Go to contents

Pending problems faced by the business circle

Posted January. 31, 2001 12:59,   


The listing of Samsung Life on the Korea Stock Exchange and sale of Hanbo Iron and Steel and Korea Life Insurance -- these are the three major problems that relevant corporations or creditors have to tackle in order to make a fresh start.

However, the government has failed to make a clear decision on these matters, and the side effects have reached a risky level. Companies that are subject to sale are even more insolvent, and creditors are endlessly fighting companies over settlement of debts. "It is because the government, which holds a key to the solution of the problem, just wants to keep them as they are for being controversial issues with protests by involved parties and questions of special favor,¡± Kim Suk-Jung, managing director of the Federation of Korean Industries, said. ¡°It is desperately needed to tackle the questions by preparing for any blames."

Endless fight between Samsung and its creditors:

These days, the biggest headache of Samsung Group affiliates is the question of 2.45 trillion won in Samsung Motors' debt. Officials of the group's restructuring team and creditors hold meetings almost everyday, but they failed to find a solution to the question. They just confirmed the difference of view among themselves. It is primarily because Samsung chairman Lee Kun-Hee could not cash his 3.5 million shares of Samsung Life he offered as collateral for Samsung Motors' debt, due to the delay in listing of the insurer.

In fact, the government promised that it would make a decision by the end of 2000 on the question of listing Samsung Life on the Korea Stock Exchange. However, the government postponed the decision because it failed to work out a compromise on sensitive issues such as the dividend ratio of shareholders and policyholders.

Both Samsung and its creditors are waiting for any decision by the Financial Supervisory Commission, which is dealing with the question. But it is hard to predict when it will be resolved.

Officials of Samsung and creditors contend that they are fighting each other uselessly, as the government has changed its attitude. Bank officials claim that it would make it difficult to enhance their financial soundness, while Samsung executives complain that they are wasting time and energy wrongly at a time when they have to focus on working out a strategy to sharpen the company's international competitiveness.

Ailing Hanbo, Drifting Korea Life Insurance:

Hanbo¡¯s Dangjin steel mill has been deserted for the past four years since its dishonor in January 1997. The 3,000 workers at that time have now declined to 580. On Jan. 30, bank creditors of Hanbo disclosed the result of consultation that the A Section of the hot iron plant and the B Section of cold rolling plant will be separated and then sold off. Since the groundbreaking for the B Section in 1995, 3.3 trillion won has been injected into the plant. But due to difficulty of affording additional construction cost, the construction work has been stopped.

What¡¯s worse, the existing facilities also are out of order. According to the report, the A Section will be sold, recovering some of its costs, but the B Section, which needs an additional 1.8 trillion won, will be left deserted. It means that the total construction cost of 4.5 trillion won has vanished into thin air.

Korea Life Insurance, where public funds amounting to 2.05 trillion won were injected in November 1999, is state-run externally, but in fact, is operated by the private sector. Some large enterprises including Hanwha showed concern. However, with regard to its disposal method, the Financial Supervisory Committee and Ministry of Finance and Economy differ, making it difficult to meet the disposal schedule.

Park Won-Jae parkwj@donga.com