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Libya waterway project in jeopardy

Posted March. 11, 2001 19:35,   


If a decision is made to go ahead with bankruptcy procedures against Dong-Ah Construction Industrial, the Libya waterway construction project will be directly affected.

On Mar. 3, the Libyan government sent a letter to Seoul that read, ``In the event the Korean courts decide to force Dong-Ah Construction Industrial into bankruptcy, a claim for $1.3 billion will be made.`` The letter was apparently sent on the premise that the bankruptcy of Dong-Ah Construction Industrial would make impossible its ongoing participation in the project.

Furthermore, the Libyan government also filed suit against Dong-Ah Construction Industrial and its partner Korea Express for $3.3 billion in damages, which includes the cost of changing construction companies. Apparently, this action is an indirect notification that if Dong-Ah Construction Industrial goes under but remains a legal entity, it will no longer be considered part of the project.

The Seoul District Court recently said, ``In order to minimize the social and economic impact that would result from the company`s withdrawal from the Libya project, permission would be given for its continued involvement based on the approval of creditors.``

The Ministry of Construction and Transportation (MOCT) said the project could be finished by the scheduled completion date of June 2002, even if Dong-Ah Construction Industrial goes through bankruptcy proceedings. Until the liquidation process is completed and creditors are apportioned their dues, the company will continue to exist. This process may in fact last several years.

The second phase of the Libya waterway project, jointly undertaken by the Dong-Ah Consortium, made up of Dong-Ah Construction Industrial and Korea Express, is almost 90% finished.

The MOCT and Dong-Ah Construction Industrial are concerned about what to do if Libya demands Korea Express to complete the project alone or terminates the contract and brings in a new construction company. If Korea Express, which owns 12.7% of the Dong-Ah consortium, takes responsibility for the completion of the project, it will have to undertake Dong-Ah Construction Industrial`s payment guarantees of 690 billion won.

Korea Express has no construction experience and expects the government to push a domestic construction company to continue the project. However, if Libya decides that Korea Express has joint responsibility, in the worst case it would have to take over the project.

Lee Choon-Hee, bureau chief of construction at MOCT, said, ``To prevent the problem from escalating, we have informed Libya on many occasions that Dong-Ah Construction Industrial will have no problem continuing with the project and pro-active action discussions will be held in the future.``

In view of MOCT`s participation in the original contract-signing ceremony, Libya may consider that the Korean government guaranteed the project. This may sour relations between the two nations.