[Viewpoint] Diamond from a lump of coal

An outrageous scandal over an expensive diamond bribe recently happened. It’s a black comedy surrounding a diamond mine.

In late 2010, the Ministry of Foreign Affairs and Trade announced that “CNK secured the rights to develop diamond mines in Cameroon where at least 420 million carats of diamonds are estimated to be buried.”

After the announcement, the stock price of the company skyrocketed. Soon after, suspicions were raised about the mines. Some government officials and relatives, who had allegedly learned about the information in advance from the ambassador for energy and resources, had purchased the firm’s stock in large amounts.

“Are diamonds a natural resource?” an official who is in charge of overseas resources development complained. In fact, resources are largely about industries such as coal, iron and other precious metals.

And yet, a diplomat in charge of resource diplomacy was linked to a diamond mine scandal, causing the entire resource diplomacy department to become the target of suspicion, and the official said he felt uncomfortable about the situation.

In fact, resource diplomacy has been criticized for some time, and critics are again raising their voices after the latest scandal. During an audit of the Ministry of Knowledge Economy last year, the Lee Myung-bak administration’s overseas resources development and resource diplomacy departments were severely attacked.

Lawmakers pointed out that only five of the 33 MOUs signed by the Korea Resources Corporation actually became real contracts, and the investment return rate was a low 15 percent. The lawmakers also spoke of suspicions that the powerful members of the administration benefited from the projects.

But experts know that Korea’s performance in overseas resources development is not bad. Industrial resource development is a project that takes a long time to bring to fruition.

About 10 years are needed to complete exploration, development and production. The Pasir coal mine in Indonesia is often called a successful example of Korea’s overseas resources development. For this project, the exploration took place in 1983 and the first production came in 1992.

In addition, an MOU is a document expressing the intention to analyze and explore a mine. When there is no economic feasibility, we must not begin the development.

Even a major resources developer like BHP Billiton actually signs only one or two contracts out of its 10 MOUs. Criticizing the low number of contracts from the MOUs or talking about economic gains from the investments only after a few years is a result of ignorance of the industry.

The Lee administration’s resource diplomacy is a favorite target of critics, but how will we be able to secure resources without it? The global resource development market is split into two.

One is dominated by major companies such as Vale and BHP Billiton, and the other is a market controlled by state governments. Mines operated by commercial companies produce great quality products with low risks.

The niche market, however, is the resources-rich countries in South America and Africa. The development rights of their mines are held by their presidents. No matter how hard working-level officials try, the presidents’ decisions to allow development are the key. That’s why we need resource diplomacy.

It is still undeniable that the resource diplomacy of the Lee administration has long been criticized as “the presidential elder brother’s business.”

The projects were promoted unnecessarily loudly, but there were no immediate outcomes while public servants appeared to have gained profits through the programs. It is no wonder that resource diplomacy cannot be welcomed.

We rely heavily on overseas resources and energy - they comprise 97 percent of our domestic demand. But the raw material market is worsening day by day.

Our future is still about manufacturing products and exporting them. That’s why we must engage in overseas resource development right now, as it will take a decade to see a product.

Any corruption linked to these projects must be laid bare and punished sternly. But diplomacy must not be shaken. We cannot burn the entire house just to kill a bedbug.

*The writer is an editorial writer of the JoongAng Ilbo.

by Yang Sunny