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  Korea Report - August 2008
  Author : Hwang & Co     Date : 08-09-22 10:06     Hit : 40581    
Topics
-President Bush visited Korea on the way to Beijing
-President Hu Jintao flew to Korea one day after successful closing of Beijing Olympic.
-SKorea consolidated its presence in Olympic.
-Korea recorded the fastest growth stories in the past 6 decades.
-LPGA adopted language barrier to the dominant Asian women golfers.
-NK suspended nuclear facilities disablement, complaining delayed the removal of sanction.
-Seoul detailed its ¡°Vision 3000¡± to help North.
-Korea¡¯s trade deficit grew.
-Government set out plan to reduce the dependency on fossil fuels.
-Government set the reformation plan on state-owned companies.
-Government made an agreement with local companies for battery packs.
-KOSPI slumped and Kwon weakened.
-BOK raised key interest rate to 5.25%, while consumer price climbed to 5.6%
-Cancellation of newbuilding orders alert the market.
-Bid for DSME started with the participation of POSCO, GS Group, Hanhwa Group and HHI.
-STX took control of Aker Yard, and reshuffled the management.
-STXPO grew to No 1 Shipping company in Korea.

GOVERNMENT AND SOCIETY

US President George W. Bush met President Lee Myung-bak during his 3 days visit to Korea during Aug 5-7. Bush requested to nonmilitary support for Afghan reconstruction. In Dec last year, SKorea completed the pullout of medics and engineers, putting an end to its 6-year mission in Afghanistan. Public opinion was against the US call for an extended deployment in the country, where 2 of the 23 SKorean voluntary workers taken hostage had been killed. SKorea is to accommodate the US call for nonmilitary support by dispatching police officers to help train the Afghan police force and expanding its "Provincial Reconstruction Team" of civilians, which has taken over the medical facilities that were managed by medics.
Another important agenda for the Lee-Bush summit was the FTA, which is awaiting ratification both in Korea and USA. Bush promised to strive to ratify the agreement before his term in office expires. The Korean National Assembly is to ratify the accord when it opens a regular session in Sept. That will put pressure on the Democrats in USA to reconsider their stance when the presidential election is over.

Leaving behind a nation in euphoria after a highly successful Olympics, Chinese President Hu Jintao flew on Aug 25 to Korea, one day after the closing of the Beijing Olympics, for a 2-days state visit to a joyous Korea, which achieved its best-ever results at the Games in Beijing. President Lee's declared policy of close ties with USA, after a considerable schism under the previous Seoul administration, made China uneasy about the future shape of the security structure in Northeast Asia, a possible explanation for the frequent Korea-China summits. As for Lee, the recent direct talks between Washington and Pyongyang over the denuclearization process, have forced him to seek closer collaboration with Beijing. Hu became the first Chinese head to come to Seoul twice during his tenure. More than 6 mil people traveling between 2 countries each year and about 64,000 Korean students study in China and 33,000 Chinese students in Korea. Leaders of 2 countries agreed to launch high-level diplomatic talks this year and push for closer military cooperation. Presidents Lee and Hu Jintao also agreed to "actively consider" a FTA and increase trade and business ties. In trade ties, they agreed to advance the target year for reaching a 2-way trade of $200 bil from 2012. The bilateral trade totaled $145 bil in 2007.
They also promised to closely cooperate to advance the 6-nation talks on terminating NK's nuclear weapons program, which has been deadlocked over the method of verification of the North's declaration of its arms programs. During their first summit in May, they agreed to upgrade Seoul-Beijing relations from a "comprehensive cooperative partnership" to a "strategic cooperative partnership."

President Lee appointed his ministers of education, agriculture and health without parliamentary confirmation. Opposition parties strongly denounced the move and threatened to boycott the Aug parliamentary session. The presidential office said Lee was forced to unilaterally name his ministers because he could not afford to lose more time waiting for the Assembly to hold confirmation hearings. The president was authorized to unilaterally name his Cabinet members because the National Assembly failed to hold a confirmation hearing by the legal deadline of July 30. The Assembly must open hearings within 20 days of receiving Cheong Wa Dae's request.

78 lawmakers proposed designating "Dokdo Day" in a bid to enhance Korea's sovereignty over the easternmost islets consisting of 2 main outcroppings and 33 smaller rocks, which are at the center of a diplomatic dispute with Japan. The proposal was made a day before the 63rd anniversary of Korea's liberation from Japan's colonial rule during 1910-45. The government launched Dokdo Research Institute to study history, geography and international relations related to the group of tiny islets in the East Sea. The new institute is also responsible for education, public relations activities and various promotional events at home and abroad.
The US Board of Geographical Names reinstated Korea's sovereignty over the Dokdo islets in its database, just hours after US President Bush so ordered amid strong protests from Korea. The BGN a week before changed Dokdo's status from SKorean territory to "undesignated sovereignty" on its Web site, infuriating Koreans, who still harbor bitter memories of Japan's brutal colonial rule over Korea from 1910 to 1945.

The US Senate confirmed the nomination of Kathleen Stephens, a career diplomat, as Washington's new ambassador to SKorea, as the first woman to hold the top diplomatic position in Seoul, replacing incumbent Ambassador Alexander Vershbow.

President Lee's approval ratings have been rising as the disputes over US beef imports, public appointments and Japan's claim to Dokdo have lost steam and his government is pursuing economic reforms more aggressively. Korea's strongest-ever showing at the Olympics also helped the president, who marked 6 months in office in Aug. His ratings, which had languished at less than 20%, moved up to 24.1-31.2% from 20.7-26.9% on June-July period.
President Lee decided to grant a special pardon to over 340,000 people on Aug 15, the 63rd anniversary of the Liberation Day and the 60th national foundation anniversary. The amnesty list of 341,864 people includes high-profile tycoons such as Hyundai Kia Automotive Group Chairman Chung Mong-koo, SK Energy Chairman Chey Tae-won and Hanwha Group Chairman Kim Seung-youn. Former Samsung Chairman Lee Kun-hee was not included as the court case for his corruption charges is still on-going. Various economic groups praised the pardon, raising hopes of economic revitalization.
A total of 12 politicians and the 12 heads of provincial governments were pardoned. 10 public servants, 5 journalists and 1,902 election offenders were also granted amnesty.

SKorea notched a series of sensational victories at the Beijing Olympic Games to consolidate its presence as a regional powerhouse. SKorea, which won 9 golds in Athens 4 years ago, scored its best-ever record of 13 and reached seventh in medal ranking at the Olympics in Beijing.
SKorea swept all four of its taekwondo competitions, claimed a largely unpredicted title in baseball, took an unprecedented gold in swimming and produced the gold in woman¡¯s weightlifting. The rally began on Aug 10, when 19-year-old swimming sensation Park Tae-hwan won the gold in the men's 400-meter freestyle event to bring his country its first-ever gold in Olympic swimming. He also grabbed silver in 200 m freestyle in the following days. The country won the gold in the men's 60-kg judo event a day earlier. Choi Min-ho won a gold medal, bringing his country the first gold medal in the Games. He won the whole games beating by ippon.
After Sa Jae-hyouk won the men's 77 kg weightlifting title, Jang Mi-ran rekindled the golden flame by winning the women's super-heavyweight over 75 kg event on Aug 16. The 25-year-old world champion shattered 3 world records in a row and beat her closest rival by a total of nearly 50kg in the competition. Jin Jong-oh won the gold in the 50-meter pistol competition. He previously won the silver in the 10m air pistol.
An unimagined gold victory in the baseball tournament was for SKorea. The 3-2 win over 3 times champion Cuba was the ninth straight victory SKorea has claimed in baseball at the Olympics, and the fifth one-run win the team has scored since it edged USA 8-7 in the opening preliminary. 3-time champion Cuba is the only other team to have finished an Olympic tournament undefeated. Korea came into the tournament hoping for a bronze medal, and even that seemed to be an uphill task, as Japan, Cuba and USA were 3 teams generally considered favorites to medal.

Bone-in beef from USA has hit the market for the first time in nearly 5 years. The National Veterinary Research and Quarantine Service cleared from inspections about 1.35 tons, which included ribs and other cuts with and without bones. Limited imports of boneless beef were briefly allowed last year and then were suspended again when banned materials, such as bones, were discovered in a shipment. Bones had been prohibited over fears they carried a greater risk of transmitting the brain-wasting illness.
US beef imports are beginning to inundate the local market following their full-fledged entry in July, putting US beef in second place after Australian imports, and topping the meat from New Zealand. Up until June, New Zealand beef ranked second. The restaurants and retailers have been required to label the origin of their meat products.

Prosecutors are considering tougher measures to investigate MBC TV's investigative program, which has been accused of false and lopsided reports on mad cow disease associated with US beef. The consideration came one day after PD's Notepad aired an official apology to viewers regarding 2 broadcast in April and May, which raised fears of the human form of the brain-wasting disease. The apology was demanded on July 16 by the Korea Communications Standards Commission, who said the program violated broadcasting standard regulations on fairness and objectivity. On July 31, a Seoul court also ruled in favor of the Agriculture Ministry, which accused the program's producers of having defamed government negotiators engaged in the April 18 beef import deal by unduly exaggerating the risks of the disease. The broadcaster made the decision to apologize at a meeting with senior officials, amid efforts by MBC's unionized workers to block the apology from being broadcast.

To end a stalemate in the National Assembly that lasted more than 80 days, National Assembly Speaker delivered an ultimatum that he may invoke his right to enforce the Assembly formation if the parties failed to reach an agreement by Aug 19. The Parliament opened, and the parties agreed to immediately suspend imports of all beef from a country if mad cow disease arises, and ban imports of meat from cattle older than 30 months for 5 years from the country. But they made a compromise clause in a supplementary provision to the livestock law so that they will not affect the Korea-US beef deal signed in April. The GNP chaired 11 committees while the DP headed 6. The third negotiating group has also been given a committee to lead.

The Education Ministry is to spend KW317.3 bil ($292 mil) to forge 82 high-quality public boarding schools in rural areas from the school year of 2010. The state funding plan for boarding schools was one of President Lee¡¯s campaign pledges to provide high-quality public education to students with less opportunities.
The state-run Korea Advanced Institute of Science and Technology will build a branch campus labeled "KAIST Lyu Keun-chul campus" at the new administrative city of South Chungcheong Province by 2012. This comes as the science and engineering specialization school received a massive donation from Lyu Keun-chul, 82, a professor at Moscow State Technical University Bauman, with his property valued at KW57.8 bil ($56 mil), which is recorded to be the biggest sum given to a Korean university by a single donor. KAIST launched a comprehensive 5-year plan to improve the school administration and strengthen its competitiveness, with a goal to join the rank in the world's top 10 science and technology universities.
Korea plans to expand its school curricula covering Internet ethics and common online etiquette, and will start, beginning next March, teaching "online courtesy" from the second grade as part of a wider social skills curriculum. New courses will not only address topics like language abuse and personal attacks on the Internet, but also issues like protection of intellectual property and personal information.

Korea wrote one of the fastest socio-economic growth stories in the world during the past 6 decades. The nation's per-capita GNI shot up from a meager $67 in 1953 to $20,045 in 2007. The nation's GDP grew 746-fold to $969.9 bil as of 2007, the world's 13th-largest, from $1.3 bil in 1953. The annual average GDP growth rate recorded 6.8% from 1954 to 2007, except for 3 years of negative growth in 1956, 1980 and 1998 which were due to the Korean War, the second oil crisis and the Asian financial crisis, respectively. Trade volume skyrocketed to $728.3 bil in 2007 from $230 mil in 1948, with exports surging to $371.4 bil from $22 mil, and imports to $256.8 bil from $208 mil. Oil imports grew from 5.8 mil barrels in 1964 to 807 bil barrels in 2007.
The size of Korea¡¯s population, recorded at 20.19 mil in 1949, broke the 30 mil mark in 1967 and the 40 mil in 1984. By 2007, Korea's population had grown by 240% from 1949, and was 48.46 mil. The proportion of the population accounted for by those under the age of 15 was reduced by half between 1955-2007, and the number of those over age 65 tripled.

Tens of thousands of Buddhists took to streets of Seoul in protest against the alleged religious bias of President Lee and his administration. It was the largest-ever anti-government rally organized by the religious group, demanding that Lee apologize for the government's discrimination against Buddhism. They also called on the police chief to resign to take responsibility for an invasive inspection last month of a vehicle of the head of the Jogye Order, while patrolling Jogye temple for civic activists suspected of organizing anti-government street protests in May. The incident enraged the country's Buddhists, who slammed the police for disrespecting the highly revered Buddhist leader.

US President George W Bush expressed his amazement by Korean women golfers sweeping LPGA scoreboards. Korea¡¯s Ji Eun-hee got her first title at the Wegmans LPGA on June 23, Lee Seon-hwa notched a victory at the US LPGA Tour¡¯s NW Arkansas Championship July and Park In-bee won the US Women¡¯s Open on July 1.
Shin Ji-yai won the last major of the year as the youngest winner in Women's British Open history. Shin, a 20-year-old, maintained Asia's recent domination of the majors on the LPGA Tour. Taiwan's Tseng Yani was second, while Korea's Ji Eun-hee and Japanese third-round leader Fudoh Yuri tied for third. Japan's Miyazato Ai was fifth and 13 of the top 20 were from Asia. Lorena Ochoa came to the Women's British Open firmly established as the world No 1 and strongly favored to retain the title she won last year at St Andrew's. Instead, she tied for seventh.
The US LPGA decided to suspend players who cannot pass an English speaking test. Beginning in 2009, the LPGA will require players to speak basic English. Players who have been members of the tour for 2 years will face suspension if they fail the speaking test. Korean players in the LPGA are 45, the largest group among the 121 international players from 26 countries on the LPGA circuit. In recent years, Korean names have dominated the LPGA scoreboards. Known as Pak Se-ri kids, these young golfers are excelling in a sport which only a decade ago. Only a few of these players are conversant in English. The LPGA thinks it's important for the players to effectively communicate in the language, so that they can interact with sponsors and fans, improving the marketability of the LPGA. Incidentally, no other major sport has an English-fluency policy.

NORTH KOREA AND NATIONAL DEFENSE

Presidents Lee and Bush held their third summit and pressed NK to improve its human rights conditions and accept rigorous terms for its nuclear program verification. They also urged Pyongyang to cooperate to resolve the dispute over the fatal shooting of a SKorean tourist by NKorean soldier early in July. This is the first time that a Korea-US summit has squarely tackled the North's human rights abuses. The previous liberal governments of Seoul have shunned the issue, concerning that would raise the hackles in the North and damage inter-Korean ties.

With NK's submission of a declaration on June 26, a plenary session of the 6-party talks was held on July 11-12, and the members agreed that the next step would be to set up the verification protocol. Washington and Pyongyang were then to bilaterally discuss the scope, method and other details of the mechanism. Washington officials made it clear that the sanctions will remain intact until the verification mechanism is established.
No standing agreement endorsed at the 6-party talk states that a verification mechanism is a precondition to the lifting of Washington's sanction. In 1992, the IAEA and the North clashed over the exact amount of extracted plutonium produced by reprocessing the spent fuel rods from Yongbyon's 5-megawatt reactor. While the North at the time reported just 80 grams of plutonium, the IAEA and USA estimated the amount to be large enough to be calculated in kilograms.
NK announced that it has suspended its nuclear facilities disablement process on Aug 14, in protest against the US delay in removing Pyongyang from its list of state sponsors of terrorism. Washington was initially expected to lift the sanction by Aug 11, but did not do so because the North refused to accept the US proposal on a verification mechanism. The North added that it will consider resurrecting the disabled facilities.
While the North insists that a declaration is sufficient to having the US sanction lifted, USA and other parties are adamant that they must agree on the verification protocol befor the sanction is removed. NK has so far completed 8 of the 11 disablement steps. The remaining 3 include extracting spent fuel rods from the nuclear reactor, discarding fresh fuel rods, and removing the driving gear of the control rod. So far, NK has extracted about 60% of the 8,000 spent fuel rods.

The Korean Navy will launch its second Aegis destroyer in Nov as part of efforts to build up defense capabilities. The KDX-III destroyer which has a displacement of 7,600 tons, is being built by DSME.
The SKorean and US armed forces carried out the Ulchi Freedom Guardian, an annual joint military exercise based on computer simulated war games. This year will mark the first drill with the SKorean war-fighting headquarters in the forefront while USA plays a supporting role. The new roles were designed to prepare for the 2012 transfer of wartime operational control to SKorean forces.

NK deported most SKorean personnel at its Mt Geumgang resort and strictly control the entry of SKoreans at the military demarcation line, further vowing to respond with strong military countermeasures against even "trivial" provocations from the South at its tourist resort to refute the Seoul government's handling of the July 11 killing of SKorean tourist Park Wang-ja. 262 SKorean staff are stationed at the resort, employees of tourist companies, the operator of the tours to Mt Geumgang and Gaeseong industrial park. NK once again rejected Seoul's calls for a joint investigation. SKorea suspended tours to Mt Geumgang immediately after Park's killing. Tours to Gaeseong were not interrupted. NK receives $100 per tourist for a Gaeseong City visit, and had received $80 per tourist for the 3 day Mt Geumgang tour.

Seoul unveiled more details on its plan to help spur NK's economy as it completes key stages of denuclearization. The plan so-called Lee¡¯s "Vision 3,000," aimed at raising NK's per capita income to $3,000 within 10 years after its denuclearization. Lee's vision, considered a more pragmatic approach than his predecessors' generous Sunshine policy, had lacked details and direction until now. Seoul divides into 3 stages the process of NK's denuclearization. Stage one would be NK's completion of its nuclear facilities disablement, the second being NK's commencement of its nuclear dismantlement, and third, the North's completion of nuclear dismantlement.
In return for the first phase, the government would begin discussions on creating an economic community with the North, and prepare a legal structure for such cooperation. Once NK finishes its nuclear disablement and its nuclear activities are verified, the government will begin the process of starting the Vision 3,000 project. Once the dismantlement process of NK's nuclear materials begins and continues smoothly, the government will enter the second phase of a 5-point development plan. The five are economics, education, finance, infrastructure and quality of life. Aid to improve those 5 fields will accelerate in the third phase, along with a creation of an international cooperation fund worth approximately $40 bil. NK strongly denounces the "vision 3,000" plan as a declaration against unification, or declaration of war.

The 34-year-old woman, Won Jeong-hwa, disguising herself as a defector from NK, has been gathering military intelligence in the South for NK over the past several years. Her case is a wakeup call for SKorean intelligence service, whose vigilance has been dulled by the previous administrations' efforts to improve inter-Korean relations. She married a SKorean in China before coming to the South in 2001. She got divorced soon after settling in the South and developed intimate relationships with military officers to gather intelligence for the North. The information she was ordered to produce included the location of key military facilities and the whereabouts of Hwang Jang-yup, the former secretary of the NKorean Worker's Party, who defected to the South in 1997. Won also was directed to assassinate SKorean government agents who were collecting information about the North.

ECONOMY AND POLICY

Korea¡¯s trade deficit reached $3.23 bil in Aug mainly due to high global energy prices. The exports rose 20.6% on year to $37.39 bil, while the imports grew 37.0% to $40.62 bil. The monthly deficit is the largest since the $3.92 bil tallied in Jan this year, and the third straight month in the red. As of Aug, the country¡¯s trade deficit stood at $11.57 bil, compared to a surplus of $8.44 bil for the same period last year.
Korea is on track to post a record trade deficit with Japan this year, while its surplus with China is likely to shrink. So far this year, the country has accumulated a deficit of $19.1 bil, 11.2% up on year. In the first 20 days in Aug, the country posted a surplus of $630 mil, 23% down on year in its trade surplus with China, its largest export market. Trade surplus with China fell to $20.9 bil in 2006 and $19 bil in 2007, from a peak of $23.3 bil in 2005. Korea became the fifth biggest trading partner of USA last year, with 2-way volume surpassing $78.4 bil. The US exported $33 bil worth of goods, up 7.2% on year, and imported $45.4 bil, up 1.5% on year.
The current account shortfall reached $2.45 bil in July, a turnaround from a $1.82 bil surplus in June. During first 7 months of the year, the country posted a cumulative current account deficit of $7.8 bil, up from a shortfall of $75.5 mil a year ago.

Korea¡¯s overseas investment jumped 42.8% during the first half of this year on increased investment by the conglomerates in energy development projects. Korean firms invested $14.72 bil, compared with $10.31 bil in the same period in 2007.
Korean investments in foreign stocks, bonds and so-called Korean Paper reached $95.2 bil in the second quarter, 3.5% down on quarter, amid a global credit crunch. Investments in foreign stocks fell 1.4% on-quarter to $59.4 bil as of end-June as emerging markets suffered losses. Investments in bonds shed 5.2% to $23 bil.

Korea has recovered, as of June, KW91.7 tril ($90.6 bil) out of a total of KW168.5 tril in public funds spent to rescue companies hit by the financial meltdown in 1997.
Domestic credit card transactions, excluding credit card loans, during the first 7 months of the year rose 20.86% on year to come in at KW172.02 tril ($169.3 bil), attributing the changes to the increasing price of household necessities.

The Financial Services Commission received updated documents from HSBC Holdings Plc and that has resumed its regulatory review of HSBC¡¯s acquisition of Korea Exchange Bank, giving the green light to the controversial deal. Last Sept, HSBC agreed to buy a 51.02% stake in the nation's No 5 lender from the US buyout fund, Lone Star. A verdict on the legal disputes over Lone Star's 2003 purchase of KEB would be a critical factor in deciding the fate of the $6.3 bil deal that already expired on July 31. HSBC has been reported in talks with Lone Star to readjust the cost of takeover, as the price of KEB shares has fallen about 8% since Sept 3 last year, when HSBC agreed to buy controlling stake in the bank.

Kookmin Bank, the nation's largest lender, is to spend KW1 tril ($963.4 mil) to buy back 5% of its outstanding shares, 16.84 mil shares, between Aug 18-Nov 17, to stabilize its stock price in the course that the lender forms a financial holding company in Sept. Kookmin's stock price has slid about 13% this year. Foreign investors own 74% and local institutional investors hold 18% of the lender. The National Pension Fund, which has increased its stake to 5.02% from 4.44%, decided to support the plan.

The nation's consumption of gasoline and diesel fell in July as more people turned to LPG due to lofty oil prices. Koreans consumed 4.9 mil barrels of gasoline in July, down 5.1% on year. Consumption of Diesel also fell sharply to 10.6 mil barrels in July, down 13.3%. By contrast, consumption of butane jumped 24.5% to 4.7 mil barrels in July on year, as surging gasoline and diesel prices spurred drivers to switch to LPG cars.
The government set out a plan to significantly reduce the nation's dependency on fossil fuels from the current 83% of the total energy use to 61% by 2030, and increase the proportion of renewable sources such as wind, solar and biofuel from 2.4% to 11% by 2030. It also plans to build 10 more nuclear power plants and improve energy efficiency by 46% over the next 2 decades to cope with rising oil prices and the impacts of global warming. It plans to increase supply of solar energy 44 times the current level, wind power 37 times, biofuels 19 times and geothermal power 51 times. Nuclear power will sharply expand to account for 28% of total energy consumption in 2030 from 15% in 2007. 20 commercial nuclear-power reactors are currently in operation and 8 are under construction for completion by 2016. The program also aims to increase the nation's self-sufficiency in oil and gas from a mere 4.2% to 40% by the target year.
The government estimates the plan will need KW100 tril in facility investment. The government will contribute KW28 tril and the private sector will shoulder KW72 tril.

CHAEBOLS

The government plans to sell, merge or restructure 41 of the 305 state-owned companies in the first stage of its public sector reform program. The government will sell 27 public firms, merge 2 firms into one and restructure 12 companies in plans aimed at enhancing competitiveness of the firms.
The privatization plans include selling a 49% stake in Incheon International Airport and parts of the Industrial Bank of Korea. The firms like Korea Development Bank, New Seoul CC, the Korea Asset Investment Trust, the Korea Real Estate Investment Trust, Kyongbuk Tourism Development Corp, and Korea Construction Management will be put up for sale. The Korea National Housing Corp and the Korea Land Corp would be integrated as the two have overlapping function.
The 14 firms, including DSME, Hyundai Engineering & Construction, Hynix Semiconductor and Woori Finance Holdings, will be sold soon. The 12 state-owned firms that need to be restructured due to their overlapping functions with the private sector include the Korea Tourism Organization and Korea Trade Promotion Corp. However, the key sectors such as electricity, gas, tap water and health insurance will be excluded from the privatization.
The government is to strictly impose an ownership ceiling when it sells shares in state-owned companies to the private sector, ensuring that the public-sector reform policy would not lead to massive layoffs and hikes in public services fees. The government is also seeking ways to allow individual investors and employees of public companies to buy shares to prevent specific parties from exerting control over those companies.

Samsung and LG make the 3 best selling cell phones in USA. SEC's Blackjack 2 recently topped the list as the best-selling phone of Wirefly, the No1 US seller of wireless phones. LGE¡¯s EnV2 and Shine ranked second and third. LGE's Vu CU920 was also picked as the most popular "back-to-school" cell phone by Wirefly. LGE placed second in terms of total sales in the US market, selling 9.4 mil handsets in the second quarter. SEC closely followed LGE by selling 8.4 mil handsets from April to June. Motorola, the overall market leader, sold 11.4 mil cell phones during the period.

SEC accomplished triple 30 in first half in the market. It reached 30% market share in Memory chips overall, Flesh memory and DRAM, with Flesh memory of 33.5%, DRAM 30.4%, 30.3% for Memory overall, despite the slowing marketing in general.
SEC is on track to achieve 7% growth in global sales of refrigerators, washing machines and other home appliances this year, thanks to a premium image and high quality.
Samsung Techwin, a camera-making affiliate of SEC, released 14-megapixel camera, VLUU NV100HD model, the world's highest resolution digital camera. It has a lens from Schneider, with high-definition video recording and a function called "Beauty Shot" which allows users to retouch photos to make skin appear brighter and to give the impression of a smoother skin tone.

LG Electronics added another non-Korean to its C-suite executive lineup, which is already dominated by non-Korean nationals. It has hired an American expert, James Shad, for a new position called chief go-to-Market officer in charge of strategic markets such as USA. Shad has 29 years of experience in marketing and customer relations and served at Swiss Novartis. Shad will be stationed in New Jersey. With the appointment, LG now has 5 foreign C-level executives.
LS Cable Ltd, Korea¡¯s biggest wire and cable maker, has acquired 86.88% of US based Superior Essex. LS Cable also expects to acquire an additional stake of 7.04%. With acquisition, LS Cable will become the world¡¯s third-largest cable maker and secure a footing in the US market amid a global boom in the cable industry.
Hyundai Steel has signed a contract with Rio Tinto and Westfarmers of Australia for the supply of 1 mil tons coking coal per year for 10 years.

Korean builders clinched record-high overseas orders worth $34.7 bil in the first 7 months of the year thanks to increased demand from Middle Eastern and Asian countries. Kuwait was the biggest market, awarding $7.4 bil worth of orders, Qatar ranked second with $4.3 bil, followed by UAE with $3 bil and Saudi Arabia with $2.8 bil. Hyundai E&C received the largest overseas orders worth $6 bil, trailed by GS E&C with $4.5 bil and Daelim Ind with $3.1 bil. SK E&C with $2.8 bil and POSCO E&C of $2.6 bil. Korea set a goal of $45 bil for overseas construction orders this year.
Daesung Group is developing a green city covering about 3.3 mil sqm near the Mongolian capital of Ulan Bator, which will be run by solar and wind energy in Sept. The multi-alternative energy plant aims to stop the desertification of the region through vast underground water resources and electricity from wind and solar power.

The government and local companies signed an agreement to collaborate in developing battery packs for plug-in hybrid vehicles, as a part of the government's plans to develop Korea into one of the top 4 nations in terms of eco-friendly automotive technologies. 4 companies taking part in the project are Hyundai Kia Group, LG Chem, SK Energy and SB LiMotive. SB LiMotive is a joint venture between Samsung SDI and the German auto parts maker Robert Bosch GmbH that specializes in making batteries for hybrid electric vehicles. Hyundai Kia will buy the final product for use in the plug-in hybrid vehicle in 2013. LG Chem is the battery supplier for Hyundai Motor's electric hybrid car that will be launched next year. The company has produced prototype batteries for GM's plug-in hybrid Chevrolet Volt.

Korea told WTO it was ¡°deeply disappointed¡± that Japan had not scrapped memory chip duties. Japan was instructed to scrap the duties on Korean DRAM chips by Sept 1 after a WTO dispute panel ruled they violated trade rules. Japan imposed the duties in retaliation for a 2002 bailout of Hynix Semiconductor that it believed amounted to a state subsidy.

MONETARY AND ECONOMIC INDICES

Korea Composite Stock Price Index started the month at 1573, surged 1581 when a drop in oil prices eased concerns over the global economy and the gain in KWon against the greenback, then nose dived breaching psychologically important 1500 barrier at renewed global credit woes, and ended the month at 1474.
A total of 54 local securities firms and foreign branches posted a combined net profit of KW775.7 bil ($749.3 mil) in the first quarter, compared with KW1.29 tril a year earlier. The average return on earnings stood at 10.4% in, down from 22.6% a year ago, as commission incomes declined amid slumping stock markets.
A widening shortfall of the current account, coupled with rising overseas debt and a selling spree of local stocks by foreigners, is putting downward pressure on the already-weakening local currency. The exchange rate of KWon declined against USDollar throughout the month, starting at 1014 and weakened to 1089, the 4 year low, at the end of the month. KWon may continue to decline, because the demand for the dollar is expected to rise further on worries over local banks' dollar liquidity. The weakness of the KWon mainly stems from the globally strong dollar, which has gained against major currencies. In Aug alone, KWon lost 6.59% against the dollar, its largest drop among major currencies. The euro lost 5.62%, the Singapore dollar 3.21%, and the yen 1.91%. For the whole year, KWon fell 15.3%.
The nation's foreign reserves reached $243.2 bil as of the end of Aug, down $4.32 bil from a month earlier. Korea was the only country of 10 of the world's largest economies whose foreign exchange reserves contracted. The reserve has been reduced to $247.52 bil as of July, a $14.7 bil drop from the $262.2 bil recorded the same time last year, mainly due to government¡¯s currency intervention policy, aiming at curbing the weakening KWon and stabilizing consumer prices.
BOK raised the key interest rate by 0.25% to an 8-year high of 5.25%, prioritizing inflation control over growth. BOK also raised rates on aggregate credit ceiling loans, which are offered to local banks at a special rate to encourage lending to small companies, to 3.5% from 3.25%. The yield on 3 years corporate bond kept rising through the month from 6.85% to 7.37%.
The consumer price index gained 5.6% in Aug on year decelerating from the 5.9% in July, the highest in almost 10 years, as oil and commodity prices showed signs of stabilization. Korea¡¯s inflation jumped 5.5% in June on year, compared to an average of 4.4% in the OECD¡¯s 30 member nations.
Soaring raw material prices and a weaker local currency drove up Korea's producer prices in the second quarter to the second-highest among countries in OECD. Korea¡¯s producer prices rose 12.6% in the period on year. The average increase of OECD members was 7.6%.

SHIPBUILDING AND SHIPPING

Shares in Korea's 5 major shipyards continued their falling in the local stock market, sparked by news of a recent batch of orders scrapped. DSME announced the orders for 8 x 4,250-teu containers by Germany¡¯s NSB Niederelbe worth $610m were cancelled. HMD also had cancelled order for 4 x product carriers. Shipyards have moved to calm worries over the shaken confidence, as the contracts were cancelled by the shipyards themselves as the shipowners failed to remit their down payment, and yards may benefit from selling the berths to others at higher prices. But the general sentiment in the market is not that optimistic, as it is very unusual for the owners to stop paying installment of the orders, whose long term employments are secured. Especially the contracts to secure the berths with the major Korean yards have been considered as the fortune. The owners excused the difficulties of financing, but many people start to worry that the happening is representing the concern of the players to see downturn move in the market.
Financially troubled Qingdao Jimo Mastek Shipyard, the Sino-Korean joint venture, has seen that the Vafias group has walked away from a contract for 4 x 92.1K post-panamax bulkers. The 3 Chinese partners, in QJMS, refused to invest for their combined stake of 75%, the funds into the construction of the mega-facility. The Vafias group was the second owner to sign with QJMS, following Murmansk Shipping with6 x 75K ice-class 1B bulkers.
Japanese steel mills demanded to raise the price of ship plates to around $1400 per ton and a change of contract period from biannually to quarterly from Oct, after Chinese steel mill, Shagang raised shipbuilding plates to RMB8500 ($1240) per ton. 
Dramatic falls in VLCC and suezmax rates have been sending shockwaves through the market. The rate for VLCC nosedived with the fall of Worldscale 140 points over 2 weeks, shattering the optimism and confidence of owners. The fall in the VLCC rate has been mirrored in the suezmax and Aframaxes market at the same manner. Dry market is not better. BDI, which hit 11793 in May dropped to 6000 level in Aug.

HHI won the order from Kristian Gerhard Jebsen Skipsrederi for 2 x 120K LR2 tankers, HMD had Oceanis for 8 x 59K bulkers and South American company 2 x 59K bulkers.
SHI agreed with 2 Americans to build 1 x drillship each.
DSME got the orders from a US operator for 1 x drillships, another US buyer 1+1 x semi-submersible rig and KOTC 4 x 318K VLCCs.

KDB officially invited bids to sell 96.4 mil shares, 50.37% of total stake in DSME, the value of which is estimated around KW8 tril ($7.5 bil), the largest-ever takeover deal in Korea. Foreign investors can invest only upto 10% under security rules, as the yard is constructing defense systems in the premise.
POSCO, GS Group, Hanwha Group and HHI have submitted letters of intent to acquire a controlling stake in DSME on Aug 27. Provisional bidders will carry out due diligence by Oct 3, so that KDB can name a preferred bidder by mid Oct. It hopes to complete the sale within this year. Cash reserves, other than the offered price itself, are emerging as a key factor and companies should not borrow excessively in order to buy DSME. POSCO has about KW2.4 tril ($2.3 bil) in cash and cash equivalent assets. That compares with KW410 bil held by GS Group and KW822 bil by Hanwha Group.
DSME is one of the firms that was rescued from near-bankruptcy by the government's injection of public funds in the aftermath of the 1997 Asian financial crisis. It now has an order backlog that should keep its dockyards busy until mid-2011.
POSCO expects that the combination of the steel and shipbuilding business would maximize synergy effect, which is seeking to secure natural resources in global markets. POSCO seeks tie-ups with Korea¡¯s National Pension Service to strengthen its bid. POSCO was selling JY52.795 bil ($482.2 mil) worth of the 5-year, zero-coupon bonds and exchangeable for shares in SK Telecom at a 23% premium. POSCO is to sell more bonds later this year, for the cash preparation.
GS Group is considering a consortium with strategic investors both home and abroad. Adding DSME to its business portfolio, comprising of energy, construction and plant businesses should help the group expand its presence in global resource development projects.
Hanwha Group chairman Kim Seung-youn himself publicly urged for the takeover deal, saying the acquisition of DSME will be at the core of its "Global Hanwha" blueprint, aiming to attain target sales of KW100 tril by 2017 and diversify its revenue structure, with half of its group-wide sales coming from abroad. Hanwha is preparing to sell its real estate and other key assets to finance the deal.
HHI has entered the race at the last minute. HHI turned down offers from Hanwha and others to submit joint bids. HHI is reportedly aiming a synergy effect on its weak sector like LNG carrier and offshore industries. When it comes to cash, HHI leads the pack with about KW3.3 tril ($3.03 bil) in cash and cash equivalent assets as of the end of June. HHI, which already has a nearly 20% share of the global shipbuilding market, will be able to solidify its dominant No 1 position by acquiring DSME.
Doosan Infracore, the construction equipment unit of Doosan Group, withdrew from the competition, saying it has decided to concentrate on its main line of business rather than expanding into the new territory of shipbuilding.
The labor union of DSME responded negatively to HHI¡¯s participation in bidding, citing unstability of employment due to restructuring.

STX received orders from STX PO for 2 x capsizes, SCI 4 x 80K bulkers,  European owner 2 x VLCCs, Maersk Tankers 4+2 x 320K VLCCs, Emirates Trading Agency 2 x 80K kamsarmax bulkers, Aktif Denizcilik 2+2 x 320K VLCCs, and European 2 x bulkers.
STX reshuffled the top management. GS Chung, the president of STX yard, moved to STX Dalien yard, KS Kim, the president of STX Heavy Ind, became the president of STX Chinhae yard, and SH Shin, Head of shipbuilding division in Chinhae, is appointed as chief operating officer of Aker Yards ASA in Norway.
STX has been allowed to ¡°demand a forced transfer of the remaining shares,¡± after taking controlling 100,396,293 shares in Aker Yard, corresponding 88.37%, and inheriting Aker¡¯s 5 mil treasury share. STX paid NOK 63 ($11.71) each for all the shares. Aker Yards will be renamed STX Europe ASA, Aker Yards France will become STX France Cruise SA and Aker's Norwegian yards will be rebranded STX Norway Offshore AS.

Hanjin won the orders from Yasa for 1 x 180K bulker, Asian 1 x caper bulker and European 2 x caper. Daesun got the order from Panamanian for 1 x bulker, SPP from Kristen marine 2 x pc. Sungdong agreed with Meandros Lines for 1 x 159K Suezmax tanker, and Grand Union 4 x 158K and 2 x 75K LR1 tankers.

STXPO recorded remarkable growth in 2008, ranked No 2 surpassing HMM in first quarter and became No 1 in second quarter to top the Hanjin Shipping.

Hanjin Shipping announced to order 2 additional 115K capesize bulkers, investing KW1322.2 bil
Virgin Island based Fairmont Partners Ltd acquired additional 1.38% stake in HeungA Shipping, increasing its holding to 18.53%. The second largest stake holder is Geverand Trading, subsidiary of Golar LNG, with 9.24%.