusion in 1979. Although the Ministry of Commerce
under the Chon Tu-hwan regime insisted th at the plan be finished during the
Fifth Five Year Plan (1982-1986), the econnmic planning agency insisted that it
be postponed to the next plan period because of the enormously large capital
requirement. Finally, it was decided that the construction be started in 1985
in the later part of the Fifth Five-Year Plan period and f.inished in 1988 during
- the Sixth Five-Year Plan period.
A Symbol of Chon Regime's Success ~
In February this year, at the firing ceremony of the No 4 blast furnace at
P'ohan~, President Chon Tu-hwan stated: "When construction of the second
steel mill is successfully c~mpleted, Korea will come one step closer to the
ranks of advanced nations both in name and reality." Just as P'ohang was the
symbol of economic growth under the Pak regime, the second steel mill shall be
the symbol of economic success under the Chon regime, it appears.
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According to a korean source, in addition to the purely economic reasons, there
was also political reason as to why Soutti Cholla Province was chosen as the
- construction site. Namely, South Cholla Province has long been treated
indifferently so that anti-establishment sentiment is very strong there.
_ This act is, therefore, considered to be a concilia~ory measure.
The source further pointed out that political consideration toward the tragedy
that took place in Kwangju, South Cholla Province in May last year was also at
work.
COPYRIGHT: Mainichi Shimbunsha 1981
9113
CSO: 4105/26 END
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