Policy stunts industry¡¯s energy efficiency

Korean corporations' energy investment and energy efficiency are very poor, so they are suffering even more difficulties under the high oil prices.

So far, the government has maintained low prices of fuel used for industrial purposes, so companies have failed to sharpen their competitiveness in energy costs as they constituted only a tiny portion of their production cost.

In comparison, with an input of the same amount of energy, Japanese metal companies produced 27% more products compared with their competitors in Korea.

The Bank of Korea reported Tuesday that the financial cost's portion in a corporate sales turnover was 6.9% as of 1999 and that of distribution cost stood at 13.2%. On the other hand, energy expenses accounted for a meager 1.78% of their total sales. Analysts point out that it is because of the government's low-price energy policy for industries.

The government is taking a protective policy to keep industrial fuel prices low by maintaining electricity prices at below production cost and granting tax-free benefits to bunker-C oil, which is used for industrial purposes. Such a low energy price policy motivated domestic companies to focus on obtaining low-interest loans rather than saving energy.

An executive of a large company admitted that companies would rather get low-cost financing from a bank than make efforts to save energy. Because of such apathy among domestic corporations, their energy efficiency is very poor.

Lee Myung-Jai mjlee@donga.com