Rigging resource development

Much-publicized projects to develop overseas resources have reentered the spotlight, but this time due to the whiff of corruption. Exploitation is suspected in contracts with local governments and companies to mine diamonds in Cameroon and develop gas fields in Myanmar.

Despite denials of foul play, the way that Korean companies win such contracts is often murky and vulnerable to charges of influence peddling by the Korean government on the pretext of promoting the development of overseas resources.

The Cameroon project looks to all intents and purposes like a typical case of stock-price rigging. C&K Mining announced late last year that it discovered potential diamond reserves in Cameroon and won a license from the government to explore these. The Ministry of Foreign Affairs and Trade subsequently issued a statement touting the deal as a successful example of private-public collaboration.

A high-level government official reportedly visited Cameroon to support the deal, which led C&K’s stock price to more than quintuple. As company executives later sold their shares and pocketed hundreds of millions of won, the government effectively helped them line their pockets.

The Myanmar gas project is equally suspect. Even though a government-led investigation decided the plan was not feasible, a private consortium went ahead earlier this year and won its bid. The same high-level government official was involved in the process, and the company founder had, coincidentally, raised huge corporate funds to support President Lee Myung-bak during his election campaign.

Neither project has so far lived up to the hype or made any significant progress so far.

We have to question the ulterior motives behind such projects. South Korea lacks natural resources of its own and needs to seek out developments overseas to guarantee stable and cheaper supplies. But does it seem fitting for government officials to get involved in these projects and use their influence and networks to win licenses for private companies? Overseas developments that are hyped as lucrative cash cows are often large scams, and the two cited projects seem to fit this description.

Authorities at the Financial Supervisory Service and the Blue House are known to have had doubts about the diamond deal, but they have not taken any action. Prosecutors should investigate the suspicions, especially if senior-level officials are involved.