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  Korea Report - June 2007
  Author : Hwang & Co     Date : 07-07-10 13:59     Hit : 45563    
Topics.
-Lawmakers quit ruling Uri Party, leaving the party minority.
-Korea and USA renegotiate FTA to sign the new one on June 30.
-Government plans to change non-regular employees to regular.
-Korea sampled gas hydrate in East Sea.
-US Parliamentary Committee passed a resolution on sexual slavery in Japanese Army in WWII.
-Korea¡¯s male oriented family system meets change.
-NK took the frozen money in Macau and the procedure of denuclearization starts.
-The relocation of US military bases targets 2012.
-Korean Navy launched first Aegis combat ships.
-Korea exports record $32.3 bil in June.
-Lone Star Fund take the steps to exit Korea.
-Chairman of Hanhwa Group indicted.
-KOSPI broke 1800 in 18 day after surpassing 1700.
-Korea¡¯s Big 3 shipyards received order exceeding $8 bil individually in first half.
-Korean yard are busy to collect order for caprsize bulkers.
-KLC is to expand its caper fleet to 50.

GOVERNMENT AND SOCIETY

President Roh Moo-hyun opened fire on the opposition Grand National Party and its presidential hopefuls, in a speech at the forum of Roh's supporters, saying that the thought of the GNP winning in the Dec presidential election makes him shudder in horror, in an apparent attempt to turn the tide against the popular GNP ahead of the presidential race. The presidential race has been dominated by 2 leading GNP presidential hopefuls, former Seoul Mayor Lee Myung-bak and former GNP Chairwoman Park Geun-hye. He criticized Lee's pledge to build a network of cross-national waterways with which Lee hopes to revive the economy and denounced Park lacks legitimacy since she was the daughter of a former dictator.
The GNP filed a complaint with the nation's election watchdog, accusing Roh of allegedly breaching the law. The National Election Commission ruled that the president violated Article 9 of the law, for public officers to keep neutrality in election, saying that the president failed to uphold the law with his speeches and interview with a newspaper, noted that the president was in violation a second time following its earlier ruling after the president criticized the GNP and its presidential hopefuls in a speech to his supporters. The GNP urged the president to wholeheartedly accept and acquiesce to the decision, and also criticized the watchdog agency for failing to issue a harsher penalty against the president.
President Roh filed a constitutional petition against the National Election Commission's verdicts concluding he failed to keep political neutrality, emphasizing that the president filed the petition as an individual citizen in order to uphold proper procedures, because, if Roh files as president, the chances are that the Constitutional Court would dismiss the petition based on precedents.

A former top aide to President Roh, former Uri Party Chairman and 16 lawmakers quit the Uri Party, appealing for broader unity among liberal politicians. Their departure left the Uri Party with 73 seats in the 299-member National Assembly, less than half of the 151 it gained in a landslide election victory in 2004. They are likely to join forces with civic leaders before merging with a party to be launched by the Democratic Party and 21 independents who defected from Uri earlier. The nation's liberal forces are split into several groups, such as the Uri Party, its splinter groups, the DP and civic groups. The groups' alliance drive picked up pace recently with the Dec vote drawing near.
The Democratic Party and a splinter group from the Uri Party agreed to merge into a new party, tentatively named the Centrist United Democratic Party, combining the Uri splinter group's 21 seats and the DP's 13 seats, becoming third largest bloc in National Assembly, following GNP with 128 seats and the Uri party of 73. The CUDP and another group of liberals will be expected to engage in an intensified tug-of-war to gain clout in an envisioned alliance. The GNP and its two presidential hopefuls, Lee and Park command sweeping approval ratings amid public discontent with President Roh, who founded the Uri Party.
 
Korea and USA had another signing ceremony to conclude their revised free trade agreement on June 30 in Washington DC. Korea has accepted the US request to modify parts of their bilateral FTA, concluded in early April after 10 months of tough negotiations, to reflect recent US policy changes that call for stricter labor and environmental standards, along with modifications in the areas of pharmaceuticals, intellectual property rights, government investment, procurement and port safety, as the FTA may not be endorsed by the US Congress, if the amendments are not reflected.
Fast track authority, which dates back to the Ford administration in 1975, gives the president the right to negotiate trade agreements that Congress can accept or reject, but cannot amend. Negotiations with Peru and Columbia are finished, USA and Panama signed a deal on June 28, and the FTA with SKorea was signed on June 30, just before Bush¡¯s authority expires.
The US House speaker and other leading Democrats criticized the deal for failing to address trade barriers, particularly in the auto sector. Sen. Hilary Clinton was the third Democrat to announce the opposition to the Korea-US FTA, following John Edwards and Barak Obama. The Korean Metal Workers Federation, a radical affiliate of KCTU, made a strike against the FTA on June 25-29.
SKorean and US business leaders agreed to cooperate to have their countries bilateral FTA ratified this year, calling the proposed deal important not just for 2 nations but for all of Northeast Asia.
US President George W Bush pledged to work with Congress to include Korea in the visa waiver program. The program currently covers 27 nations, but no country has been added to the list since 1999 due to the intensifying US war on terrorism.
 
Korean farmers' incomes are forecasted to drop by more than half by 2030 because of FTA and the Doha Development round of world trade talks. The farming industry's total income which averaged KW15 tril ($16.2 bil) in 2005 could decline to KW11.5 tril by 2010, and fall further to KW6.9 tril by 2030. The government will provide cash subsidies to cover up to 85% of income losses by local agricultural and fisheries industries following the FTA with USA. The government plans to subsidize the loss of farmers and provide cash incentives to corporations that hire workers from agricultural and fisheries businesses, to minimize negative impacts in the industries from the FTA.
 
The government plans to grant full-time status to about 70,000 nonregular employees in the public sector, a third of the total nonregular workers hired by the central and local governments, hopefully encouraging the private sector to follow suit to provide better protection of temporary and short-term contract workers suffering from job instability and discrimination in salary, promotion and other benefits. Employees who have worked for more than 2 years will be eligible for the change.
 
Korean engineers have found chunks of gas hydrate in the East Sea 100 km south of Ulleung Island and successfully separated gas from them, possibly giving the resources-scarce country a new source of energy. The deposit in SKorea's East Sea, estimated at 600 million tons, can meet SKorea's natural gas needs for roughly 30 years. The gas hydrate extracted from the East Sea proved to be of top quality, comparable to 99% methane gas. Only USA, Japan, India and China have reported finding such deep-sea gas pools. SKorea has earmarked KW225.7 bil in a 3-stage gas hydrate project that runs from 2005 to 2014.

The US House of Representatives Foreign Affairs Committee, by an overwhelming 39 votes to 2, passed the resolution calling on Japan to apologize unambiguously for forcing Asian women into sexual slavery serving the Imperial Army. Japan had desperately lobbied against the bill, an effort that culminated in a full-page ad in the Washington Post that denied that the Japanese government coerced women to serve in military-run brothels before and during WWII. The ad, signed by 44 Japanese legislators, alleged that the US occupation forces had asked the Japanese to operate brothels to prevent rape. The claim has only infuriated Americans, including Vice President Dick Cheney who has ordered an investigation into the matter. About 200,000 women and girls from Korea, China, Indonesia, the Philippines and Taiwan were forced to serve as sex slaves in Japanese army brothels. Japan has never assumed responsibility for the egregious human rights violation.
A group of Japanese ruling party law-makers denounced the Nanjing Massacre as a fabrication, contesting Chinese claims that Japanese soldiers killed hundreds of thousands after seizing Chinese city in 1937. They accused Beijing of using the alleged incident as a ¡°political advertisement.¡±
 
Korea's male-oriented family system will meet significant changes beginning Jan 1 next year. The Supreme Court disclosed the finalized details of the new registration law, under which each family member will be separated from hoju, the head of the family and usually the father, through an individual register book. Children will no longer be obliged to go by the father's surname and can follow the mother's. The status of each family member is defined in terms of his or her relationship to the hoju. When a husband dies, he is usually succeeded by his first son. When a daughter gets married, she is removed from her father's hojeok, family register, and transferred to her husband's. The new registration system will allow offspring to use the name of the mother by agreement. It also will enable a child to change his or her surname in accordance with the stepfather with permission.
 
The Constitutional Court ruled that current laws denying voting rights to overseas Korean nationals are incompatible with the Constitution, making the landmark ruling against the laws on elections and referendums that permit voting to citizens who resister residency at home at the time of elections. But the existing laws would be effective until Dec 31, 2008, avoiding the possible legal confusion ahead of the presidential election in Dec and parliamentary votes next year.
A SKorean dry cleaner sued for $54 mil over a missing pair of pants won a favorable ruling by the court who said its owners do not have to pay anything to the plaintiff. He would also be awarded the cost of the legal actions, in a case that dragged on for 2 years. The case drew added attention because the plaintiff, Roy Pearson, was an administrative law judge.

SKorea has been classified as a bird flu risk-free country by the world animal health agency. The announcement by the World Organization for Animal Health comes after no bird flu outbreaks were reported in the last 3 months. The announcement by OIE opens the door for Seoul to ask foreign countries to lift their current import bans on SKorean poultry.
 
SKorean female golfer Pak Se-ri, 29-year-old, accedes to the World Golf Hall of Fame, after her finishing the first round of McDonalds LPGA tour and submitting the score card at the Championship. The Championship is one of the 4 major LPGA tours. Pak already fulfilled the necessary points in 2004, just shy of the qualifications of finishing 10 seasons.
SKorean Golfer Choi Kyoung-ju, 37-year-old, finished with a four-round total of 17-under 271 in the Memorial tournament, during May 31-June 2, to capture his fifth career PGA Tour victory. Former amateur champion Ryan Moore was second at 16-under 272. Choi, who started the final round 5 strokes behind the leader, managed one-putting the final 3 holes. Last Dec, Choi won the Chrysler Championship title.
Korean ballet dancers surprised the world's ballet circles by winning 6 prizes at the 2007 New York International Ballet Competition, biannually held at the prestigious Lincoln Center for Performing Arts. Ha Eun-ji received a gold medal in the women's division while Kim Na-eun won a silver medal, and Shin Seung-won got a bronze. In Feb, 2 Korean teenage ballerinas, Park Sae-eun and Kim Chae-lee won top prizes at the 2007 Prix de Lausanne held in Switzerland. Kim Joo-won received the top prize last year in the women's division of the 14th annual Benois de la Danse, widely known as the "Academy Awards of the Dance." Male ballet dancers also showed off their talents at the New York Competition. Park Gwi-sup won a bronze medal in the men's division with Lee Young-do and Jung Young-jae grabbing the Lefkowitz Award for Artistic Achievement.

NORTH KOREA AND NATIONAL DEFENSE

NK refused to proceed with 6 way talks until the funds, frozen in Macau¡¯s Banco Delta Asia, were returned. US Treasury Secretary Henry Paulson defended the release of $25 mil in allegedly laundered funds to NK. US Treasury helped orchestrate a transfer of the money to a bank in Russia, where NK had a dormant account. Moscow reportedly granted a US request for a private Russian bank to accept purportedly illicit NKorean funds frozen in Banco Delta Asia before they are moved to Pyongyang.
NK has, at last, withdrawn some of its funds from a Macau bank. Representatives for 2 NKorean trading houses reportedly to take, out in cash, part of $25 mil from the BDA, and the remaining funds, originally deposited in a variety of currencies, had been converted into single account in USDollar. NK at last announced that the disputed funds, ¡°have finally been transferred according to our demand.¡±
Top US negotiator to the six-party talks Christopher Hill visited NK upon NK's invitation, signaling a thaw in relations between 2 countries as denuclearization efforts reach a new level. Hill was expected to deliver Bush's message reconfirming the pledge to implement the Feb 13 agreement and the eventual denuclearization and the corresponding incentives including normalization of ties with Washington and removal from the US list of terrorist-sponsoring states.
NK invited UN nuclear inspectors in the first concrete sign of a breakthrough in a stalemate over its nuclear program, as the problem of frozen NKorean funds was resolved. The North sent a letter to the International Atomic Energy Agency, inviting inspectors to discuss procedures for the IAEA's verification and monitoring of the Yongbyon reactor's shutdown.
The SKorean government has decided to start the shipment of 400,000 tons of rice to NK, following NK's moves to call in IAEA inspectors and shut down its Yongbyon nuclear facilities. Rice and fertilizer aid to the impoverished state have been on hold since NK's missile tests and nuclear test last summer. In all, the rice aid promised for this year will cost approximately KW164.9 bil ($178 mil). NK will be required to report the details of its distribution within 15 days of receiving the rice and allow SKorean officials to make on-sight inspections to ensure transparency.

The planned relocation of US military bases to Pyeongtaek, 70 kilometers south of Seoul, is expected to be completed by Nov 2012. The Program Management Consortium is assigned to be responsible for the design and construction of new US military facilities in Pyeongtaek, starting from Sept. Seoul and Washington had agreed to decide on a concrete date for the completion of base construction in accordance with PMC's investigations. In 2004, 2 countries agreed to consolidate 42 US military installations scattered across the peninsula into 2 hub bases in the Pyeongtaek and Daegu regions. Under the plan, the US Yongsan Garrison in downtown Seoul, and the 2nd Infantry Division, north of Seoul, was scheduled to move into US Camp Humphreys in Pyeongtaek by 2008, tripling of the size of the camp. But the plan has been delayed due to protests from local residents and anti-US civic activists.
 
Korea and USA agreed to set up a new joint military structure by 2009 as part of preparations for the planned transfer of wartime operational control of Korean armed forces from Washington to Seoul. The road map was signed for the Strategic Implementation Plan, aiming to complete by late 2009 new joint command structures which would see Seoul play a leading role in case of war on the Korean Peninsula. The allies will establish a new joint military coordination system by 2009 to replace the current Korea-US Combined Forces Command. Under the Alliance Military Coordination Center (AMCC) system, ground and naval forces operations will be led by the Korean military, while USA will provide aerial-centric support to the Korean troops. If hostilities break out, USA would deploy up to 690,000 troops, 160 vessels and 2,000 aircraft to the peninsula, in addition to the current troops, which number about 29,000, to remove the regime of NK and defeat its 1.17 million member military.
USA asked SKorea to extend the stationing of its troops in Afghanistan as the scheduled withdrawal of the troops nears. SKorean troops, consisting of about 60 medics unit and 150 engineers, have been operating in Afghanistan since 2002 to assist the US-led coalition forces to reconstruct the war-torn country. Seoul plans to lay out a timetable soon for the withdrawal of the 1,200-strong Zaytun division stationed in the northern Iraqi city of Irbil.

The US Forces Korea are struggling to clean up their tainted image as they hand over land and facilities to Koreans as part of their global realignment. Critics argue that the USFK returned the decades-old bases without appropriate decontamination measures, especially regarding soil and underground water, thereby passing a huge financial burden to taxpayers here.
The Korean government is also under criticism for hastily accepting the transfer of 23 bases without evaluating their environmental conditions. The Defense Ministry launched 2 new battalions of environment purification units, comprising of 262 engineering and supporting soldiers, and operating 2 environmental purification companies. The most of 23 bases are seriously contaminated. USFK claimed it handed over the bases after its own decontamination measures, but inspections of 3 US military bases recently returned to Korea found an overpowering smell of oil when an excavator dug 3 meters into the soil about 20 meters away from an oil tank and a 20-cm-thick band of oil in a sampling from underground.
The Korean Environment Ministry estimates it will cost up to KW500 bil ($540 mil) to clean up the 66 US bases. USA complains that Korea is demanding too high an environmental standard.
 
NK supporters in Japan have sold after years of financial troubles amid tension between the countries. The Tokyo District Court ordered The General Association of pro NK Residents in Japan, to repay JY62.7 bil (about $780 mil) to a Japanese official debt-collection agency and allowed the agency to seize the premises housing Chongryon headquarters, the 10-storey central headquarters with an estimated value of JY2 bil ($164.3 mil). Chongryon, which has served as NK's virtual embassy in Japan in the absence of diplomatic relations between Tokyo and Pyongyang, has funneled funds to the North collected from Korean firms and individuals affiliated with it. Since Tokyo Governor lifted tax exemption on Chongryon facilities, other autonomous bodies have followed suit, causing deeper financial woes to the organization. The impending seizure of the Chongryon headquarters in Tokyo will hasten the decline of the pro NK organization. Japanese media reported that 9 of 29 major Chongryon facilities across the country have already seized by the Resolution and Collection Corp. The Chongryon confirmed not to appeal a ruling that it had to pay debts totaling JY62.7 bil ($508 mil).

Korean Navy launched its first destroyer equipped with the Aegis combat system, which links radar and weapons systems to simultaneously detect, track and engage hundreds of aircraft and missiles. With the 7,650-ton warship, Korea became the world's fifth nation to operate Aegis destroyers, after USA, Japan, Spain and Norway. The destroyer is the first ship out of 3 vessels developed under a naval force improvement program by 2012.
Korean Navy launched their newest 1,800-ton-class attack submarine, which is the second of 9 vessels of the same class to be built by 2018. The new submarine will be delivered around Nov 2008. It was developed by HHI in partnership with German¡¯s Howaldtswerke-Deutsche Werft GmbH. Korea has ordered 3 submarines, to be deployed by 2009 under the first phase of the program. For the second phase, the Navy plans to build another 6 units that will enter service by 2020. Currently, Korea has 9 German Type submarines (1,200 tons) and a smaller submarine.
Korea is to purchase nearly $1 bil worth of weapons from USA in the fiscal year 2007, which ends Sept. SKorea will likely have purchased a total of $955 mil worth of weapons through the foreign military sales (FMS) program.

ECONOMY AND POLICY

IMF predicted Korea's economic growth will pick up "modestly" to 4.4% this year, driven by rising exports and a rebound in domestic demand, overcoming threats such as rising oil prices, global financial market volatility and the risks from a US slowdown. Goldmansax raised its forecast on Korea¡¯s GDP growth to 4.8% this year from its previous 4.0%, citing bigger-than-expected increase of industrial production and exports.
 
Korean exports grew 15.9% in June on year to reach a record $32.3 bil, supported by strong overseas demand for autos, ships and LCD panels. Import expanded 9.3% to $28 bil to create a trade surplus of $3.9 bil. The exchange rate of KWon against 100 JYen reached 760, the lowest in nine and half years. It has been dropped about 30% in two and half years, deteriorating the competitiveness of exporters, especially small and medium firms, and increasing trade deficit to $30 bil from $25.4 bil in 2006.
Korea's current account swung to a surplus $924.7 mil in May on the back of brisk exports, a turnaround from a revised deficit of $2.1 bil in April. It was the first surplus in 3 months. Overseas investment gained 5.9% in the first quarter of the year on quarter, reaching $475.8 bil up $26.5 bil from the end of last year, mainly due to increased holdings of foreign stocks and bonds.
BOK's consumer confidence index increased to 108 in the second quarter from 103 in the first quarter, as the latest sign that economic growth may be gathering pace.
 
US based investment fund Lone Star continues its efforts to sell a controlling stake in Korea Exchange Bank, Korea's fifth-largest lender. In 2003, the US equity fund bought a 50.5% stake in KEB for KW1.4 tril (US$1.5 bil), and signed an agreement in May last year to sell its increased 64.62% to Kookmin Bank, but withdrew from a $7.3 bil deal in Nov amid the legal dispute. Lone Star is locked in a court battle with Korean prosecutors over the legality of its acquisition of KEB in 2003. Some claim that the US fund may be ineligible under Korean law to own a majority stake in a local bank.
Lone Star Funds appears to be taking steps to exit Korea. Including the KW419.2 bil ($420 mil) dividend lone Star received from KEB last year, and $1.28 bil generated from the block sale of 13.6% stake in KEB, it has recovered more than its initial investment of $1.2 bil made in 2003. Lone Star Fund announced the sales of its 2 other Korean holdings in Kukdong Construction, a small-sized builder, and StarLease, a leasing firm. It sold its 98% stake in Kukdong for KW660 bil to Woonjin Holdings and 94.9% stake in StarLease to Hyosung Group at a price of KW302.3 bil. Lone Star bought Kukdong at KW170 bil in 2003 and the leasing firm at KW150 bil in 2002.
In 2005, the National Tax Service slapped KW140 bil on Lone Star's gains when it had sold Star Tower through Belgium-based Star Holdings, the NTS concluded that Star Holdings is a "paper company" and applied the tax agreement with USA instead. But it seems not to be easy this time to levy the taxes on the sale of KEB, Kukdong, and STARLease, due to a dual tax agreement between Seoul and Brussels. Lone Star sold off its shares through its Belgian subsidiaries LSF-KEB Holdings, KC Holdings and HL Holdings.
 
Korean banks are increasingly relying on foreign debt to meet their capital needs, and the ratio of Banks' outstanding short-term foreign debt balance to the nation's foreign currency reserves has exceeded 50%. The short-term foreign debt balance reached $129.75 bil as of the end of March, about 53.2% of the foreign currency reserve balance of $243.92 bil. Just before the Asian financial crisis, in Sept 1997, the ratio neared 264.5%, then by the end of 1997 it peaked at 312.5%.
 
Local insurers opposed the broadening of bancassurance operations to whole life and auto insurance. They asked the government to call off the expansion plans, arguing that the whole life and auto insurance policies "are not suitable for sales through bancassurance channels" and if banks were allowed to sell the products, countless layoffs will be inevitable. Insurers warned to file an official petition with the National Assembly, demanding a stop to bancassurance operation expansion plans proposed by the central government.
 
Korea Electric Power Corp, the supplier of almost all the power in Korea, is leading the group to talks to buy 10% of a coal mine in Australia, paying $100 mil to Australia's Felix Resources Ltd for the Moolarben mine in New South Wales. KEPCO imported 51.3 million tons of coal last year, a third of which came from Australia. KEPCO is also in talks to buy 10% stakes in Anvil Hill and Tarobora mines in Australia.
Daewoo International, which leads the consortium with Korea Mining Corp, Kyeongnam Enterprise and STX, decided to invest $54.5 mil to Ambatobi Nickel Mines in Madagascar, which is expected to reserve 125 mil tons. They expect to produce 60,000 tons of nickel and 5,600 tons of cobalt a year for 7 years from 2010.

 CHAEBOL

The Fair Trade Commission will seek the revision of related laws to facilitate the conversion of business conglomerates into holding companies, whose structure represents a better alternative to the circular shareholding structure currently prevalent among local chaebols. The FTC considers several changes including the extension of the period to meet legal requirements of becoming a holding company and providing increased tax benefits to holding companies with regard to the dividend payments from subsidiaries.
 
Global shipments of liquid crystal displays hit a record high in May. The global LCD shipments reached 33.1 million units, up 11.1% on month and 58% on year. Taiwan topped LCD shipments, having 46% of the market share. Korea posted just 3% behind Taiwan. By manufacturers, LGPhilips LCD ranked first with 21.3% of market share in terms of shipments, followed by Samsung Electronics (SEC) with 21.1% and Taiwan's AU Optronics with 20%. In terms of revenue, SEC held the top position with 24.1%, followed by LG.Philips LCD with 21.6% and AU Optronics with 18.9%.
 
Samsung Group has achieved tremendous growth with the total revenue reaching KW141 tril ($122 bil) last year, more than 3 times higher than the KW41 tril recorded in 1993. During the same period, the group's market capitalization grew 18 fold, from KW7.6 tril to KW140 tril, and export volume expanded 6 times to $66.3 bil.
In April 2005, Samsung became the official club sponsor of the Chelsea Football Club. The $100 mil, five-year contract, is the biggest ever sponsorship deal signed by Chelsea and the second largest by Samsung after its sponsorship of the Torino Olympics.
SEC, the flagship company of the Samsung Group, is the world's largest maker of many semiconductor products, the world's largest LCD manufacturer, and the third-largest mobile phone maker. SEC plans still to expand its global market-leading products from the current 8 to 20 so it can become one of the world's top 3 electronics makers by 2010. To meet the goal, SEC announced 8 products that it will foster as its new growth engines, memory chips, non-memory chips, HDD, LCD, digital TV sets, printers, air-control systems and next-generation mobile communications services.
SEC is to invest $6.74 bil in plants and equipment this year, down 2% on year. Despite the drop, SEC is still the leading investor in the global semiconductor sector. Intel Corp came second on the list with $5.5 bil, down 5%. Hynix Semiconductor increased their investment 4% on year to $4.73 bil this year, remaining third on the list.
Motorola may lose its status as the world¡¯s No 2 cell phone maker, ceding the spot to rival SEC. Motorola¡¯s market share tumbled to 15.3% in the second quarter, down from 22% last year. Meanwhile, SEC¡¯s market share has climbed to 14.5%. Nokia¡¯s market share rose to 37.4% in the second quarter, as a leader of the market.
SEC launched a 70-inch high definition LCD TV, PAVV LED 70, in the domestic market, as a significant move to consolidate its leading status in the luxury TV market. The 70-inch model is the largest among commercially available LCD TVs in the world. The SEC grabbed more than 50% of the 40-inch or larger LCD TV panel global market in the first quarter.
SEC formally opened its new $3.5 bil semiconductor plant in Austin, USA. The plant is the second plant in Austin for SEC. The first one opened a decade ago. The new factory will produce NAND flash memory chips upto 60,000 wafers per month by 2008.
 
LG Electronics has signed a three-year sponsorship agreement with Fulham FC, a football club in England¡¯s Premier League, which allows LGE to put its logo on jerseys of Fulham footballers beginning July.
LG Telecom, Korea¡¯s smallest mobile service provider, has teamed up with Yahoo! Korea to provide an improved mobile search service to its customers, using Yahoo¡¯s ¡°oneSearch¡± engine for its mobile search service, allowing its 7.4 million customers to obtain faster results.
KTF, the nation's second-largest mobile operator, launched a high speed up-link packet access (HSUPA) commercial network. HSUPA can upload data with a maximum speed of 5.6 megabits per second, meaning users can upload a 1-megabyte photo in 1.4 seconds. The HSUPA service using USB-type devices will begin in major cities and the nation-wide service will be available in Oct.
 
Prosecutors indicted Hanwha Group chairman Kim Seung-youn, 55, on 5 charges, including ordering local gangsters to kidnap and beat up bar workers who had been involved in a scuffle with his son. Kim is also believed to have provided approximately KW110 mil ($118 mil) to a crime gang leader and helped him flee to Canada. Prosecutors demanded a two-year jail term for Chairman Kim.
 
Pfizer Inc will invest $300 mil in Korea over the next 5 years in research and development. Pfizer and Korea government signed a MOU on the joint R&D investment, under which Pfizer will develop new drugs, animal testing and clinical research, as the single-largest R&D investment by a foreign company in Korea.
 
S-Oil Korea¡¯s third-largest refiner and one-third owned by Saudi Armaco has put an indefinite hold on its $4 bil plans to build a sophisticated new 480,000 barrels per day refinery by 2010, because construction costs surged as much as threefold.
Hyundai Oilbank decided an investment of KW2.1 tril in expansion of enhanced facilities by year 2011. Hyundai is to build enhanced facilities such as atmospheric residue hydro-desulfurization (ARHDS) and residue fluid catalytic cracking units (RFCC) at 52,000-barrel production daily near its Daesan plant by 2011. Combined with the preexisting 64,000-barrel scaled hydro-cracker (HCR) and delayed coker units, the completed facility will boost its production capacity to 116,000-barrels.
 
POSCO, the world's fourth-largest steelmaker, will begin the construction of a two-stage project for building 2 rolling mills in the Phu My Industrial Park near Ho Chi Minh City in early Aug. A cold rolling mill with an annual production capacity of 1.2 million tons will be built by 2009 in its first stage, which will be the largest steel mill of its kind in Southeast Asia. In the second stage of the project, POSCO plans to build a hot rolling mill with an annual production capacity of 3 million tons by 2012. A private harbor, designed to support the 2 plants, is also under construction and will be completed in March 2009. The project is one of the largest direct foreign investment programs in Vietnam.
POSCO is spurring on its campaign to establish itself as a leading steelmaker in Southeast Asia. POSCO has processing centers in Indonesia, Malaysia, Thailand and Vietnam. POSCO plans to establish 6 more plants in Asia by the end of the year, increasing the number of facilities in the region from 19 to 25 and almost double production capacity to 3.1 million tons per year. It is also planning to invest $400 mil and increase the number of its overseas facilities to 40 by 2010 as part of its plans to establish itself as one of the world's 3 largest steelmakers.
POSCO is seeking to expand cooperation with Arcelor Mittal on overseas projects. POSCO and Arcelor Mittal may jointly develop a mine, build a blast furnace to make steel in a third country. Arcelor Mittal is likely deciding to form an alliance with POSCO instead of attempting a takeover.
 
Ssangyong Engineering & Construction was nominated this month as the winning bidder of Aceh Road and Bridge Reconstruction and Rehabilitation, a $108-mil project to reconstruct Indonesia's Aceh region, devastated by the 2004 tsunami.
Hyundai Construction $ Engineering won the project to build 18 stories ¡®Overseas Union House¡¯ building in Singapore from Lippo Group. The building will be built in the center of Singapore for $115 mil in 32 months.
Doosan Babcock, Doosan¡¯s British subsidiary, agreed with British Energy to provide technical service worth KW1 tril, in engineering, maintenance and improvement of performance for 9 power plants under management of British Energy.
HHI won the order from Jubail Power & Co to construct super power station of 2800 mw and desalination plant of 800,000 cum. As a consortium member with GE and Sidem will undertake power plant portion worth $1.1 bil.
Samsung Engineering won the contract to construct $50 mil worth sewage treatment plant from state run Hexez of UAE. It will start operation to handle 40,000 tons of waste water from Feb 2009, with the management right for 5 year after completion.
Samsung Engineering got the order from Abu Dhabipolimers Co, subsidiary of UAE national Petroleum, to construct petrochemical plant in Ruwais to produce annually 750,000 tons of prophylene from May 2010.
Shinyang Metal won the project from Benson, world biggest curtain wall provider, to supply aluminum exteriors wall for ¡°Freedom Tower¡± which will be erected in the place of WTC in New York. The project is worth $15 mil to supply 1600 tons of products by Aug 2009.

MONETARY AND ECONOMIC INDICES

Korea Composite Stock Price Index started the month at 1716, kept climb to break the barrier of 1800 and reach 1008.6 in June 18, 18 days after KOSPI surpassed 1700 first time in history despite the slump in China¡¯s market, then check till the end of the month on the concerns of overheated market and closed at 1743. KOSPI has gained 26% so far this year, compared with its 4% advance in the whole 2006. The share of foreign ownership in the main Seoul stock market has continuously fallen to 36.08% as of June 21, from 44.14% on April 26, 2004.
The exchange rate of KWon against USDollar has been in the box of 924-928 through out the month. As of the end of June, the nation¡¯s foreign reserves amounted to $250.7 bil, down $40 mil from a month earlier. It was the first monthly drop since June last year. Korea's jobless rate rose to a six-month high, 3.4% in May from 3.3% in April, as manufacturers shed workers.
Bank of Korea kept the benchmark interest rate unchanged at 4.5% for a 10th month, saying economic growth is showing "clearer" signs of a rebound. The yield on 3 years corporate bond were stable in the box of 5.53-5.69-5.71-5.66%. Korea¡¯s consumer inflation accelerated in June due to a global oil price hikes. Consumer price index gained 2.5% on year in June, compared with a 2.3% advance in May.

SHIPBUILDING AND SHIPPING

KOEXIM signed the contract with Mediterranean Shipping to finance the new building of 6 x super container ships in SHI, worth $539 mil.
Korean Big 3 yards are recently concentrating on super container carriers. HHI received order of 16 x 8600 teu class ships, accounting about 50% of the orders in this year. SHI got 14 container ships, including 12,600 teus and DSME secured the biggest number of order with 17 x above 8000 teu vessels.
Korea¡¯s Big 3 have received new building order exceeding $8 bil individually in first quarter this year. HHI had $8.4 bil, SHI $8.6 bil and DSME $9 bil including the order won by Daewoo Mangalia.
Waertsilae Oyj and HHI secured EU¡¯s antitrust approval for a joint venture to produce dual-fuel engines for LNG carriers. The companies will produce only one type of engine, mainly for the Korean, Taiwanese and Japanese markets. EU commission concluded that the proposed joint venture would not bring about substantial changes on the market for ship propulsion main engines. They will invest 29 million euros ($39 mil) each in a Korean plant to make 100 units.
 
HHI started to receive order for capsize bulk carriers. HHI won the order from Phoenix Navigation for 2 x 180K capsize, Chang Myung 2 x 180K bulker and India Steamship 1 x 105.83K tanker. HHI delivered first Dual Fuel Diesel Electric driven LNG ship to BP, for the first time in the world.
Hyundai Samho signed the contract with Chios Navigation to build 4 x 180K bulkers, Keoyang Shipping 2 x 180K capsizes, Liquimar 1 x 167.5K tanker and a European 6 x 4000 teu box ship. HMD received order from Omega Navigation Enterprises for 5 x 37K IMO II/III pc.

SHI won the order from Finaval for 2 x 114.8K tanker, Yasa 1 x 157.7K tanker, Fratelli D'Amico 2 x 157K suezmaxes, International Andromeda Shipping a third 115K and Nexus Floating Production in Singapore 1 x second FPSO. SHI completed its second block fabrication basis in Ningbo China, doubling its output to 200,000 tons.

DSME signed the contract with Korea Line for 2 x 180K bulker, a foreign owner 1 x 9100 teu, TMT 1 x 306K VLCC, US owner 1 x Drillship, Exmar NV 1 x 150.9K LNG, Anangel Maritime Services 2 x 180K capesize bulkers and European 3 x VLCC.
DSME opened DSME Shandong Ltd in Yentai, the second foreign subsidiary after Daewoo Mangalia, who will fabricate 30,000 tons of blocks this year, expanding to 220,000 tons by 2010. It was reported that Lykiardopulo paid a record-breaking $95m for a 180K capsized bulker newbuilding at DSME for delivery of 2H/2009. DSME was told that it has also secured 2 x 180K capers from Anangel Maritime Services at $90m each. Including Daewoo Mangalia¡¯s order, DSME has now secured 18 capers for the delivery by 2010.
 
Hanjin got the order from Delphis of Belgium for 4 x 3400 TEU and Eregli Denizcilik 1 x 175K bulker.
STX received order from KLC for 2 x 181K capsize bulker and Trojan Maritime of Greece 4 x 81K Kamsarmax bulkers. STX Busan yard agreed with STX PO to build 2 x 13K chemical, Munchmeyer Petersen Capital 6 x 13K IMO-II tankers and Dong-A 4 x 13K chemical carriers. STX marked 200 ships launched in Chinhae shipyard by floating 74K PC for Target Marine and 3500 teu container ship for Hansa Line, since it started the ship construction in June 1996.
 
Korea officially became a member of the World Consultative Shipping Group in June, on the back of country¡¯s influence with the first in shipbuilding and 8th largest fleet in the world.
Hanjin Shipping started the mediterranean Asia America Pendulum service, by extending the combination of existing china Mediterranean Express Service and Pacific Southwest Service. Hanjin plans to put the container fleets of 12 x 4500-5500 teu.
 
Cash rich Korea Line (KLC) has plans to expand its capesize fleet to 50. KLC is currently controlling around 35 units, half of which are dedicated to carrying long-term cargoes. In addition to new building order to STX and DSME for 2 each unit of 180K capsize, KLC has 2 x 174 capesizes at Namura Zosen for delivery in 2010 or 2011 and a 205,000-dwt bulker at Universal Shipbuilding for delivery in 2012. It has also chartered in a pair of 170,000-dwt newbuildings for 10 years from Daehan Shipping that are under construction at Daehan Shipbuilding for delivery at the end of 2008 and in early 2009.
Golar LNG has sold its remaining 1 mil stake in KLC at about $95m. In April Golar sold 1mil KLC shares for $71m, booking a profit of $29m. Golar has now received $166m from the sale of its entire KLC stake and booked a gain of $65m.
STX Pan Ocean (Shanghai) established Tianjin STX Sinotrans, a joint ventured logistic company with Sino Trans Tianjin. STX Pan Ocean bought 2 x 1,700 teu box ships, re-sales from Guangzhou Wenchong Shipyard for delivery in 1H/2009.