JPRS ID: 9907 KOREAN AFFAIRS REPORT

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• Collection: JPRS
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00850R000400040019-3
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• Original Classification: U
• Document Page Count: 14
• Document Creation Date: November 1, 2016
• Sequence Number: 19
• Content Type: REPORTS

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JPRS L/9907
12 August 1~81
- Korean Aff ai rs Re ort
p
(FOUO 2/81)
~B~$ FOREIGN BROADCAST INFOR~'VrATION SERVICE
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JPRS L/9907
12 August 1981
KOREAN AFFAIRS REPORT
(FOUO 2/sl~
CONT~NTS
SOUTH KOREA
~ ECONOMY
Status of Elite Business Groups Examined
(Maeda Yasuhiro; ECONOMIST4, 10 Jun 81) 1
Prospect for Second Pohang Steelmill Examined
(NIKKEI SANGYO SHIl~UN, 9 Jun 81) 10
- a - [III - ASIA - 109 FOUO)
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S.KOREA/ECONOMY
STATUS OF ELITE BUSINESS GROUPS EXAMINED
Tokyo ECONOMISTO in Japanese 10 Jun 81 pp 48-53
[Article by Maeda Yasuhiro: "The Group of Korean Businessmen That Sustain the
Chon Tu-hwan Regime"]
[Text] The Fifth Republic regime of the ROK was fully launched ~ahen the Min~ong
Party, or Democratic Justice Party, which was foLmded by President~Chon Tu-hwan,
obtained tiie ma~ority vote in the general elections held last March. The Chon
regime, which is regarded as a military regime in substance, has been attempting
to stabilize the political situation by means of such measures as the reopening
of the vational Assembly in April, the carrying out of a large-scale shift in
top-ranking government circles, and the reorganization of the circle of m3.li-
tary leaders. Hawever, the most difficult problem, that of "rebuilding th~
~ ROK economy," which has been completely stagnant, is still left unsolved.
The zaibatsu and industrial circles uf the coun-ry, which had been outside the
range of the sweeping cleansing and purging staged during the past year, are
now facing a sudden storm of changes. Plunging into an unprecedented adverse
environment--increases in deficits in foreign trade and in the stdte budget,
rapid increase in unemployment, wild inflation, and depression in rural villages--

~ economic circles, including large and small businesses, are naw being forced to
improve the organizational quality of their own businesses and to reorganize the
entire business system.
'~he factors emanating from "the pressure from outside," including the Chon Tu-
hwan regime's policy of compulsorily merging major business enterprises and the
reexamination of the excessive protectionist policy of the government that had
been implemented for some time, must not be overlooked, of course. However, it
may be said that these represent an essential proce~s necessary for the rebirth
of "a medium-developed industrial state." Let us review the new setups being
developed in government business enterprises, in the zaib atsu, and in industrial
- circles, centered around the new economic policies of the Chon regime.
The man who seized the position of number one economist in the Chon Tu-hwan
regime is Pak T'ae-chun, chairman of the board of directors of the P'ohang Iron
Works. He was born in 1928 in Pusan, South Yyongsa~,g Province, so he is 53
years old. He was a student in the Engineering De~partment at Wase3a University
when World War II ended. After liberation, he returned to the ROK and entered
the military academy. He was in the same class as former Prime Minister Kim
- G'hong-p'il. He was one of "the Floral Eighth Class Students." When (then)
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Major General Pak Cong-hui staged a military coup d'etat in 1961, he became the
director of the secretariat under Pak Chong-hui, chairman of the Supreme Council
for National Reconstruction. From *_hen on he was very much trusted by President
Pak. He er.tered the economic circles and founded the P'ohang Iron Works, a
government business enterprise. And he developed it as a model business enter-
prise of the ROK according to his very conservatively wholesome r~iethod of manage-
ment.
The iron works completed the construction of the fourth high furnace in February
~ 1981, thereby establi~hing a system capable of producing 8.5 million tons of pig
iron annually. It is nc~r the world's llth largest iron works ~~ith a system of
continuous operation of pig iron and steel making.
rir Pak T'ae-chun emerged as a new leader both in name and in iact Iast February
when he became the first chairman of "the ROK-Japan Association for Economic
Cooperation" established by the ROK side. He took this post because President
Chon asked him to "leave the post of president of the P'ohang works and take the
lead in economic circles."
T'he association is an organization that serves as the center of economic relation~
with Japan. Affiliated in it are: the Greater ROK Chamber of Commerce (chairman,
Chong Su-ch'ang), the National Associ.ation of Economists (chairman, Chong Chu-
yong), the Trade Association (chairwan, Yu Ch'ang-sun), and the Cooperative
- rlssociation of riedium and Small Business Enterprises (chairman, Yu Ki-sun). Its
inaugural convention was attended by approximately 150 managers of major business
enterprises, and it turned out to be an occasion for the announcement of the
splendid debut of Pak T'ae-chun. Pak T`ae-chun, Chong Su-ch'ang, and Yu Ki-sun
are members of the Legislative Council for National Defense; they may be called
the economic representatives of ~he Chor~ regime. The association is expected
to take over the functions of the former ROK-Japan Fconomic Cooperation Committee
and to promote the economic diplomacy toward Japan on a civilian level. It is
indicative of the great importance t1i~ Chon regime attaches to the relationship
with Japan.
Chairuian Pak obtained a seat in the National Assembly in the general ele~tion
last March, where he was ranked in 17th plac~ by the Democratic Justice Party,
the government party, as a designated assembJ.yman under the proportional repre-
ser~tation system. Thus he assumed a strong position of influence in both political
and business circles. "Making the treic to Mr Pak" by personages of Japanese
political and business circles has become evident. President Chon Tu'hwan is
planning to build a second P'ohang Iron Works with Japan's cooperation during
his 7-year term; Mr Pak T'ae-chun has thus become indispensable to him.
In connection with the sudden rise of Mr Pak, attention is being drawn to the
presen.ce of Chairman Chong Chu-yong (65), the leader of "the Hyondae Group,"
_ numUer one zaibatsu in the country. At one time it war speculated that he might
withdraw from a position of leadership in economic circles after being swamped
by the big waves of depression in the chemical heavy industry, the stagnation �
in exports, and the surge in the price of crude oil, but he sti11 ~aintains an
influential position.
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"The Hyondae Group," which encompasses 60 businesa enterprisPS, is under the
management of Mr Chong Chu-yong, the leader, his four brothers, and his sons.
Last April, when [Chong] In-yong (60), former president of the Hyondae Yanghaeng,
was arrested on charges of embezzlement and misappropriations in the conduct of
business, etc, it was gossiped that even "the Chong Kingdom" was getting ready
for a downfall. Tn-yong is a brother o~ Chong Chu-yong.
(Chong] Chu-yong (chairman of Hyondae Construction and Hyondae Heavy Industry);
second brother Sun-yong (president of Hyondae Cement); third brother Se-yong
(president of Hyondae Automobile); fifth brother Sang-yong (president of Kumgang
Slate); former son-in-law Hui-yong (president of the Hyondae Comprehensive Firm);
second son Mong-ku (president of Hyondae Steel Pipe, Hyondae Automobile Service,
and Hyondae Precision Industry); and third son Mong-kun (pres~dent of l:umgang
Development Industry)~-the whole family is thus tightly united in business.
Only In-yong once rebelled against the fainily and established Hyon3ae Yanghaeng
independent from the group, but he returned to the gxoup later. His Hyondae
Yanghaeng went into a slump and he abandoned it, after which its name was changed
to Han'guk Heavy Industry and it became a monopoly producer of electric generating
- equipment; thus the company made a f=esh start and Kim Yong-chun became its
president.
However, "the Hyondae Group" itself did not budge at all. It is holding fast to
its unique capital nationalism, which allows no merger with foreign business
enterprises except for the introduction of technology. The family rule system
has no*_ ch anged either. However, the group recently employed Yang Pong-ung,
executive director of Hyondae Construction, as the president of Han'guk Pavement
Construction Company--a case in which the group has now let a management specialist,
who had been brought in at an early age, take over th~ management of a business
enterprise under its ;jurisdiction; and there have been a number of similar caaes.
Thus, in the future there will be two ma~or business pillars in the group: one,
Hyondae Heavy Industry (shipbuilding; president, Yi Ch'un-nim); and the other,
Hyondae Construction, which earns dollars in construction projects in the Middle
East. And the automobile, cement, and slate businesses will become more and
more independent. Meanwhile, In-yong has been released and has gone ~o Papua,
- New Guinea.
Last April, :~tyondae Heavy Industry wais successful in getting the order for plat-
forms (turretsj in the international tender for procurement of equipment needed
for the project of developing natural gas off the coast of Tokiwa, Japan, beating
out the Japanese forces of Shin. Nittetsu and Nihon Kokan. This was a great
' shock to Japan's industrial circles.
Han'guk Heavy Industry, w~hich was separated from the Hyondae Group, at one time
had four departments: pawer generating equipment, iron manufacturing equipment,
petrochemistry, ~id heavy equipment (construction machines). It has naw aban-
_ doned petrochemistry in an attempt to normalize its busin,ess management.
The ROK is planning to build one or two atomic power plants over a 10-year period
from now. It is expected that Han'guk Heavy Industry will achieve a high growth
as a producer of comprehensive power generating equipment.
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Government's Aim
The major zaibatsu, including "the Hyondae Group," of this country have now
embarked upon the work of reorganizing the systematized business enterprises
"on their own initiative," thanks to the enforcement of the Monopoly Contrcl
Law and the Fair Trade Law enacted by the Chon regime.
The zaibatsu, which spread out their management nets over all industries like
an octopus, were criticized on the grounds th3t they had launched an acute price
contest and thu~ had r~glected to nurture the essential strength to be gained
from launching international competition. Thus, government policies are aimed
at aligning the major enterprises of the zaibatsu through the competition of
qt~:~lity con,trol. Hawever, on the part of the zaibatsu, there may arise a situa-
tion in which some business enterprises wiZ1 have to be contracted to achieve a
balance or be abandoned because of the phenomenal restrictions on the absorption
_ of other enterprises an3 the new establishment of enterprises.
"The Taeu Group," under the leadership of ~;im U-chung, who is only 46 years old,
is trying to tide itself over the current transitional period with the organiza-
tional setup centered around the founding comrades in the group and the alumni
of the group chairman's alma mater (Kyonggi hi~her school).
The four major trunks of the group are the following: Taeu Business, Taeu Ship-
building, Taeu Development (construction), and Taeu Heavy Industry. The year
before last, when U-chung took over the management of Taeu Development in order
- to prop up the field of urban development and strengthened the business of the
firm in order to maintain the title of number 1 exporter, he concurrently took
the post of president of Taeu Business for the secorld time and transferred Yi
Sok-hui, who had been president of the company, to Saehan Automobile. Taeu
Heavy Industry has been placed under Yun Yong-sok (44), executive director of
Taeu Business, and Taeu Shipbuilding under Hong In-ki (44~--t~oth young men.
Tlie Taeu Croup grew up by ~eans of dealings in typical export goods of Korea,
such as textile products and miscellaneous goods; it is a"mixture" of inedium
and small scale business enterprises, and therefore neither a monopoly nor an
oligopoly system would work for it. Its inherent weakness has always been its
- dependence on overseas trends. Thus it is of more and more importance for streng-
_ thening the management basis of the Taeu Group that the automobile industry--an
oligopolical domestic consumption industry--and heavy industry fields be developed
f urth er. .
The rharacteristic~ of the Taeu Group are the "enticing" of employees from other
companies by offering higher pay and thorough implementation of responsible
management in each department of the business. Although the group of founding
comrades occupy the top ranks, the Taeu is surpassing other zaibatsu in opening
its offices to talent from outside. The number of holders of Ph.D. degrees--
"the brains" of the management camp--are as follows: the Taeu, 16; Lucky Group,
10; Samsong Group, 7; and Hyondae Group, 5. Thus the Taeu is proud of its "Taeu
of Personnel."
However, last September, when the Ch`oe Kyu-ha regime was suddenly replaced by
the Chon Tu-hwan regime, the Taeu Group was faced with a delicate situation.
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Chairman Kim U-chung was forced to "give back" 20 billic~n won worth of his personal
property, except for his home, unconditionally to the societ,. Furthermore, in
compliance with the strong policy of unify:~ng *_he automobile and pawer generating
plant businesses into one, it was ordered that the Hyondae Group would be respons-
ible for passenger car production and the Taeu would be responsible for power
generation; and it happened that Mr Kim U-chung was forced to take over the manage-
ment of the above-mentioned Hyondae Yanghaeng, which went into a slump.
Furthermore, the capital participation of the Taeu Group was re~ected; and the
name of the business was changed to Han'guk Heavy Industry, which became a govern-
meiit-awned company operated by government investment. Then the company was fur-
ther downgraded to a company associated with Han'guk Electric Power, and Kim
Yong-chun became its president--a bizar~e and weird transformation drama. Saehan
Automobile under the 3urisdiction of the Taeu Group--which will be described later
--was almost merged with Hyondae Automobile. However, GM of the United States,
which held a SO~percent investment there, "sat upright" and so the original
status was restored after a disagreeable fuss. This myste~ious policy of con-
solidation was taken as the beginning of "zaibatsu crushing" by the Chon Tu-hwan
regime; and industrial circles shuddered in horror.
Car Production Dualized
The Hyonclae and the Taeu are launching a severe contest under the new policy
of dualizing the production of automobiles.
In view of the fact that the Pak regime's policy of nurturing the chemical heavy
industry reached an impasse, last August the Chon regime set forth a bold policy
of unifying the automobile industry into one; and all the zaibatsu were shocked
by that. After much ado, it was decided that among the three passenger car
makers, Kia lndustry, which had a tie-up with Toyo Industry of Japan, would be-
come the exclusive producer of trucks, while, starting last February, Hyondae
Automobile and Saehan Automobile would become the exclusive makers of passenger
automboiles.
The main Hyondae cars are the "Colt," built with a body designed by Italian
designer Jujiaro [phonetic] and with Mitsubishi's "Lancer" [phonetic] engine
installed on it. Saehan Automobile took the lead in developing diesel engines,
competing by producing "Geminis" and "Re~~ords." The Hyondae has the capacity to
~ produce 116,000 cars a year, but last year it produced only 39,700 cars, 16,000
of which were exported to underdeveloped countries. And its operation rate has
dropped to less than 30 percent. Once it had in storage over 100,000 cars, in-
cluding buses. Starting this year, both Hyondae and Saehan have swung into full
operation because of ths increase in domestic demand. In March this year, during
a 1-month period, they sold 3,800 cars (passenger cars).
The Chon regime is planning to have the annual car output reach the 1-million
car level by 1985. It is not going too far to say that the future of the ROK's
econoiuy depends on whether the automoblle industry becomes the cardinal pillar
of these two zaibatsu. While Hyondae Automobile is a purely national type,
Saehan is much different, in that the American GM invested 50 percent of Saehan's
asset. The du~alized production setup is also a result of the tremendous resistance
put up by GM against Hyondae's proposed absorption of Saehan. GM has decided to
produce 1,000 cc class world cars (annual output, 300,000 to 500,000) at Saehan;
implementation of this plan will start in thE second tlalf of 1983.
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Hawever,�the government's patronage over Hyondae's national system is so great
that some observers suspect that Saehan may dwindle away into nothing eventually.
In any case, it is now emerging as such a force that Japan's car makers cannot
afford to ignore it.
h'ithin the Taeu Group, it seems that Taeu Shipbuilding will make rapid progress.
ROK shipbuilding ranked second, next to Japan, in the amount of shipbuilding
- orders received last year. Based on its past business showing, the ROK naw
ranks fourth among shipbuilding countries of the world, with Brazil and the
United States ranking second and third. As of the end of March this year, the
balanc~ of the amount of orders receive@ was 3,009,000 tons; breaking this down
among the enterprises, Taeu Shipbuilding's growth is highest, followed by Samsong
Sti~pbuilding and Taehan Shipbuilding.
The Taeu is hurrying to install a large type crane of the world's largest class
at the Okp'o Shipyard; it will soon be completed. In the field of shipbuilding,
too, Hyondae Heavy Industry, which has the highest business showing in ship-
building in the ROK, may compete with the Taeu in every project th at comes up
there. However, competition to get orders in shipbuilding circles is said to
lead invariably to sacrificing exports, so there may be mutual destruction if the
below-cost business run continues as it is now while technology continues to go
high~r. Shipbuilding in the ROK, however, is limited to the construction of
ship ~odies; as for shipboard high-class precision equipment, the ROK's dependence
on Japan will increase more than ever. Such circumstances, it is said in some
quarters, will stabilize the Japan-ROK perpendicular division of labor system.
Another self-made business group similar to the Hyondae and the Taeu is "the
Samsong Group," whose chairman is Yi Pyong-ch'ol (73). This group is said to be
a typical zaibatsu. However, it is different from the Hyondae and Taeu in that,
except for the top-ranking managers, the fa~mily rule system is not a predominant
feature of this group. For more than 20 years now, it has held on to the policy
of employment based on open employment tests, which are called "kongch'ae." The
management as a whole is the responsib ility of each business enterprise (39 busi-
ness enterprises); it is not necessarily in the hands of blood relatives.
At one time the second son, Ch'ang-hui, and the third son, Kon-hui (42), were
competing with each other to succeed Mr Yi Pyong-ch'ol; but last year, when
Kon-hui took the post of vice chairman, the competition ended. Yi Su-pin (42),
a university classmate of Kon-hui, was hired through the 1965 "kongch'ae," and
heads the management of Cheil Sugar Manufacturing and Cheil Woolen Textile--the
second and third ranking companies of this group.. Yi Pyong-ch'ol's on~e-man
system is now being shifted to a system of the era of second-generation group
management.
The central business enterprise of the Samsong Group is Samsong Products, which
is making a good showing in foreign trade without objection; president Kyong
Chu-hy~n (42) belongs to the 1964 "kongch'ae" group. The Samsong Group is trying
to become the most modernized enterprise; it has in it former high-ranking mili-
tary personnel, capable former government officials who were employed through
influence exerted from above, and those who were brought in at a young age and
promoted gradually.
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~,lso Aimed at Most Advanced Technology
The most rapidly growing among the enterprises of the Samsong Group is Samsong
Electronics (president, Kang Chin-ku), which is en3oying popularity because of
its production of color television sets. In the ROK, Samsong Electronics, Kumsong
Company (president, Ho Chin-ku; the Lucky Group), and Taehan Electric Wire (pres~!-
dent, Ch'oe Hyong-kyu) are called the three home electric companies, and they
are competing fiercely with one another. Since the end of last year, when color
television broadcasting wds started, the sale of color television sets has in-
creased rapidly, and so these three companies have been in full operation.
Color television sets are naw among the strong export goods. However, there has
been no increase in their export, because the United States, the largest market,
has limited its quota for the ROK to an annual total of 505,000 sets. Therefore,
the Kumsong Company decided in March this year to take the initiative and set
up an assembly plant in the state of Alabama. Samsong Electornics, too, decided
to b uild plants in the United States, Spain, Portugal, Brazil, and Denmark; and
Taehan Electric Wire is considering beating a path to Los Angeles in the United
States. Thus they are all burnit~g with a desire to "beat Japan."
The three home electric companies, it seems, are monopolizing the profits resulting
from the buying boom in home consumer goods, including televisi~n sets, electric
fans, refrigerators, washing macY~ines, and air conditioners, as the national
income increases. They represent rapidly growing industries, reminding us of the
1960's and 1970's in Japan. These electronics companies, which are growing on
the basis of the production of television sets, will surely develop into the ~
ultramodern technical industry of semiconductors and computers.
The field of electronics is said to be the one to which the government is ren-
dering the greatest support, while the tendency to form capital is shifting from
government to private initiative. Along with shipbuilding, electronics is draw-
ing attention as a field standing in the way of Japan.
"The Lucky Group," a strong zaibatsu ruled by a single family, has a history as
long as that of the Samsong. Under the leadership of Ku Cha-kyong (64), eldest
son of the founder, [K}s] Cha-hak (50), brother [of G'ha-kyong]--former president
of the Kukche Newspaper Company--is in charge of the group's main enterprise,
th e Lucky (synthetic resins).
And [Ku] Cha-tu (49), second brother [of Ku Cha-kyong]--former president of the
_ Pando business---is president of Sinyong Electric. Ho Chin-ku, president of the
Kumsong Company, and some members of the Ho family are rel~lted to Mr Ku by mar-
riage and occupy a corner of the management camp. One of the group's character-
istics is its policy of employing only personnel of Kyongsang Province origin;
it is displaying a color of zaibatsu that stands in contrast to that of the
Samsong. It may be said that the 53 business enterprises in the group have been
taken over by second-generation descendants of the founder of the group. The
closed attitude and the advanced age [management] of this group stand out in
comparison with the characteristics of other zaibatsu groups.
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Furthermore, "the Kukche Group" (chairman, Yang Chang-mo), "the Tusan Group"
- (chairman, Pak Yong-kon), "the Tonga Group" (chairman, Ch'oe Won-sok), "the
Ssangnyong Group" (chairman, Kim Sok-won), "the Hyosong Group" (chairman, Cho
_ Sok-nae), and "the Hanjin Group" (chair.man, Cho Chung-hun) are trying to expand
their business--both old and new. In particular, the movement of "the Son'gyong
Group" (chairman, Ch'oe Chong-hyon) iG drawing attention: it was a newly emerging
bus iness group in the 1960's, when it grew through exporting textile gooda; in
the 1970's, it made inroads into the fields of electronics, machines, and petro-
chemistry.
The Son'gyong purchas~.d Taehan Petroleum Company from the government at the end
of last year. When Gulf Oil Company, a major American company, withdrew from
the ROK, the Chon Tu-hwan regime directly chose this group for a zaibatsu which
wc~uld buy the shares; thus this group suddenly became a top class zaibatsu and
made a stir. Chairman Ch'oe Chong-hyon of the Son'gyong Group at the same time

, became president of the [Taehan Petroleum] company and is now going to have the
group do its best to promote the company. In fact, the group has control over
the textile industry, which is the ~ain industry of the ROK, and the group's
capability to raise domestic capital has been recognized. The government also
granted the group the right to obtain foreign loans (cash) from Europe. And there
are indication~ that the group is becoming a very large one.
Control over Zaibatsu
The Chon regime has strongly requested that these zaibatsu replace their family
rule system with a modern business enterprise system by means of offering shares
of stock for public subscription and taking busine,s consolidation measures;
it intEnds to wield the "governmental control power" of the military government
and thereby reor~anize the zaibatsu during the next year or two.
It is a common characteristic of the zaib atsu of the ROK that their capability
to raise their own funds is very limited because of the fact that the banks in
the urban areas are all run by the government.
As for the business enterprises in the field of major chemical heavy industry,
their debts are very heavy and the rate of their owned capital is only 10 to 12
percent (as announced by the government in April). For example, in the case of
Samsong Heavy Industry, its owned capital is 3.6 billion won (aplroximately
1 billion yen) and its borrowed capital is 70.4 billion won; thus the rate of
its owned capital is only 4.9 percent. In the case of Hyondae Automobile, 11
percent; H~osong Heavy Industry, 7.3 nercent; and Taeu Heavy Industry, 18.7
percent. Thus they are sti11 far from reaching the standard rate (30 percent)
needed to engage in international competition.
The Chon regime has announced that the Hanil Bank, one of the four urban banks,
will be run privately starting in the month of June and thereby the economy will
be turned over to the management of civilian control. However, it is still not ~
likely that the present system of ruling banks will be abolished; and this is
because the systematization of cert~.in zaibatsu have to be prevented. In other
words, it is likely that the monetary field wi11 be used as a decisive ~eans of
"controlling" the zaibatsu. Thus the toughest task confronting the zaibatsu of
the ROK will be to find how to excel over others by accumulating owned capital
in these circumstances.
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How will the new maaagement camp akillfully deal, without rausing damage to the
enterprises in question, with the task of consolidating or merging 166 companies
among the 631 companies assigned to the 26 zaibat~u? The competence of the new
management camp depends on how it solves this problem.
And mc~st of the economic policies continuously set forth by the government have
been the result of impulsive--due to the military way of thinking--and "lack-of-
principle" action. Economic circles in the ROK are facing peculiar circumstances
in which they cannot afford to move without caution, because it is sti11 hard
to predict the future of the long-term stability of the Chon regime.
But if the government hurriedly launches reforn~s, this may result in "the remedy
being worse than the evil." Still, once any strict order is issued, it must be
implemented thoroughly. Whether this regime succeeds in controlling the zaibatsu
is a matter of life or death to the regime.
As for economic relations with Japan, the ROK-Japan Association for Economic
Cooperation has begun launching its activities with Chairman Pak T'ae-chun as
its axis. It is expected that a link with Japan will be formulated with the
help of the follawing three senior members of business circles: Yi Pyong-ch'ol,
chairman of the Samsong Group; Kim Yong-wan, honorary chairman of the National
Association of Economists; and Kim Yong-son, forroer chairman of the Taehan Chamber
of Commerce (former ambassador to Japan).
And 10 vice chairmen of the association have been appointed, including Kim U-
chung, chairman of the Taeu Group; U Yong-hae, president ~f the Ssangnyong Com-
pany (former minister to Japan); Chong Se-yong, president of Hyondae Automobile
Company; and Cho Chung-hun, president of the Korean Airlines Company. Meanwhile,
the "ROK-Japan Civilian Joint Economic Co~ni.ttee" will hold a 3-day meeting in
Seoul starting on 10 June which will serve as the initial act-in-line step of
the personages of ROK economic circles, the first since the inauguration of the
Chon Tu-hwan system.
A group of more than 60 leaders of Japanese bt:siness circles, whict~. will be
headed by Hidaka Teru, chairman of the Japan-ROK Economic Association (adviser
to the Yamaich i Choken), is scheduled to attend the meeting. Interest is beir~g
aroused around haw Korean economic personages will deal with the Japanese leaders
in order to establish Japanese economic cooperation with the ROK.
COPYRIGHT: Mainichi Shimbunsha 1981.
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S. KOREA/ECONOMY
PROSPECT FOR SECOND POHANG STEELMTLL EXAMTNED
Tokyo NIKKEI SAP;GYO SHTMBUN in Japanese 9 Jun 81 p 3
(Article by Staff Reporter Onda: "The Second Pohang Plan in Standstill"]
[Textl When South Korea starts work on the second comprehensive iron manu-
facturing construction project, the so called "Second Pohang," is a matter of
great concern for Japan's steel and plant industries; but now opposing views
within the government have surfaced---such as the Economic Planning Board
proposing to the Ministry of Commerce and Industry a substantial postponement
- of the construction schedule, giving the problem of financial resources as
_ the reason. It is forecast that noYa the plan will take time to solidify.
Concerning the Second Pohang Construction, Korea made the proposal, "When
the construction plan is concrete, please give us both your financial and
technological cooperation" to Yoshihiro Inayama, chairman of Keidanren (Fed-
eration of Economic Organizations) who attended the lighting ceremony of the
number four blast furnace at the Pohand Steelmill in February of this year.
As might be expected from such a large scale construction of making an iron
mill from start to finxsh with a total capacity of 12 million tons, which
in the orig.i:nal plan would cost 1.8 billion dollars and for which construc-
tion would start in February 1982 and continue until 1991 and four 3 million
ton blast furnaces would be built, major business f~rms and plant manufactur-
ers were starting to move toward information gathering in order to sell
_ equipment starting this spring, thinking "it is f~nally definite." Meanwhile,
since the Korean steel industry is already strong and is becoming a"threat"
to Japan, the comment, "There is the worry of a boomerang effect. We should
be more cautious about cooperation," is being heard among steel company lead-
ers. There has been no formal request for cooperation, and the plan prepara-
tions are being studied wi.th a complex �rame of mind, and subtle differences
of opinion are beginning to appear, depending on the manufacturer.
With regard to the construction sites, at present the original proposed sites
were narrowed down to two locattons, Asan Bay and South Cholla Province, and a
French manufacturer commissioned by the government is in the midst of investi-
gating those sites. W~.th the ~nvestigation co~~ng to a conclus~on ~.n July,
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~ FOR QFFICIAL USG ONLY
it seezns cert~in thaC th~ Kpre~n ~ovexnlqent wi~,1, ~,ncprpor~te the Second Pohang
Plan as a pill.ar of the about-to-be~decided fi.~tfi economic and social develop-
ment five year plan (.1982.-19$6), and the opinion was widespxead that a descrip-
tion and a request fur ~ooperation on construction wi11 be forthcoming from
Korea at the Japan-Korean non--governmental ~o~nt economic committee con~erence
to be held tc Seoul as early as the lOtii.
Expressly, Pohang's "first iron manufacturing," equipped for an 8.5 million
ton set-up, will be in full operation this August, and it seems that a boom-
erang effect is about t~ appear in concrete form, That is why the steel in-
dustry's nerves were on edge at the movement toward coneretizing the Second
Pohang Plan. But lately it is said that because of financial problems the
Economic Planning Board proposed to the Min~stry of Commerce and Tndustry,
"what about starting construction after 19�7." What is being considered at
present is to increase the present capacity of Pohang from 8.5 million tons
to ~.6 million tons, not build the second iron mill next year, and see how
events turn ov.t.
Regarding this, the Ministry of Commerce and Industry, as well as those close-
ly connected to Pohang, who ar.e the nucleus of the enterprise, are insisting
construction start in 1982 as originally planned, stating: 1. the balance of
suppl.y and demand will collapse if construction is delayed, and the influence
on the total industry will be great; and 2. Pohang's production cost is 300
dollars per ton, but if there is a delay, the construction cost will be higher
and an i;~ternational competitive power cannot be held onto. However, it seems
that the f inancial problems are rather serious, and it seems that a compromise
~or postponement until 1984 or 1985, not 1987, is being examined.
COPYRIGHT: Nihon Keizai Shimbunsha 1981
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