Ministry criticized for differing reports on resources projects

As the ruling and main opposition parties continue to wrangle over the scope of an ongoing parliamentary investigation into Korea’s overseas resources development, the Ministry of Trade, Energy and Industry has come under fire for its indeterminate stance on a signature project carried out by the Lee Myung-bak administration.

Criticism against the Energy Ministry has mounted since it submitted differing reports to the ruling Saenuri Party and the main opposition New Politics Alliance for Democracy (NPAD) in the lead-up to the inquiry.

The reports, which were submitted separately, detailed spending by former governments in securing resources overseas and the rates of return for those projects.

But the center of the controversy lies in their profit estimates: The report handed to the ruling party provided a more favorable outlook for the Lee administration’s initiative, with a recovery rate of 114 percent. The other to the NPAD cited a much lower rate of return at 13.2 percent.

In its paper to the opposition, the Energy Ministry presented a damning assessment of the Lee government’s resource development initiative, stating that only $4.9 billion had been recovered of the $37 billion poured into those projects, which accounted for the low recovery rate.

The figure, 13.2 percent, is markedly low when compared to the recovery rate of the preceding Roo Moo-hyun government at 72.8 percent, as well as the average 51.9 percent recovery rate.

In the NPAD’s report, the ministry said $5.7 billion had been recovered of the $7.8 billion worth of resource development deals signed by the former Roh government, putting the recovery rate at 72.8 percent.

On merger deals with foreign resource developers clinched by Korea National Oil Corporation (KNOC) from the start of Lee’s term in 2008 - which the NPAD has criticized for having been made without due diligence and called failed investments - the language used by the ministry appeared to place particular blame on the former president, now 74.

It also said that KNOC pursued the business expansion because the Lee government prioritized the purchase of oil refinery companies in its resource diplomacy initiative.

With those figures in hand, the NPAD has been awaiting the opportunity to ruthlessly question former officials in the Lee government over what the party has described as a series of mismanaged projects that resulted in the loss of more than 35 trillion won ($32.3 billion) in tax money.

However, the ministry’s report submitted to the ruling party painted a starkly different picture of the resource deals.

In it, the ministry contends that the resource projects carried out by Lee so far have had a recovery rate of 114 percent.

On the wide gap, a ministry official told the JoongAng Ilbo that the ministry took into account profits that were forecast to be generated from the $37 billion initiative later on, calling the calculation a “total retrieval rate.”

Still, the official admitted that it was “not an official statistic,” as it reflects future earnings as a way to better understand the soundness of the investment projects.

BY CHUNG JONG-MOON, KANG JIN-KYU [jkkang2@joongang.co.kr ]