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  Korea Report - November 2007
  Author : Hwang & Co     Date : 07-12-10 08:29     Hit : 36221    
Topics.
- Dec 19 presidential election muddled by business scandal.
- Yeosu City chosen to host 2012 International Expo.
- The commissioner of Tax Office arrested.
- Korea discovered large gas dehydrate deposit.
- US base relocation started.
- SKorea abstained on UN resolution of human right in NK.
- Korean export continued to climb to record high.
- BOK to purchase KW1.5 tril bonds to stabilize market.
- Samsung Group is shaken with biggest ever blow by own whistle blower.
- STX executives arrested for stealing technical data from Doosan.
- KOSPI fluctuated.
- Government help SME cope with fluctuation KWon.
- BOK recommend yards to settle the payment in KWon in contract.
- Shipyards recorded earning surprise in 3Q.

GOVERNMENT AND SOCIETY

12 candidates registered for the race to succeed President Roh Moo-hyun in Dec.
Lee Myung-bak, ex Seoul City mayor and CEO of Hyundai Group, is facing allegations that he was involved in a business scandal using a company called "BBK." The prosecution is investigating the case. The candidate recently apologized for employing his son and daughter in a company he owns, possibly to evade taxes. Lee is the wealthiest among the candidates. Despite the negative implications, the GNP contender remained at the top of opinion polls, securing 37-30% support, compared to the 18-19% garnered by Lee Hoi-chang and 11-14% for Chung Dong-young of the United New Democratic Party.
Lee Hoi-chang, a former chairman of the GNP left the party to run in the Dec 19 presidential election as an independent, for the reason to get rid of the leftist government, denouncing Lee Myung-bak as an inappropriate candidate to represent the GNP. The former chairman, who unsuccessfully ran for president in 1997 and 2002, vowed to stay away from politics after it was revealed that he had received illegal campaign funds 5 years ago. The GNP issued a fierce reaction to the elder Lee's announcement, upbraiding the former chairman for attempting to break up the party when it is so close to the election. Cheong Wa Dae said that Lee was insulting the public by running a third time for presidency, as his 2 failures were partly because the public did not trust him.
The UNDP's Chung Dong-young, a TV journalist-turned-politician and former unification minister, hails from Jeolla, his main region of support.
The Democratic Labor Party's Kwon Young-gil clearly presented his image as a pro-labor leftwing candidate pledging a change in the employment system.

State prosecutors are walking a tightrope in dealing with BBK case, involving presidential frontrunner Lee Myung-bak. Should their findings implicate Lee in the 2001 financial scandal, the ethics of the GNP candidate will be the big question, and this could shake up the presidential campaign. The reports will be issued before Dec 5, when the arrest warrant for prime suspect Kim Kyung-joon expires. The authorities have so far taken an extremely cautious approach, so as to avoid influencing the upcoming election.
The investment fund BBK was founded by Kim Kyung-jun in April 1999. BBK was an offshore company incorporated in the British Virgin Islands. In Nov 1999, BBK registered a Korean subsidiary.
In Feb 2000, Lee and Kim co-founded LK-eBank, an online financial holding company with each investing KW3 bil. LK-eBank invested KW3 bil in BBK. In Feb 2001, Lee and Kim established a securities brokerage firm called EBK. The Financial Supervisory Service found in March 2001 that BBK had falsified investment reports to clients and rescinded BBK's operating license on April 27. Lee had closed EBK on April 3, and resigned as CEO of LK-eBank on April 18. He then severed all ties with Kim.
On April 26, Kim founded an investment company called Optional Ventures. He allegedly spread false rumors that the firm would be acquired by a foreign company. Optional Ventures' stock prices jumped four-fold, from KW2,000 per share to KW8,000. In the process, Kim is suspected of having misappropriated company funds amounting to KW38 bil. MAF, an off-shore fund which Kim controlled, is claimed to have been a foreign buyer of Optional Ventures. Kim's purported stock manipulation is estimated to have affected over 5,200 individual investors, causing financial losses of some KW60 bil. Accordingly, prosecutors issued an overseas travel ban on Kim. Kim managed to flee to Los Angeles on a forged passport on Dec 20, 2001. In the wake of his allegedly illegal financial wheeling and dealing, DAS failed to recoup an investment of KW14 bil and Kim claimed Lee had been his firm partner through the manipulation. Lee claimed to have lost KW3 bil by the manipulation of Kim.

Korea's Yeosu City won the right to host the 2012 International Exposition, beating Tangiers in a run-off vote by representatives of 140 International Exhibitions Bureau (BIE) member states Nov 26, after 500-day campaign. The third candidate, Polish city Wroclaw, was eliminated in the first ballot. Yeosu, a coastal city in south western Korea, garnered 77 votes against the Moroccan city's 63. In the first round, Yeosu won 68 votes, Tangiers 59 and Wroclaw 13.
The government is to spend KW19 tril ($20.5 bil) on the Yeosu Expo, expecting the contribution to balance regional development by stimulating the development of the country's southern coast. With its timely theme "The Living Ocean and Coast," the Expo will help Korea lead the international effort to address climate change and global warming. The expo will take place over 3 months, during May 12-Aug. 12, 2012.
The event is expected to attract nearly 8 million Korean and foreign visitors. The expo is expected to generate KW10.3 tril worth of new development and KW4 tril in terms of added value goods and services, and create 89,000 jobs. Korea also plans to adopt the "Yeosu Declaration" which would seek sustainable development of the seas and oceans, under the collaboration with international organizations.
Along with the Olympic Games and World Cup, the international exposition is considered to be one of 3 major international festivals. The economic benefits forecast to be brought in by the international fair is almost 3 times larger than KW3.5 tril attributed to the 2002 Korea-Japan World Cup.

Chung Mong-koo, chairman of Hyundai Kia Automotive Group, made biggest contribution among local business leaders. Chung made all-in efforts on Yeosu's behalf, meeting high-level government leaders from numerous countries including Brazil, Canada and Russia, as the honorary chairman of the bid committee. He used his group' international sales networks to promote the bid.
The Chung family's history of supporting bids to host international events in the country began with the late founder of the Hyundai Group, Chung Ju-yung, who was the chairman of the committee to invite the Summer Olympics in Seoul in 1988. The Hyundai-Kia chairman's younger brother, Rep. Chung Mong-joon, the main shareholder of HHI, put his weight behind the bid to host the FIFA World Cup that was co-hosted with Japan in 2002, as the president of the Korea Football Association and a vice president of FIFA, the independent lawmaker-turned-businessman.

The Korean government established a plan calls for KW20.4 tril ($22.4 bil) to be spent during 2014-2017 to bolster competitiveness of agricultural sector and expand the market for local farm products as more imports enter the country, after the FTA with USA concluded in late June. Import duties for beef are to be eliminated in 14 years, while those for pork are to be lifted starting in 2014. Tariffs on other products are to be lifted within 2-20 years. Seoul is pushing for the FTA¡¯s ratification within the year, with Washington expected to follow suit in 2008. The agreement should go into effect in 2009. Korea became the third-largest importer of American beef in Sept. Korea imported 6,076 tons of American beef worth $33.45 mil during the month, placing it third behind Canada and Mexico.

Korea signed an agreement on services with the 10-member Association of Southeast Asian Nations, moving closer to completing a FTA deal with the regional group. Economic ministers from ASEAN countries and SKorea signed the Agreement in Singapore. The services deal is the second part of a four-step process to establish a FTA by as early as 2009. ASEAN is South Korea's fifth-largest trading partner with trade totaling almost $62 bil. SKorea ratified FTA with Chile in 2004, with Singapore in 2005 and USA in June.

Jun Gun-pyo, the commissioner of the National Tax Service, was arrested on charges of bribery. He is suspected of having received KW60 mil ($66,000) in cash last year from the former head of the Busan Regional Tax Office, asking for a promotion. He became the first incumbent tax chief ever to be arrested. Immediately after the warrant was issued, he resigned.

Korea has discovered a large gas hydrate deposit in the Ulleung Basin off the east coast. The deposit has been determined to have a thickness of about 130 meters in waters that were sometimes 1,800 meters deep. The discovery in 3 locations raises the possibility that up to 600 million tons of gas hydrate may be found in the East Sea. That amount is sufficient to meet the country¡¯s LNG needs for 30 years. In 2005, Korea imported 2.7 million tons of LNG.

Se Ri Pak was inducted into the World Golf Hall of Fame on Nov 12. The LPGA Tour uses a strict system of points, and Pak, 30 years old, reached that level 3 years ago. She won 5 majors, 2 of them during a rookie season in 1998 that gave women's golf its biggest boost since Nancy Lopez. She is the youngest player to be inducted. Her success served as a catalyst for more young players to compete on the strongest circuit in women's golf. 10 years later, the LPGA Tour has 45 players from Korea, which accounts for 38% of the LPGA population.
Kim Yu-na of Korea skated to victory at the Cup of China, one of 6 events in the ISU Grand Prix of Figure Skating series on Nov 10 and won her second Grand prix gold medal of the season Nov 24 in the Cup of Russia. Kim put in a winning performance to the music of musical "Miss Saigon" in the final competition in Harbin in China and in Moscow. She has been qualified for the Grand Prix final, which she won last year.
Korea¡¯s swimming sensation Park Tae-hwan took gold medals in the men¡¯s 200 meter, 400 meter and 1,500 meter freestyle events at a World Cup swimming meet in Germany on Nov 18. Park has won a total of 9 gold medals in this year¡¯s series of races.

The population has surpassed the 50 million mark, making SKorea 24th out of 194 countries in population. As of the end of Oct 2007, there were 24.65 million men and 24.54 million women. Including NK, which has about 23.11 million people, the peninsula ranks 18th place out of a global population of 6.67 billion tallied as of July 2007. The population in SKorea includes 624,377 foreign residents and 268,845 residents who cancelled their registration. Almost half the nation's population was concentrated in Seoul and Gyeonggi Province.
The number of newborn babies increased 8.5% on year in the first 9 months of this year, numbered 365,492. If this trend continues, the fertility rate is set to be around 1.25 by the end of this year. The government plans to raise the birthrate from 1.08 to 1.6, which is the average for OECD countries, by 2020.
The Engel's coefficient, the percentage of income spent on food, declined for the third consecutive year as the nation's average income rose. The coefficient decreased by 0.6% on year to 25.9% in the third quarter of 2007, compared to 27.2% in 2005 and 28.5% in 2003. By contrast, average household monthly income surged 23.8% on year to KW3.7 mil in the third quarter this year.
Korean scientists have developed an eco-friendly top soil that enhances plant growth and drastically reduces harmful residues of pesticides. A research team made the new soil by using small quantities of so-called rare earth elements. These are a group of compound materials made up of Lanthan, Scandium and Yterium.
The average monthly wage for regular workers in Korea rose 6.2% during the first 9 months of this year on year. The average full-time worker earned KW2.64 mil ($2,870) per month in the Jan-Sept period, up from KW2.48 mil a year earlier.

NORTH KOREA AND NATIONAL DEFENSE

Hyundai Asan, the Hyundai Group¡¯s tour program operator in NK, agreed with NK to offer new tour programs to Mt Baekdu and Gaeseong City, the latter of which is near the border with SKorea. Hyundai Group will have exclusive rights to operate tourism business to Mt Baekdu for 50 years. Sightseeing tours to Mt Baekdu, which is located on the border between China and NK, had been agreed by President Roh and NKorean leader Kim at last month's inter-Korean summit in Pyongyang. Currently, SKoreans go TO Mt Baekdu through the Chinese route.

President Roh reiterated his position that in order to ensure NK's denuclearization process, the leaders of 2 Koreas, USA and China must jointly initiate talks aimed at officially ending the Korean War. He was referring to his earlier suggestions that 4 nations jointly issue a declaration marking the beginning of discussions for replacing the current cease-fire pact, which was signed in 1953 between NK, the UN forces and China, with a peace treaty, so as to officially end the 1950-1953 Korean War. He believes that such a gesture signaling the start of a peace process would provide greater momentum for NK to end its nuclear weapon programs. The main opposition party made it clear not to support any official declaration of the end of the Korean War until NK completely dismantles its nuclear program.
 
Prime ministers of 2 Koreas met in Seoul for the first time in 15 years to create a blueprint for implementing the agreement at the last month's summit regarding peace and economic cooperation. Both PM agreed to launch internet and phone services at a joint industrial park in Gaeseong next year, and to launch a committee next month to push for a peace zone in the disputed West Sea. A cross-border railway linking to Gaeseong will begin regular freight operations from Dec 11. SKorea will also begin helping NK modernize their outdated railways and highways, and construct shipyards in NK's Anbyeon area from next year. The PM¡¯s talks will open every 6 months, starting with the second round to be held in the first half of next year in Pyongyang. The joint economic cooperation committee will also be held biannually with the first round on Dec 4 headed by deputy PM. The joint committee on the West Sea peace zone, headed by ministers, will open every 3 months, starting the first session in Gaeseong in Dec.

Korea and USA held a ground-breaking ceremony for the expansion of a US military base in Pyeongtaek, 70 kilometers south of Seoul, formally beginning the multibillion-dollar US base relocation project. In 2004, Korea and USA agreed on the Yongsan Relocation Plan and Land Partnership Plan to relocate the US Yongsan Garrison in central Seoul and 2nd Infantry Division at north of Seoul, to 2 hub bases in southern Korea, by 2008. Under the plan, the US military will return to Korea 35 military bases and 7 training facilities across the country, measuring 171 million square meters. Construction has been delayed however, following strong resistance from local residents and anti-American civic activists. The base relocation is expected to be completed by 2012. Korea has earmarked KW5.6 tril ($6.1 bil) for the relocation of the bases, about half of the total KW11 tril required. 2 countries are also close to concluding an agreement that Korea will bear 60% of the expenses for relocating the US digital command system from the Yongsan Garrison to the new installation. Under the plan, Camp Humphreys in Pyeongtaek will triple in size and become the US military's chief installation in Korea, in accordance with a worldwide realignment of US troops. The base will be remodeled to accommodate more than 44,000 US soldiers, their families, and Korean employees.

On Nov 20, the UN General Assembly committee adopted a draft resolution expressing "very serious concern" about human rights violations in NK, such as torture, the inhumane conditions in prisons, and the practice of conducting public executions. SKorean government abstained from this year's UN vote on the annual resolution, citing "special circumstances," in contrast to Seoul's approval vote last year following the North's Oct 9 nuclear test. This change of position has incited concern and criticism that the SKorean government is now neglecting humanitarian issues relating to Pyongyang, and focusing only on improving relations with the communist regime.

The Korean military is stepping up efforts to develop combat robots, aiming to deploy them from 2015, earmarking KW15 bil ($16 mil) for the project. All the required technology will take in place for the development of the combat robot by 2010.
Korea and Italy are competing to win a $1 bil deal to supply the UAE with about 40 trainer jets. Korea Aerospace is bidding for the contract along with Italy's Alenia Aer Macchi. Britain's BAE Systems earlier this week dropped out of the tender. Korea tendered its T-50 supersonic trainer jet and Italy presented its M-346. If successful, it would be Korea's first overseas sales of its indigenous supersonic aircraft, making it the world's sixth-largest exporter of supersonic airplanes. Korea Aerospace is supported by US Lockheed Martin Corp with a derivative of Lockheed's F-16 Fighting Falcon.

ECONOMY AND POLICY

The projections on Korea economic growth in 2007 and 2008 vary by various institutions, causing a deep confusion. Korean Government predicted not to be difficult to achieve GDP growth of 5% next year, despite the uncertainties in the economy of USA and China. IMF lowered its forecast on Korea's economic growth to 4.6% next year, from an expected 4.8% rise in this year. The World Bank forecast 5.1% in 2008, while Morgan Stanley said 4.8% for 2008 and 5.3% for 2009, citing Chinese demand for consumer goods and recovering domestic consumer sentiment. Nomura Holdings raised 5.2% in 2008 and 5.1% in 2009, from its earlier forecast of a 5% to 5.1%. However, Deutsche Bank and UBS are skeptical to say a slowdown 3.9% next year, due to the US subprime crisis, and high oil prices and interest rate hikes. Deutsche Bank projected Korean economic growth will slow to.
BOK had estimated in Oct that the Korean economy would achieve 5% GDP growth this year, and that the economy would keep expanding into next year. However, in Nov, it starts to concern on surging oil prices and uncertain global finance markets. BOK currently bases its economic projections on an average import oil price of $64 per barrel. If the figure rises to $80 per barrel, the GDP would fall as much as 0.6%.

Korean exports continued to climb to a record in Nov, thanks to surging sale of machinery and cell phone to China and the Middle East. Exports climbed 17.5% on year to a record $36 bil. Imports rose 26.5% to $33.9 bil on year as the value of crude oil soared 42.6%. The nation posted a monthly trade surplus of $2.1 bil, up from a revised $1.9 bil in Oct.
Korea's trade volume is projected to hit $720 bil by the end of 2007, up from $635 bil last year. Korea¡¯s trade volume for the first 9 months of the year jumped 12.1% on year, to $524.4 bil, compared to Hong Kong¡¯s $518 bil in trade which was 11th in global trade. Korea marked $100 mil export in whole year of 1964 and grew to achieve $1 bil export every day in 2007.
The growth rate of Korea¡¯s service sector accelerated in Oct thanks to strong output in the finance, wholesale-retail and telecommunication. An index rose 9% on year last month, up from a 3.5% on month. Korea's current account surplus in Oct hit a record, mainly because of the trade surplus on brisk exports, and a reduction in the service account deficit. The surplus reached $2.6 bil in Oct, the highest since Nov 2006.

The KWon's gains have made local trading companies uneasy, but for private individuals and households, a stronger won is a good chance to purchase US goods and spend dollars overseas. BOK's balance of international payments records that in 2000 asset transfers abroad totaled $694 mil and continued to climb as the figure hit $1 bil in 2002 and jumped to $1.8 bil in 2004 when KWon averaged 1,144.70.
Korea¡¯s overseas direct investment rose nearly 20% on-year in the first 9 months of this year, due to a surge in investment in the real estate sector. The nation¡¯s overseas investment reached $15.1 bil in the period, compared with $12.6 bil a year earlier.
The upper limit of $3 mil placed on individual overseas property investments will be removed next year, the Finance Ministry announced. The ministry will also allow foreign investors to purchase local bonds through omnibus accounts managed through International Central Security Depositories. These and other changes were included in the Finance Ministry's latest foreign-currency liberalization plans released Nov 8. The latest measures have been drawn up in an effort to raise foreign-currency liberalization standards. The plans also showed that local companies whose annual international transactions are worth more than $50 mil will be allowed to receive and make payments without providing documented evidence for the transactions from Dec, and also allow currencies and other payment methods such as gold exceeding $1 mil in value to be transferred in and out of the country without receiving approval from BOK from Dec. Individuals will also be allowed to transfer up to $50,000 to overseas accounts each year without providing documents from Jan 2008.
Kaupthing Bank, Iceland's largest bank, held an investors relations forum in Seoul to issue so-called kimchi bonds, dollar-denominated bonds issued in the Korean market. The size of the kimchi bond issuance is expected to be about $100 mil. To date, foreign companies wishing to raise capital within Korea have issued "arirang bonds," which are KWon-denominated bonds. The kimchi bonds would help the country manage the falling value of the US dollar against the KWon.

Universal Studios, owned by General Electric, and partners will build a $3.1 bil theme park in SKorea, its third resort in Asia. The resort, to be built in partnership with POSCO Engineering & Construction, will be located near Hwaseong, south of Seoul, and open in 2012. Entertainment and gambling companies, including Walt Disney and Las Vegas Sands, have expanded in Asia to take advantage of rising disposable incomes. Universal aims to attract 10 million visitors a year to the Korean park. The project will include hotels, a golf course and a shopping outlet.
Gyeonggi Province has secured $227 mil worth of investments, and agreements worth $5 mil to export agricultural goods, as a result of a campaign across USA. One of the major deals is a $120 mil agreement signed with retail developer Chelsea to construct a premium outlet in Paju. Others include an $83 mil investment by 3M to build parts manufacturing plants for LCD panel production in Hwaseong, a $14 mil for building a paint factory in Pyeongtaek by Rohm & Hass, and a $10 mil proposed injection by Sigma-Aldrich aimed at strengthening local semiconductor suppliers.

Kookmin Bank, Korea¡¯s biggest bank, agreed to buy Hannuri Investment & Securities, a small local brokerage house, for KW266.3 bil ($291.5 mil) from its largest US shareholder J.D.K. Investment Corp, to enter the securities business. Kookmin is the only lender among the country's 4 biggest banks that is not under the control of a holding company and does not own a brokerage firm under its wing.

The Bank of Korea is to purchase KW1.5 tril ($1.6 bil) worth of government bonds to stabilize the market, as massive selling has made prices drop and yields surge to 5 year highs. The central bank's move aims to cool down the jittery financial market sentiment. Besides, the tumbling bond market could negatively affect the stock markets, which have been volatile in recent weeks. BOK said in a statement today that it will buy three-year, five-year, and 10-year government bonds earlier than the initial purchase plan that had been scheduled for early next year. 5 years bond recorded 6.09%. Though BOK announced to buy KW1.5 tril worth bond, market showed little response.
Foreign investors currently hold around KW26 tril ($28 bil) worth of domestic bonds, up nearly 600% from the beginning of the year, as the US subprime mortgage crisis has discouraged them from investing in risky equities. The buying spree started in Aug, when the mortgage loan malaise triggered a global credit crunch. Foreign financiers have purchased some KW17 tril of corporate and state bonds in the Seoul market over the past 4 months, in contrasts with massive stock sales over KW20 tril by foreign investors on the Seoul bourse this year.

Korea imports roughly 900 million barrels of oil every year. In 2006, the country imported oil worth $55.8 bil, equivalent to 18% of the country's annual imports. The price of Dubai crude oil kept renewing record high, due to various reasons, such as drop in US crude stockpiles, falling USD value and bad weather in oil producing area, in the box of $82.41 - 87.45 - 84.8 - 89.8 - 85.21 per barrel through the month. 
Korea National Oil Corp, the state-run energy developer, will lead a Korean consortium to explore for oil and gas in Iraq. The consortium, including SK Energy, signed a production-sharing contract with the Kurdistan Regional Government for the Bazian block in northeastern Iraq. The area is estimated to hold more than 500 million barrels of probable reserves. KNOC is to set up a local office for the project in Jan next year. Korea National has a 38% holding in the block.
Korea Eximbank reported that a 10% increase in the price of oil usually shrank consumption by 0.6% and industrial output by 0.3% from 1992 to 2005 and pushed the inflation rate nearly 0.4%.

CHAEBOL

Samsung Group, Korea's mighty industrial conglomerate, has been attacked by a former employee who blew the whistle on its secret slush fund and illegal lobbying. The whistleblower, Kim Yong-chul, an attorney who headed Samsung Group's legal affairs team until 2004, kept disclosing secret documents and proving the involvement of Chairman Lee in the illegal lobbying of politicians, government officials and public prosecutors. He claimed 4 major allegations that Samsung managed slush funds in bank accounts opened under the names of its former and current employees, Samsung attempted to bribe public prosecutors, politicians and other influential figures, and that chairman Lee Kun-hee was directly involved in the illegal lobbying. The third allegation with the sale of Samsung Everland convertible bonds, which made possible the father-to-son transfer of control of the conglomerate, and lastly, Samsung cooked its books to cover up all those transgressions.
Kim presented the slush-fund accounts under his own name, some KW5 bil ($5 mil) was deposited in those accounts. He also claimed he has a list of bribe-takers, including high-ranking prosecutors, politicians and senior government officials. He insisted that the group fabricated "facts," and persuaded witnesses to commit perjury during court proceedings on the group's alleged transfer of wealth from Chairman Lee Kun-hee to his son Lee Jay-yong, by arranging the sale of convertible company bonds to the junior Lee at below-market prices, which enabled him to take control of Everland, a de facto holding company of Samsung Group.

The Samsung Group fired back, in a 25-page press release, said it now cannot but clarify its position regarding the "groundless accusations and false claims," as they seriously threaten its image at home and abroad.
2 civic groups jointly filed a lawsuit against Samsung Group chairman Lee Kun-hee and 4 other executives, citing alleged embezzlement and bribery. The suit also targets some bank employees who are suspected of helping Samsung to raise secret funds via accounts under borrowed names.
Both liberal and conservative parties have submitted bills calling for an investigation by an independent panel, but each for different reasons. The GNP is seeking to use the probe to attack the liberals by highlighting illegal donations Samsung allegedly gave President Roh and his allies in 2002 to help finance Roh's presidential campaign. The UNDP, on the contrary, hopes voters will associate the chaebol's reported irregularities with the allegations against the GNP candidate. The National Assembly's judiciary committee endorsed a special probe into allegations surrounding Samsung Group.
Korea's 5 major business groups joined the voices to oppose a move by politicians to appoint an independent counsel to look into Samsung Group's alleged illegal lobbying, concerning that the investigation by an independent counsel may be used politically, given its sensitive timing of presidential election on Dec 19.
The prosecution formed a special taskforce to investigate allegations that Samsung bribed prosecutors. The prosecution, which itself is accused of receiving bribes from Samsung, has vowed to help get to the bottom of the scandal, with the help of local civic groups and Kim Yong-chul. In a sweeping probe into corruption allegations, prosecutors have banned Group chairman Lee and several other executives from leaving the country. State prosecutors raided a Samsung Group securities brokerage in a search for evidence of slush funds it allegedly managed for the conglomerate, expecting some stock transaction records and accounts of other executives.
President Roh has denied the allegations against him, saying he did not receive illegal donations from Samsung Group in the form of a "congratulatory gift" after he won the 2002 presidential election. He accepted the parliamentary bill to launch an independent probe into Samsung's graft allegations, after threatening to veto such a bill. Roh will appoint a head counsel from among 3 candidates nominated by the Korean Bar Association, after the bill passes the Dec 4 Cabinet meeting. The actual investigation should begin in about 3 weeks, and last up to a maximum 105 days.

Samsung Electronics (SEC) widened its lead over Motorola with global market share of mobile phone rising to 14.9% in the third quarter from 14.4% from a quarter earlier, while Motorola¡¯s share slipped to 13% from 13.7%.
SEC is solidifying its No 1 position in the global television market, with a 17.7% share by value. Japan's Sony and Korea's LGE rounded out the top 3, with market shares of 10.8% and 9.6%, respectively. It is the seventh straight quarter that SEC claimed the top spot in worldwide sales of TVs.
SEC was honored by the government for setting a new record in exports, by receiving the $45 bil Export Tower in the Trade Day celebration ceremony on Nov 30. The firm became the first Korean firm to break the $45 bil mark during the July-June period. Samsung received the exports award 2 years ago, when it broke the $40 bil mark in exports for the first time.
SEC has signed a sponsorship contract to support the 2008 Beijing Paralympic Games. Samsung sponsored the 2006 Torino Paralympics and has been the official partner of the International Paralympic Committee since 2006. The Paralympics is held every 2 years following the summer and winter Olympics.
SEC sold a record $2 bil worth of liquid crystal display panels in Oct, strengthening its leadership in the global display industry. That was the 30th straight month that the Korean electronics giant ranked No 1 in the world in monthly LCD sales. Oct sales rose by 13% on month, and by 56% on year, attributing to increased sales of new computers and larger-sized televisions in Oct. The firm accounted for 38% of global sales of large-sized TVs in the third quarter.

The state-run Korea Development Bank and 11 other banks will provide a syndicated loan of $3.9 bil to Doosan Infracore to finance the company¡¯s takeover of 3 units of US based Ingersoll Rand. In July, Doosan Infracore, Korea¡¯s construction equipment maker, agreed to buy Ingersoll-Rand¡¯s Bobcat and 2 other units for $4.9 bil, the biggest-ever overseas acquisition by a Korean company.
Prosecutors arrested executives of STX Heavy Industries for stealing core technical data from their former employer Doosan Heavy Industries and Construction. The arrest of 2 top executives is expected to deal a blow to the latecomer in the desalination facilities market. Doosan, as the world's No 1 supplier of desalination facilities, has been receiving an increasing number of desalination and power plant orders worth trillions of won from Middle East. STX recently jumped into the business by recruiting former executives from Doosan, who allegedly stole Doosan trade secrets stored in computer files. The prosecution confirmed that the documents STX used to bid for the projects had exactly the same data in Doosan's files, including some clerical errors.

POSCO has opened its first European processing center in the Special Economic Zone in Kobierzyce near the city of Wroclaw, Poland. The $14.8 mil plant is equipped with a slitting line and a shearing line capable of processing 140,000 metric tons of cold rolled steel products a year. The processing center would help the steelmaker increase sales to the large automakers such as General Motors and Volkswagen AG that have production facilities in Poland and other European countries.
POSCO has signed an agreement with the Busan city government to build a power plant fueled with recycled domestic waste materials in Busan. The project is estimated to cost KW180 bil ($192 mil). Scheduled for completion in 2010, the power plant will use recycled waste materials from a landfill located in western Busan to produce 25 megawatts of electricity an hour.

Daewoo International delivered 200 buses to the Azerbaijani government, the first batch in sales contract for 1,000 metro buses. The country bought $60 mil worth of buses from Daewoo to revamp the transportation system of its capital city, Baku.
Rotem Co, a unit of Hyundai Motor has won a $310 mil contract to supply 192 rail cars to the Delhi Metro Rail Corp of India. The order calls for Rotem to deliver the rail cars from April 2009 to June 2010 for subway lines in the Indian capital.

Hynix Semiconductor is set to become the first Korean firm in the market of carbon dioxide emissions trading amid a global race to cash in on the highly lucrative business of saving the planet. The firm has signed a contract with Ecoeye, a local environment consultancy, to cut greenhouse gas and sell the carbon credits in the market. The firm's plan for carbon reduction comes as Korea, the world's 10th-largest greenhouse gas producer, prepares to start a carbon credit exchange this year. Korea plans to grow its carbon credit exchange into a KW450 bil ($495 mil) market by 2012.
WTO has ruled that Japan's countervailing duties on computer chips made by Hynix are illegal and ordered Tokyo to remove the punitive trade barrier. Korea filed a complaint with WTO in March last year after the Japanese government imposed a punitive tariff of 27.2% on Hynix memory chips, accusing Hynix of receiving an unfair subsidy from the government in 2002. Hynix was recued from bankruptcy in late 2002 by a KW3.25 tril ($3.5 bil) bailout by its creditors.

Korea won $31.5 bil worth of orders for overseas plant projects from Jan to Oct this year, mainly from oil-producing countries in the Middle East. The amount is the highest on record and up 45% on year, attributing to strong demand of Mid Eastern countries on infrastructure improvements, building power plants and desalination facilities. The figure is likely to reach $35 bil by the end of the year.

Korean Air Lines, the nation's largest air carrier, plans to launch a low-cost airline company next year, in a bid to meet the fast-growing demand for lower-cost international flights. The new airline, tentatively named Air Korea, will serve routes to the countries in Asia, including China, Japan and Thailand. The new carrier will run 3 Airbus A300s and 2 Boeing 737s. Transportation Ministry approved budget carrier¡¯s international flights under the condition that it remains part of Korean Air, despite its recent announcement that all new airlines are required to operate domestic flights for at least 2 years before starting international flights.

MONETARY AND ECONOMIC INDICES

Korean stock market was wandering in wilderness through the violent gale of renewed concern on US subprime mortgage loan, yen carry trade and China¡¯s policy of economic restrain. Korea Composite Stock Price Index started the month at 2063, then fell to bottomless abyss to 1,799.02, the first drop below 1,800-point mark in 3 months, and recovered 1900 level to 1906 at the end of the month by the expectations of USFR¡¯s interest rate cut.
Exchange rate of KWon has been softened a little bit. It began at 904, rose to 931 then ended at 922 against USDollar. KWon soared to 899.6 against the USDollar during intra-day trading on Nov 7, the strongest since Aug 1997. As KWon is continuing its rally, banks offer risk-hedging loan services to help buffer the impact of the strong KWon. The KOEXIM Bank has been offering a forward-exchange hedging service to exporters since April with $61.9 mil, as of Sept. Korea Exchange Bank offers a similar risk-averting program called HedgeMaster, enabling customers to analyze exchange risks, and calculate the hedge ratio, so as to make quicker and better business decisions.
About 30% of the country's registered small and medium sized exporting companies are suffering a loss in operating profit, due to the fluctuation the exchange rate. But more than 40% of SMEs have made no efforts to hedge against the exchange risks. The Commerce Ministry aimed at helping SMEs recording less than $1 mil in export includes exempting redemptions for those that apply for exchange risk insurance at the Korea Export Insurance Corp and is to help SMEs, unable to pay their premium.
Korea¡¯s foreign exchange reserves amounted to $261.93 bil, up $1.79 bil from Oct, as of the end Nov.
The jobless rate fell to 3.1% in Oct from 3.2% in Sept, the lowest in 5 years as service and financial companies hired more workers.
The Bank of Korea left the benchmark interest rate unchanged at 5% for the third consecutive month as external uncertainties, including soaring oil prices and shaky global financial markets. Mortgage loan rates are rising as banks increasingly issue more certificates of deposits at higher costs. Home-backed loan borrowers should pay a maximum annual interest rate of 7.61% on floating-rate mortgage loans, up 0.55% on year. The yield on 5 years corporate bond drastically rose from 6.05% at the beginning to 6.47% at the end of the month.
Korea¡¯s consumer prices rose a higher-than-expected 3.5% in Nov on year due to an increase in prices of oil, agricultural goods and industrial products.

SHIPBUILDING AND SHIPPING

Newbuilding activities kept at historical high, but not frantic as before. Delivery position in Korea is very tight in 2011, and Japanese yards started to talk 2014 delivery. Banks are becoming tougher on their financing for new building, especially to emerging yards. Many resale candidates of bulkers, from capesize to handy, to be built in Korean and China, are pouring out into the market. Many second hand ships, old and new, were brought in S&P market but a restricted number of transactions were recorded. The effect of increasing price of raw material and engine, and continued fall of USDollar is now coming as the real threat for the shipyard to face in the days to come. BOK recommended domestic shipbuilders to settle contracts in KWon and to spread hedging activities over time to curb the currency's gains against the dollar.
Korean yards recorded earning surprises in third quarter, thanks to a rise in ship prices and cost-cutting efforts. HHI posted its net profit of KW434.7 bil up 10.76% on year, operating profit KW368.8 bil up 11.35%, on the sale KW368.8 bil. HMD recorded operating profit KW93.2 bil up 57.96% on year, net profit KW80.8 bil up 66.7%, and sale KW700 bil up 14.48%. SHI with operating profit KW132.4 bil up 806.8%, net earning KW141,5 bil up 232.2%, on sale of KW2.24 tril up 41.1% on year, the biggest amount since its establishment. STX followed with sale KW538.3 bil and operating profit KW35.4 bil. Hanjin posted the sale KW536.2 bil and operating profit KW52.1 bil.

HHI won the order from Danaos for 3 x 10000 teu, NYK 8+1 x 4,900-teu boxships, TNT 3 x 318K VLOCs, Hanjin Shipping 2 x 180K bulkers, Dong-A Tanker 1 x capsize and Cido Shipping 2 x 112K tankers. Hyundai Samho erected 1200 ton Gloiath crane with the height of 125m and 142m width, to be used for the land construction of 12 x super size ships a year. HMD received order from Grimaldi Group for 5 x 3900 lm ro-ros and Latvian Shipping 4 x 52K MR tankers.
SHI got the order from Seaspan for 5 x 4500 teu post-panamax boxships.
DSME received an order to build 4 x 317K VLCCs at a record price of about $151 mil from Vela International. DSME has a total of $18 bil in new building contracts this year, surpassing its target of $17 bil. The company's backlog rose to about $39 bil, representing more than 3 years of work.
STX secured the healthy orders from Esref Cerrahoglu + Pekin Baran for 2 x 81K bulkers, Kaptanoglu group 2 x 81K post-panamax bulkers, a European 4 x capsize bulkers, STX PO 2 x 98K bulker, and GESCO 2 x 81K Kamsarmaz bulker.
Daesun signed a contract with Cosmoship Management for 4 x 25K chemical carriers.
SPP got the order from Apex Maritime for 2 x 35K, Fratelli D'Amato 4 x 35K, CF Ahrenkiel 6 x 35K bulker, and Aegean Bulk 2+2 x 59K bulkers. SPP Shipbuilding was reported to seek raising up to $300 mil in a 2008 IPO in Seoul to bankroll expansion.
Orient Shipyard agreed with Salamon AG to build 4+2 x 180K capesize bulkers and Geden 4 x 59K bulker. Jinse Shipbuilding expanded its involvement in new building with Metrostar Management for 16 x 32K bulker and Lorentzn 3 x 13K chemical carrier. Sekwang won the order from Lauritzen Kosan for 2 x 9K LPG ethylene carriers.
C& Heavy held the first steel cutting ceremony, starting its shipbuilding activities. It secured 30 x 81K bulker orders and plans to deliver its first ship at the end of 2008.
Hanjin Shipping has recorded the net earnings KW112.3 bil in third quarter. Revenues climbed 15% to KW1.84 tril and operating profit of KW122.7 bil, almost 3 times on year, thanks to the profit in container sector and recovery in dry cargo market. HMM also posted surprise performance with the sale of KW1.35 tril up 9.1% and operating profit KW93.6 bil up 649% on year. Korea Line posted the sale KW1.37 tril up 66%, operating profit KW220.1 bil and net profit KW316.2 bil up 433% on year.

KSS Line ordered a 4K chemical carrier with Shitanoe Shipbuilding in Japan for the delivery of 6/2010 at KW15.5 bil. STX PO placed order with New Times Shipbuilding in China for 3 x capsize bulkers for the delivery of 2010 with the budget of KW239 bil.