[NOTEBOOK]Wasting time costs a lot of money

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[NOTEBOOK]Wasting time costs a lot of money

Kia Motors Corp. and Hanbo Iron & Steel Co. both went into default in 1997, triggering the 1997-98 foreign exchange crisis. But the two firms are now going divergent ways.

Kia announced Wednesday that it recorded its highest-ever monthly exports, selling 61,000 cars to abroad last month. The automaker has become a better firm than it was before 1997.

On the other hand, Hanbo is still wandering around looking for a buyer. Only one factory at the steelmaker's 3.96-million-square-meter plant site in Dangjin, South Chungcheong province, is in operation now.

There have been several chances to sell Hanbo. In the summer of 1997, several months after Hanbo went into default, Pohang Iron & Steel Co. and Dongkuk Steel Mill Co. offered 2 trillion won ($1.6 billion) for the firm. At that time, Hanbo had few options because it had remained unsold even after three public tenders. Despite the gloomy environment, the steelmaker's creditors rejected the offer from POSCO and Dongkuk, saying that accounting firms estimated Hanbo's asset value at 4.9 trillion won.

Politicians also contributed to the breakdown of the deals to sell Hanbo. A number of lawmakers insisted, "We think the government is intervening in POSCO's plan to take over Hanbo," and "POSCO is being managed carelessly."

When Dongkuk bid again for Hanbo in early 1999, the deal looked like it might go through. But in the final stages, the negotiations broke down. Dongkuk offered 1.7 trillion won at that time. After that, the U.S.-based Nabors consortium proposed to buy Hanbo for 500 to 600 billion won. The steelmaker's creditors designated the consortium as a priority negotiating partner, but that deal also fell through.

The Korea Asset Management Corp. put the steelmaker to a final international bid last Nov. 30, and chose AK Capital as a buyout candidate for Hanbo. It looks as if the steelmaker might be sold; the state-run asset management firm has vowed to do so. It is highly unlikely that the contract price would be higher than the bid by the Nabors consortium. Considering that the company could have been sold at 2 trillion won three years ago and that production facilities have rusted and employees dislocated for several years, it is a great loss.

When Kia was sold to Hyundai Motor Co., a number of people were afraid that the domestic automobile industry would become a monopoly and complained that Hyundai was buying Kia at a giveaway price. But if the sale of the automaker had been delayed due to such opposition, the Korean economy would have carried a much heavier burden.

Daewoo Motor Co. is said to have at least $7 billion won in asset value. Three trillion won has been poured into the automaker since debt restructuring began in August 1999. In addition, the automaker's operating loss for the period totaled 1.3 trillion won. If the automaker had been sold to General Motors Corp. in 1998, without consideration of its asset value, or if it had been sold to Ford Motor Co. last year, it might have been better off. Jeffrey D. Jones, the president of the American Chamber of Commerce in Korea, even said, "How about transferring the automaker for free, in order to retain employees and to operate its plants?"

A cabinet council agreed Tuesday to freeze the government purchase price of rice. We can understand the decision because rice prices are directly related with domestic farmers' welfare. But if the government continues to go this way, farmers will face a larger hardship later. Domestic rice prices are 5 to 6 times higher than global prices. The opening of the Korean rice market was already decided in the Uruguay Round of global trade talks in the early 1990s.

The actual opening was deferred until 2004, so the government should have prepared for the change. Japan has continued to lower the government-purchase price for rice during the period while taking measures to raise farm incomes. Korea only wasted time.

Because two elections are scheduled next year, the government is likely to delay its decisions even longer for fear of losing popularity. But if it does, the damage to the Korean economy will only increase.


The writer is a deputy industrial news editor of the JoongAng Ilbo.

by Min Byong-kwan

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