Just a matter of survivalIt’s all doom and gloom in the overseas resource development industry that once flourished under the blessing of outgoing President Lee Myung-bak. One industry source complained that it feels like being sent to the orphanage after a new woman of the house walks in. The sense of anxiety and insecurity grows as the new Park Geun-hye administration prepares to move in. Lee and Park are poles apart in their sentiment toward overseas resource development.
Lee had been conspicuously attentive to the so-called resource diplomacy, looking outward to secure cheaper and sustainable natural resources to promote growth for the country that primarily relies on imports to produce industrialized exports. He paid special attention and energy to the field by sending experts and envoys to tap and develop new resource pipelines for the country. As a result, the country’s self-supply ratio in oil, gas and mineral resources rose by 10 percentage points from five years ago. It is one of Lee’s biggest sources of pride during his term.
In her platform booklet, Park merely mentions promoting nuclear and renewable energy, but nothing on overseas resources. The transition team includes no one who is experienced in resource and energy development. The National Assembly further slashed spending in overseas resource development by another 130 billion won ($123 million) in approving this year’s budget bill. The cut came mostly in subsidies for investment and financing loans.
The heyday for the industry began to conspicuously fade from last year. Despite ample opportunities for merger and acquisitions with many well-known resource corporate names up for grabs in the market due to problems in Europe, Korean companies were involved in just eight mergers and acquisitions worth more than 10 billion won. In 2011, Korean companies made 14 purchases of a similar scale. Arrest of the president’s brother Lee Sang-deuk, who played a key role in arranging a diamond mining project in Cameroon and other resource deals, also served as a heavy blow.
An official of the Ministry of Knowledge Economy said the government will largely focus on ensuring the success of existing projects and maximizing results through restructuring, indicating the new administration will concentrate on managing current businesses instead of searching and investing anew. State enterprises that led overseas projects are under restructuring. The new government will be cleaning up messy deals to reduce the risks and costs.
But it’s China that causes anxiety. The country maintains an insatiable appetite for overseas natural resources, recently taking over Calgary-based major oil player Nexen Energy. There are many more resource companies on the chopping block. But how are we different from China?
The industry points to high-profile politicians and government officials as their enemy. Government-level support and diplomacy is inevitable in major resource deals due to their unpredictable and sensitive nature as natural resources are mostly state entities and involve a sovereignty issue. China’s bureaucratic hands to secure overseas resources are heavy. Yet they move discreetly. The Korean industry has also been eying Nexen for a long time. But the Chinese media has been mum for over a year while negotiations for the largest-ever Chinese resource acquisition were under progress. The Beijing officials kept silent while aggressively shopping and vying for resource supplies.
Our politicians and statesmen were hardly discreet. The Prime Minister’s Office, the Ministry of Foreign Affairs and Trade and the Ministry of Knowledge Economy as well as the eldest brother of the president vied among themselves to land deals and impress a president who had a soft spot for overseas resources. They were busy making names for themselves and touting their role despite confidentiality of negotiations and often putting the deals in jeopardy. Their clamor led to controversy and scandal, raising public suspicions about overseas resource projects.
Energy prices have been stabilized due to increased supplies from American shale gas fields. Industry sources say the time is best for purchase rather than exploitation or development of resource fields. This is a country that relies on imports for 96 percent of its resources. They are connected to our viability. However, resource policy should not be influenced by market or political factors.
Our future growth depends on overseas resources. Solutions to an innovative economy, small business promotion, jobs and industrial growth all can be found in resource development. If Park’s new staff exercises discretion on top of passion, our resource policy may produce practical and sustainable results. Again, resources are issues involving our viability not politics.
*The author is an editorial writer of the JoongAng Ilbo.
by Yang Sunny