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  Korea Report - July 2008
  Author : Hwang & Co     Date : 08-09-22 10:04     Hit : 42157    
Topics
-5 months old Lee administration surrounded by serious diplomatic barriers, such as the import of US beef, Japanese declaration of sovereignty of Dokdo islet and NK¡¯s killing SKorean tourists.
-President Lee warned a ¡°third oil shock.¡±
-Korean female golfers dominate LPGA.
-NK declared uranium enrichment program and its proliferation.
-6 way talks resumed to establish a verification mechanism.
-Korea posted trade deficit of $1.62 bil in July.
-Finance Ministry and BOK intervened forex market to strengthen KWon.
-FSC indicated a decision on KEB sales to HSBC soon.
-Government to shelve privatization plans of state-owned energy firms.
-Ex Samsung chairman got a suspended 3-year sentence.
-Hyundai Kia Auto Group became fifth largest car maker in the world.
-Inflation rate jumped to 5.9% in July.
-POSCO to build a mill to expand supply of shipbuilding steel plates.
-HHI invests for the diversification of business line.
-Sale of DSME is on the track.

GOVERNMENT AND SOCIETY

American beef went on sale in July. Big retailers and supermarkets, however, have said they are not going to sell American beef. Even McDonald's and Outback steak house are trying to assure customers that they are using Australian beef, not American meat.
The government implemented the new country-of-origin labeling system on beef, as well as pork and chicken, and even on rice and kimchi from Dec. All restaurants, retailers, and catering services must notify customers of the origins of the food. If a restaurant is found to have violated the law, it could be fined KW30 mil and the owner could be sentenced to up to 3 years in prison and to temporarily close the restaurant.
Some 200 kg of American meat put on sale was soon sold out. With the candlelight protest continuing for months against US beef imports, reactions were strikingly different in the market. The US share of the imported beef market has reached 10% just 2 weeks after Seoul lifted its ban on American beef imports. The price of American beef was higher than meat products imported from Australia and New Zealand. The price of American beef was $7.136 per kg while the prices of other beef were $5.036 and $3.696, respectively, because importers are selling only boneless meat from US cattle younger than 30 months old.
Korea bought 246,595 tons of US beef valued at $815 mil in 2003, making it the third-biggest export market for the meat behind Japan and Mexico.
More than 100 vendors in central Seoul filed a collective damages suit against the organizers of protests against US beef imports, requesting KW1.73 bil ($1.72 mil) in compensation for the losses they sustained from the 2-month long candlelight vigils since early May. They signed up for the litigation against 11 civic groups, individuals, and the government. Seoul City also demanded the rally organizers pay a fee worth KW12 mil for using Seoul Plaza at least 40 times since May 14.
The Korea Economic Research Institute estimated that direct damage from the protracted vigils may amount to about KW668.5 bil ($648.4 mil), and that combined losses, including those incurred by delays in carrying out state tasks, could top KW1.92 tril, which translates to over 0.2% of the nation's GDP.

Prosecutors requested MBC, a major local broadcaster, submit all materials from its program that critics allege exaggerated the risks of mad cow disease associated with US beef. PD Notepad, an investigative news program, carried 2 installments, entitled "Is US beef safe from risks of mad cow disease?" on April 29 and May 13. The program also falsely reported that Koreans are genetically more susceptible to the brain-wasting illness. They have fueled mad cow scares across the nation, helping trigger waves of protests that have continued for nearly 3 months.
The center of controversy are the program's descript-xion of how an American woman suffering from Creutzfeldt-Jakob disease, died; and its allusion of mad cow disease as a likely cause of the symptoms of so-called downer cows, which cannot stand or walk. Controversy further escalated as one of the translators for PD Notepad argued that the problem was caused not by mistranslation but by the producers' intention to highlight their particular perspective in the editing process. The translator also said she "repeatedly and strongly" asserted to PD Notepad producers that linking downer cow directly to mad cow disease is a distortion.
Prosecutors sent a 140-page questionnaire to MBC, which has so far refused to respond to the high-profile inquiry. MBC says the inquiry undermines the freedom of the press. The Korea Communications Standards Commission took disciplinary action against the program, ordering it to make an official apology to the viewers.

President Lee Myung-bak issued a warning about what he called a "third oil shock," asking for national unity to fend off financial predicament stemming from rising prices and a global slowdown, saying "This is the time for us to hold the torch for economic survival," and "The government, entrepreneurs, workers, all the people should unite and pool their energies into efforts to overcome the current difficulties." He also said that he would not tolerate any illegal or violent demonstrations against US beef imports, while vowing efforts to ensure the safety of imported US beef. He called on opposition parties to end their month-long boycott of the National Assembly and cooperate to implement measures to revive the economy. His remark came as the nation faces risks of stagflation, amid rising prices and a slowing growth.
President Lee named new ministers of education, welfare and agriculture in a partial reshuffling of the Cabinet which has been mired in a dispute over the US beef imports. He retained Prime Minister, Finance Minister and other key ministers for the sake of the stable and consistent functioning of the government. The scaled-down reshuffle angered opposition parties and civic groups which have called for a sweeping replacement of ministers. The nomination came one month after the entire Cabinet tendered resignations amid the controversy over beef imports. The fracas forced him to apologize twice and replace almost all his senior staff at Cheong Wa Dae.

Visiting UN Secretary-General Ban Ki-moon urged the Korean government to expand its contributions to the United Nations and play a greater role in solving global issues, such as peacekeeping operations, the climate change, the food crisis and official development assistance. The government currently seeks to expand its official development assistance to 0.2% of its GNI by 2012, from current 0.1%. Korea's PKO participation also remains relatively low at 400 deployed troops.

Japanese government announced the plan to include its sovereignty claim over Korea's easternmost islets of Dokdo, called Takeshima in Japan, in a curriculum handbook to be used by teachers at junior high schools and in texts by private publishers. The handbook is slated to be in use from 2012. The handbook specifically advises teachers to emphasize that sovereignty over Dokdo is disputed, and considers the issue similar to its territorial dispute with Russia, referring to 4 islands called by Russia as "the Southern Kurils."
The Foreign Ministry released a statement condemning the latest move by Japan and demanded prompt adjustment, saying "Dokdo is our territory historically, geographically and by international law."
Dokdo and Ulleungdo were incorporated into Korea's Shilla Dynasty in the 6th century. Japan has been claiming sovereignty of Dokdo since 1905, after its victory in the Russo-Japanese War that preceded its colonization of Korea in 1910. After Japan's colonial rule ended in 1945, Korea regained control over the islets and has stationed police guards there.
A small cluster of rocky islets in the rich fishing area is administered by Korea since 1953 and currently occupied by a SKorean police unit. Government is to fortify security around the islets, enhanced inspection surrounding the islets including those for fisheries and the ecosystem, and also seek to hold academic seminars and educational programs for students to enhance the recognition of Dokdo as Korea's territory. There are currently 6 Korean citizens registered on Dokdo. The island, comprised of 2 main islets and 33 smaller rocks, is also inhabited by a small Korean police detachment, administrative personnel and lighthouse staff. The number of visitors surpassed 100,000 last year. Korea has been had a full-time squad of police on the islets since 1956.
The latest government plan includes building a maritime science research base, expanding the number of fishermen's lodges, constructing a camp for students, and creating a marine hotel.
President Lee stressed "Japan has displayed a clear intention to turn Dokdo into the site of an international territorial dispute. We must take long-term and strategic countermeasures." Lee stressed that it is worth trying to urge Japan to co-write history textbooks just as Germany, France and Poland did.
The US Board of Geographical Naming jumped into the chaotic dispute, by changing Dokdo's status to "undesignated sovereignty" on its website, from its previous call Dokdo "Liancourt Rocks" as Korean territory since 1977. The name "Liancourt Rocks" derives from Le Liancourt, the name of a French whaling ship which allegedly spotted the Dokdo islets in 1849.
Prime Minister Han visited Dokdo as part of a government campaign to protest Japan's claim of sovereignty over the islets. Han, the first PM to visit Dokdo, also participated in a ceremony for installing a marking stone on the islets. The naval forces conducted defense drills near Dokdo. F-15K fighter jets and ships took part.
After a week of public outbursts and increased diplomacy from Korea, a US naming agency has restored Dokdo's sovereignty from its recent classification as "undesignated sovereignty" to Korean. The change was made, just hours after US President George W Bush specifically ordered the readjustment.
Seoul has turned down Tokyo's recent proposal to hold a bilateral meeting of foreign ministers on the sidelines of the ASEAN Regional Forum in Singapore. The government will also reconsider attending the trilateral talks with Japan and China in Sept, and in arranging the planned visit by Japanese PM Yasuo Fukuda this Oct.

The International Oil Pollution Compensation Funds has raised the estimate for the oil spill damage at Taean to KW573.5 bil ($552.5 mil) from initial estimation of total between KW352-424 bil. The IOPC paid part of the compensation to local fishing communities engaged in the clean up in July. The oil spill contaminated a 300-km-long stretch of western coastline in Korean peninsula, having hit 101 islands, 15 beaches, about 35,000 hectares of fish farms and fishery facilities, and affected about 40,000 households. The oil spill took place last Dec 7 when 12,000 tons of crude oil leaked into the sea following a collision between a VLCC and a seabound crane.

Koreans worked longer hours but made less money than their peers in OECD. Korean people worked an average of more than 2,000 hours annually in 2007, with the average annual wage at about 60% of the OECD average in 2006. Korea's average annual hours of work per person were 2,261 in 2007. This was 200-900 hours more than its OECD counterparts. Meanwhile, the average Korean employed full-time earned $25,379 in 2006, 64% of the OECD average of $39,743.
The life expectancy in Korea stood at 79.1 years in 2006, slightly above the OECD average of 78.9 years. Korea's health spending per capita grew annually by 10.7% between 2000-2006, whereas the OECD average was 5%. Korea still remains one of the lowest spenders in health care, with total health spending of 6.4% of its GDP and the health spending per capita of $1,480, far lower than the OECD average of $2,824.
The employment rate of women with college-level education in Korea has been stuck at the bottom for 3 consecutive years among the members of OECD. Korea's employment rate of college-level educated women was 58.5% in 2005, far behind the OECD average of 78.9%. Iceland had the highest rate with 89.7%. The biggest problem was due to the women in their 30s deciding to leave work for marriage-related reasons.

Expatriates accounted for 1.8% of the Korean population, as the nation has drawn more workers and spouses from Asian countries. The non-Korean residents here increased 23.3% on year to 891,341. Korea's total population was estimated at 49.35 mil.
The maximum employment period for migrant workers will be extended to 5 years from 3 years. The Labor Ministry announced a revised bill on employment of foreign workers. The bill will be submitted to the National Assembly for approval before taking effect presumably in April next year. As of late April, 377,032 foreign workers, including 260,749 overseas Koreans, were employed.

Alia Sabur, 19-year-old lady, the world's youngest university professor, will start teaching at the Department of Advanced Technology Fusion of Konkuk University in the fall. Alia started playing the clarinet when she was 6. Alia received her doctorate and master's degree in materials science engineering from Drexel University in Philadelphia after getting her bachelor's degree in applied mathematics at Stony Brook when she was 14.

Anthony Kim is joining the short list of challengers to Tiger Woods, by his victory at the AT&T National PGA golf tournament. Kim unleashed a bogey-free round of 5-under 65 for a 2-shot victory over Fredrik Jacobson on July 6. Kim became the first American under 25 since Woods to win at least twice in the same year on the PGA Tour. He moved up to No 6 in the Ryder Cup standings, virtually assuring himself a spot on the American team in Sept.
Seon Hwa Lee, 22, birdied the final hole for a one-stroke victory over Jane Park and Meena Lee, in all Korean party, on July 6 in the LPGA Tour's NW Arkansas Championship. Seon Hwa Lee closed with a 4-under 68 to finish at 15-under 201. Lee won the Ginn Tribute last month and the Women's World Match Play last year.
Second-year pro Ji Young Oh of SKorea won her first tournament on July 20, sinking a 6-inch putt for par to win the State Farm Classic in a playoff over 19-year-old Taiwanese rookie Yani Tseng. Oh said "I would love to interview in English," she said through the interpreter, "but I couldn¡¯t, because my mind is totally blank." Tseng, who won the LPGA Championship for her first victory, said 3 of her closest losses, as a pro and an amateur, have come to Koreans. "I don't like playing with Koreans," she joked.

NORTH KOREA AND NATIONAL DEFENSE

NK has presented a declaration on its alleged uranium-based nuclear program and nuclear proliferation to Syria, separate from its previous declaration of the plutonium-based nuclear program. Chief negotiators of 2 Koreas and USA gathered in Beijing to review NK's declaration and establishing a verification mechanism. For complete verification, USA and its allies believe that the North should allow any impromptu on-site visits, extraction of samples and interviews with NKorean scientists. NK has so far only acknowledged the existence of UEP and proliferation without offering direct evidence. Washington has handed over 4 pages of a draft concerning how to formulate and operate the verification, and is waiting for Pyongyang to respond.
NK has been promised energy aid worth a total of 1 mil tons of heavy fuel oil and is currently in the process of receiving it, in exchange for its disablement of the main nuclear facilities. In return for the declaration of its nuclear programs, Pyongyang is also in the process of getting off the list of Washington's states sponsoring terrorism. Washington, in the meantime, is intent to get the verification process going before the terrorism list removal goes into effect from Aug 11.
US President George W. Bush excluded NK while referring to tyrannical regimes in an address on the promotion of human rights, still mentioning human rights abuses by tyrannical regimes like those in Iran, Sudan and Syria and Zimbabwe. Bush has described NK as part of an axis of evil along with Iran and Iraq in 2002.
The World Food Program said the freighter arrived carrying 37,000 tons of wheat, the first installment of 500,000 tons in assistance promised by Washington, just days after the North delivered a long-delayed atomic declaration and blew up the cooling tower at its main reactor site. Washington has set aside $19.5 mil to fund NK¡¯s nuclear disarmament.

The Defense Ministry requested a KW28.9 tril ($28.2 bil) budget to cover defense expenses next year. The figure was up 8.8% from this year. The proposed budget bill includes a 15% increase in the expenses for enhancing defense capabilities through weapons acquisition and military modernization programs. The budget proposal was designed to cover the rising expenses in preparation for Korea's takeover of wartime operational control from USA in 2012.

The NKorean military shot dead an unarmed SKorean female tourist. Park Wang-ja, the 53-year-old SKorean female tourist, was shot twice, in the back and buttocks, at around 5 am on July 11 after entering an off-limits zone outside the Mt Geumgang tourist area. The government urged NK to allow in SKorean investigators to learn the details of the killing on the spot, and demanded the North take "responsible measures" to prevent a recurrence of the shooting death.
Pyongyang rejected the proposal to send an investigation team to conduct a thorough inquiry into the killing of the tourist on a beach near Mt Geumgang. NK's tourism authorities expressed regrets over the incident but refused to offer an apology, saying "The incident occurred because the SKorean tourist ventured into our prohibited territory. It was inevitable for our soldier to shoot since the tourist continued to run away despite the soldier's warnings." And "The full responsibility is on SKorea. The South should offer us an apology and develop follow-up measures that would prevent such happenings in the future."
Mt Geumgang tour, which is taken by an average of 30,000 tourists on a monthly basis, is seen as a symbol of reconciliation and economic cooperation between 2 Koreas, providing a good cash to NK. Seoul decided to halt the tours until NK takes measures to ensure the safety of SKorean tourists. The suspension is expected to cause losses of $13.2 mil for the North if it continues until Sept.
President Lee called on the North to immediately accept Seoul's demands to start a joint inquiry into the death. Toward the political sector, Lee requested bipartisan support on both the issue of the tourist death in NK and the latest row with Japan over its sovereignty claim over Dokdo via textbook manuals. USA urged NK to begin dialogue with SKorea on the killing of a South Korean tourist at a NKorean resort.

ECONOMY

The Finance Ministry has slashed the nation's growth forecast for 2008 to upper 4% from 6%, citing surging oil prices and the global economic slowdown. The ministry also revised up inflation forecast to 4.5% from a previous prediction of 3.3%.
As higher energy prices have hit the nation's current account balance, Korea posted a $5.7 bil trade deficit in the first half of this year, the first deficit since 1997. BOK revised its forecast of the current account shortfall to $9 bil this year, from its previous forecast of $3 bil. Private economists have warned that inflation could reach a 6% inflation rate is possible this year.

The country posted a trade deficit of $1.62 bil in July as imports soared to an 8-year-high of 47.3% on year to $43.04 bil with exports rising 37.1% to $41.41 bil. Average prices for Dubai crude reached $131.31 in July, compared to $68.43 for the whole of last year. Local refiners¡¯ exports of gasoline, diesel and other petroleum products jumped 82.8% on year to $18.35 bil in the first half, equivalent to 8.6% of Korea¡¯s total exports worth $213.9 bil. Petroleum products emerged as the single largest export item in the first half, outperforming traditional key exports such as automobiles and semiconductors. Korea¡¯s software exports jumped 23.5% in 2007 on year, bolstered by increased overseas sales of package software and IT services. Korean companies exported a combined $1.66 bil worth of software and related services last year, compared with $1.34 bil a year earlier.

The nation's current account swung to the black in June for the first time in 7 months as robust exports helped offset increased spending on overseas travel and higher import bills. The current account surplus reached US$1.82 bil in June, a turnaround from a $377.5 mil deficit in may.
Foreign direct investment in Korea jumped 35% in the first half on year due to a sharp increase in large business projects. Korea attracted $4.54 bil in FDI, compared to $3.36 bil a year earlier.

The Finance Ministry and BOK warned that they would intervene in the foreign exchange market to strengthen its currency and curb inflation if there was excessive movement in the KWon. The KWon has declined more than 10% against the dollar this year despite government intervention on several occasions. The industry watchers warn that using foreign reserves could increase the risk of a sudden reduction in the reserves because the economy is facing a large current account deficit.
Seoul plans to allow brokerages and asset managers to trade more credit and foreign-exchange derivatives to enhance competitiveness. Starting July 25, brokerages won't have to notify authorities when trading credit derivatives unless their equity capital is less than KW300 bil ($296 mil). Asset managers trading foreign-exchange derivatives will also be exempt unless their equity capital is below KW100 bil.
The nation's state pension fund lost more than KW4 tril ($3.94 bil) from stock investment during the first half of this year on sharp market fluctuations at home and abroad. During the same period, the service earned KW4.8 tril from bond investments. The NPS is the nation's largest institutional investor, holding more than KW230 tril under its management. Of that total, it invests 18.3% in stocks and 78.2% in bonds. Despite uncertainty in stock markets, the agency plans to increase the portion of stocks in its portfolio to 40% by 2012, while reducing the ratio for bond investment to 50%.

The Fair Trade Commission is to impose a KW15.4 bil ($15.1 mil) fine on the state-run Korea Development Bank for buying bonds issued by its troubled leasing affiliate at far below market interest rates. KDB acquired KW350 bil worth of bonds issued by the KDB Capital on 7 separate occasions between 2004-2005. It bought them at interest rates of between 4.79-5.86%, compared with the average market bond yields between 7.32-11.69%. A KDB official is preparing to take legal action against the watchdog's decision, saying "the financial support to KDB Capital was inevitable, as the company partly complemented the public functions of its mother company as a state policy bank." KDB Capital was on the verge of going bankrupt, given its impaired capital and net loss of KW277.1 bil at the end of March 2003.
Seoul plans to start selling KDB next year and fully privatize it by 2012. The regulator plans to spin off the public functions of KDB to set up the Korea Development Fund and hand over the rest of the lender's businesses to an investment bank. KDF will have public funds generated by selling the 49% stake in KDB and other shares in companies by 2010. Since the KDF's main role is to support SMEs, FSC will sell stakes in Industrial Bank of Korea after checking whether KDF properly operates in the market. The government's plan to sell the IBK may be delayed. The government is likely to sell IBK only after an impact study has been completed. The government originally planned to start selling its 51% stake in IBK this year, but it is likely to be delayed until after 2011. Currently, about 80% of the bank's loans are extended to SMEs.
IBK is to offer lower rates on loans for competitive small- and medium-sized enterprises as rising fuel costs and a gloomy credit market outlook weigh down SMEs in the second half, planning to cut about 3% from the current market loan rates of 9-10% for SMEs. If the IBK cuts the loan rates by 3%, the bank will lose about KW80 bil for the whole year, which will be offset by IBK efforts to cut KW100 bil in energy consumption, marketing costs and general expenses this year.

HSBC Holdings signed a 2-page joint agreement with the KEB labor union, specifying 13 major post-merger issues ranging from board composition, integration of title and employee benefits to the use of language at the workplace. The document includes HSBC's previous pledges to keep KEB listed on the Korea Exchange and to continue to use KEB's name and corporate identity. It also reaffirmed HSBC's earlier commitment that it would not reduce the number of KEB staff after the acquisition is completed. The Financial Services Commission stated that it will soon decide whether to approve HSBC Holdings Plc's planned acquisition of KEB.

Korea¡¯s bench mark Dubai crude prices started at $135 in the beginning, went up to $138, then settled at $119 per barrel at the end of the month. The import of energy in the first half reached $70.2 bil, marking 31.9% of total import, the highest ever in Korean history, up 65.7% on year. Korea¡¯s consumption of oil products fell 3.9% on year to 384.2 mil barrels in the first half as soaring crude oil prices adversely affected demand. The average price of gasoline has risen above KW1,950 ($1.94) per liter on July 17 for the first time. Over the same period, diesel prices rose by 2.3% to KW1,947.75.
The import prices of propane and butane hit a record high in July. The monthly import price of propane gas stood at $905 per ton for July, up 10% from June. July's import price for butane gas rose $30 to hit $950 per ton.

CHAEBOLS

The government has decided that certain products will get labels marking the amount of carbon gas emitted during their production. The Environment Ministry has selected 10 items to test the carbon gas labeling system from next month. The amount of carbon used in the stages of production, distribution, utilization and abolition of the product will be labeled.
The government is likely to shelve plans to privatize state-owned energy firms. A few months earlier, the government was drawing up a public sector reform plan which was widely expected to include a massive selling of government stakes in as many as 70 energy firms and other corporations in the group of 305 state-affiliated enterprises. The subsidiaries of the state-run Korea Electric Power Co are unlikely to undergo major changes in their ownership structure, as is the Korea Gas Corp. Instead of selling them to the private sector, the government will seek to streamline their operations and to enhance management efficiency through restructuring.

An independent counsel sought, on July 10, a 7-year jail sentence and a KW350 bil ($350 mil) fine for former Samsung Group Chairman Lee Kun-hee for his charges of tax evasion and breach of fiduciary duty. Lee, in his final argument, said "Just looking forward, I have concentrated only on competing with foreign businesses. Thus, I have been negligent about the issues around me and the discussions with our society were scarce" Lee also pleaded for leniency so that Samsung executives and employees, who have poured their efforts in elevating the group to the world's top-tier one, would not be discouraged given the current sluggish economic conditions.
A flurry of petitions from international and domestic figures have been filed. Former US President George H W Bush said in his recent petition that Lee has achieved great feats in the advancement of the global economy, and Lee's leadership has set an example for myriad entrepreneurs around the world. Former IOC President Antonio Samaranch and President of the Association of NOC Mario Vazquez Rana also submitted their petitions, demanding that the court take into account the contributions Lee has made to the development of the international sports community.
A Seoul court handed, on July 16, Lee Kun-hee, a suspended 3-year sentence and a KW110 bil ($110 mil) fine after convicting him of tax evasion. The court, however, cleared him of charges that he had breached his fiduciary duty at Samsung Everland through bond issuance in 1996. It dismissed the case involving a 1999 bond sale at Samsung SDS, which prosecutors claimed was part of the father-son succession scheme, because the statute of limitations had expired. The former vice chairman and the former president of the group's defunct Strategic Planning Office were given suspended sentences of 5 years and 3 years, respectively, on the same charges as Lee.
The independent counsel said it would appeal the ruling. Several civic groups criticized the ruling as "too lenient." Some business-related groups, however, welcomed the ruling.

Samsung Electronics Co (SEC) is making strides into the global printer market. SEC was the second-largest seller of color laser all-in-one printers, accounting for 28.9% of the global sales in the first half of 2008, just 0.4% away from Hewlett Packard. A year ago, the gap between the two was 36.6%. As of the end 2007, the global printer market was worth $130 bil, larger than the $100-bil TV market and the $60 bil memory chip market.
SEC is fast strengthening its TV market position in the Middle East and Africa. Samsung was the top seller of LCD TVs in the first 4 months of this year in 12 countries in the region. It supplied a total of 35,000 units of flat-panel TVs to top-class hotels in Saudi Arabia and in Qatar. SEC aims to sell more than 1.5 mil units of flat-panel TVs in the Middle East and Africa, about 3 times more than it did a year ago.
SEC retook the No 1 spot in the global ranking of LCD panel makers, for the first time since Feb. Laptop computers are one of the main applications in which the LCD panels are used, along with TV, computer monitors, cell phones and MP3 players.
SEC has sold more than 150 mil cell phones in USA. It reached that milestone 11 years after entering the US market. SEC took a 22.1% share of the US market in the first half of this year, ranking second to Motorola Inc, which had 25.6%. Internationally, Samsung is the No 2 cell phone maker after Nokia.

POSCO acquired a 10% stake in Macarthur Coal, the world's largest exporter of pulverized coal used in steelmaking, paying A$424 mil ($405 mil).
POSCO has agreed to pay Australian miner Rio Tinto 80% more for iron ore supplies. The deal follows a Feb agreement with Brazilian mining company Vale under which POSCO agreed to pay 65% more for iron ore.
POSCO has received a 30-year license to export nickel ores to Korea from New Caledonia. POSCO becomes the first steelmaker to mine and directly supply nickel to its plants. The deal will allow POSCO to receive 30,000 tons of nickel a year, about 50% of POSCO's annual consumption. POSCO has invested $350 mil in New Caledonia since 2006 in the form of the Nickel Mining Company and the nickel smelting firm SNNC that were established in partnership with New Caledonia's largest nickel ore exporter SMSP.
POSCO began work on a new KW1.4 tril ($1.39 bil) steelmaking plant in Pohang, for completion in 2010 with an annual production capacity of 3 mil tons. The new plant push up Pohang Steelworks' annual output to 17.6 mil tons.
Hyundai Hysco plans to invest $41 mil in a copper extraction project in Mexico. The project is 70% owned by Baja Mining Corp and 30% owned by the Korean group which includes Korea Resources Corp. The copper extraction will start from 2010.

Hyundai Kia Automotive Group sold about 3.96 mil vehicles worldwide in 2007 to be become the world's fifth largest carmaker, one spot higher than the year before. The top spot went to Toyota Motor with 9.36 mil-unit followed by General Motors with 8.9 mil units. Volkswagen and Ford Motor were third and fourth place, respectively.
HMC has started commercial production at its second engine plant in India, as it is driving up small-car sales in one of the world¡¯s fastest-growing auto markets. It has spent $421 mil to build the new production facility, which would bring the company¡¯s engine production capacity in India to 570,000 units from 320,000.
A complete knock down plant assembling HMC's products went into operation in Ukraine at the end of last month. Located in Cherkasy, the new plant cost the Ukrainian carmaker Bogdan Corp 230 mil euros ($365 mil) to build. This year, 2 companies plan to produce and sell 3,400 units of HMC's compact sport utility vehicle, Tucson and the compact Avante XD. HMC plans to raise its annual output to 60,000 units.

Korean construction companies are enjoying a boom in overseas orders on the back of the growing Asian market and increased Middle Eastern demand stemming from skyrocketing oil prices. The builders have received orders worth a combined $25.9 bil in the first half, up 61% on year and a record half-year amount.
Doosan Heavy Ind won 3 projects to supply main steam generators for new Westing House 1,100 MW atomic power plants worth $700 mil. It will deliver the facilities by Aug 2014.

Korea Electric Power Corp has been chosen as the preferred bidder by the Jordanian government in open bidding for a $500 mil deal to build and run a power plant in Jordan. The Al Quatrana Independent Power Project calls for the successful bidder to develop a combined-cycle plant at a site south of Amman and run the facility until 2035 after completion in 2011. The company plans to set up a local venture in Jordan with Saudi Arabia's Xenel, in which KEPCO will hold a 65% stake.
KEPCO will build wind-power facilities in Neimeng and Gansu provinces in western China as part of a $150 mil wind-power development project. In partnership with China Datang Corp, KEPCO will initially spend $20 mil on the project. KEPCO will run the power plants, capable of producing 99.5 MW for the next 20 years.

Hanwha Chemical Corp plans to spend KW800 bil ($761 mil) over 7 years to build a solar-cell power plant. The factory is expected to generate annual sales of KW70 bil by producing 30 MW of power when completed in the second half of 2009. Hanwha aims to expand the plant's capacity to 1 gigawatt by 2015 to take a 5% share of the global solar-power market.
LG Group, the country's third-largest conglomerate, has completed construction of the nation's biggest solar power plant. Since last month, LG has begun operating a solar power plant in Taean county, capable of producing 14 MW of electricity, after  spending KW106 bil. LG is the first company in the world that plans to cover the whole production chain, from module production to power generation through solar panels.

LG Electronics, the world's fourth-largest maker of mobile phones, had sold over 7 mil units of touch-sensitive phones globally at the end of June. LGE has been leading the touch screen trend, since it introduced its "Prada" in March 2007.
In a bid to "strengthen its IT customer base," including Dell, LG Display has decided to build a plant for notebook and monitor LCDs in the city of Gumi. The world's No 2 maker of LCD announced a plan to expand its investment to KW4.5 tril ($4.5 bil) this year. Dell, along with Panasonic, is named as a possible buyer of LG Display shares held by Phillips. LG Display, formerly known as LG.Philips LCD, was created by a 50-50 venture between 2 companies in 1999. But Philips has continued to shed shares currently with a 13.2% share in the company, while LG Display holds a 37.9% stake.

Hynix Semiconductor has signed an official contract with Siliconfile Technologies to acquire a controlling stake in the CMOS image sensors developer. Hynix is seeking to gradually buy 30% of Siliconfile's shares, as it pushes to diversify its business portfolio from its concentration in computer memory chips.
Hynix Semiconductor will close its only US factory in Eugene, Oregon, by the end of Sept, amid changes in production standards and steep price declines buffeting the industry. The manufacturing plant was established in 1998.

SK Energy, Korea¡¯s top oil refiner, has bought the rights to drill for oil at a mining area in Columbia by partnering with BHP Billiton. They purchased the No 7 mining area, one of 8 in Columbia. The 2 partners will hold equal stakes in the mining area, with SK investing $32.20 mil in the project.
KOGAS plans to construct No 4 LNG production basis in Samchuk, north eastern coast of Korean Peninsula. It will invest KW1.47 tril for the first stage to build 4 units of 200,000 kl storage tanks. The work will start from Jan next year to complete by Dec 2013. When second stage is completed, KOGAS will have 14 units of tanks by 2019.

MONETARY

The Korean Composite Stock Price Index has been hovering in the box of 1509-1666 in July. It started the month at 1666, plunged to 1509, the lowest since March last year, then once returned above 1600 and ended the month at 1594. More and more companies are suspending plans to go public or float new shares as the stock market is tumbling amid sky-high oil prices and an economic downturn. KOSPI has fallen about 15% so far this year, representing an over 20% decline from its historic high late last year. The growing pessimism could even force big firms to reschedule their IPOs.

KWon started the month at 1,048 against USDollar, nose dived to 1006 and returned to 1012 at the end of the month, by the intervention of government. Korea's foreign exchange reserves plummeted by $10.6 bil in July to $247.52 bil, due to the currency market intervention of the government and the central bank.

BOK has been holding the key rate steady at 5% for 11th month in a row. The yield on 3 years corporate bond has been fluctuated in the box of 6.85-7.17-6.86-6.94-6.91% through the month. The consumer price index jumped 5.9% in July on year, the biggest rise since a 6.8% climb in Nov 1998. Import prices jumped 49% in June on year, the steepest increase since Feb 1998.
Korea's unemployment rate in June held steady at a seasonally adjusted 3.2%. The unemployment rate for 2008 is expected to be 3.1%, the third lowest among member economies of OECD, compared with average jobless rate of the 30 industrialized countries of at 5.7% this year.

SHIPBUILDING AND SHIPPING

An ABS inspector, 35-year-old Chinese, held and indicted for copying 1,500 files relating to drillships and oil platforms. There has been no indication the files have been sent to China. He is the first foreigner to be charged in Korea with technology theft.
A consortium of 7 local shipping companies, such as Korea Maritime, Namsung, Korea Line, Bumju, Seonwoo, KSS and Hyupsung, submitted a proposal to construct a repair yard in New Busan Port. The approval will be obtained by end of this year.
KOEXIM Bank decided to provide a structured finance of $550 mil for HHI to export 9 x 13,100 teu container ships project to MPC Capital.
POSCO held ground breaking ceremony to build a new steel plate plant in Gwangyang. It will produce the plates thicker than 6 mm that are mainly used in shipbuilding and other heavy industries, fulfilling the soaring demand from explosive expansion of shipbuilding requirement. The new plant will have an annual production capacity of 2 mil tons and is scheduled for completion in 2010.

HHI has won the project from Phoenix Energy Navigation to build 2 x 164K suezmax tanker, Dynacom Tankers 2 x 318K VLCCs, Samco 2 x 320K VLCC, Great Eastern 2 x 158K tanker and AP Moeller 4 x 22.5K LPG carriers. Hyundai Samho had a contract with Dynacom for 2 x 318K VLCC.
HHI has been an upswing for the past few years, with abundant cash bagged from a global shipbuilding boom. HHI is now exploring new lines of business ranging from alternative energy and stock brokerage to airline business. HHI sees a major growth opportunity in the area of alternative energy, aiming at becoming one of the world's major players in the solar energy field by 2014, by constructing its first solar-cell plant in Eumseong. The company is moving to build a second solar-cell plant with an investment of KW300 bil, as part of its plan to generate sales of KW1 tril by 2010. In March, HHI decided to set up a polysilicon-producing joint venture with KCC Corp, a local chemical producer. HHI acquired CJ Investment to form a ship building fund. HHI signed a letter of intent to invest around $17.57 mil for the acquisition of a 20% stake in the Hainan Airlines Group unit. HHI has a Chinese unit, HHI China Investment Co in Shanghai, which oversees investments in the world's fastest-growing major economy.
HMD has secured number of contracts, including with Pacific Basin for 2 x roros, European 2 x PCTC, Adnatco 3+6 x 37K bulkers, Liberian owner 4 x 37K bulker and D'Amico International Shipping 2 x 46K pc.
HMD decided to buy back own shares worth KW66 bil, aiming to stabilize share prices and raise value of share holdings.

SHI got the project from UASC for 9 x 13,100-teu vessels, American 1 x drill ship, George Economou¡¯s Cardiff Marine 4 x 159K tankers, Euronav 2 x VLCC and 1 x 159K tanker. SHI signed a LOI with Flex LNG to build topside for 1+1 x LNG-producer (LNG/P), for engineering, procurement, construction, installation and commissioning contract, marking yard's entrance to the topside-construction arena.

DSME secured orders from Maersk Line for 16 x 7,450 teu with 1,700 reefer connection, Tai Chong Cheang 2 x 180K bulkers and American 1 x drillship.
KDB and Korea Asset Management are selling a combined holding of 50.4% in DSME, worth about $3.5 bil. It has been delayed twice when KDB scrapped a decision to select US investment bank Goldman Sachs as a co-advisor and DSME¡¯s labor union blocked the due diligence team from entering the yard. KDB decided to shut out the foreign company from DSME¡¯s sale procedure in order to protect the technologies in national defense system and advanced commercial vessels. The labor union withdrew their decision to block the due diligence team. However they warned that their action could be resumed, if their demands are not met.
POSCO, Doosan Group, GS Group, Hanwha Group, as well as STX Group have said to bid for the stake in Daewoo.
Hanhwa Group expressed its determination to compete for the acquisition of DSME, saying Hanhwa is the party able to be a propeller of DSME. All the affiliates of the group are requested to cooperate, as the acquisition could be a growth engine of the froup in the uncertain period to come. Doosan Group may sell property and some assets to finance a bid worth $3.5 bil to take over DSME. POSCO is taking an approach to diversification, looking to buy up one of its biggest customers to secure future demand. Cash rich but resource poor, POSCO is one of bidders circling DSME.

STX received order from local owner for 2 x pc, Dolphin Tanker 2 x 320K VLCCs, Siba Ships 2 x 81K kamsarmax bulker, India's Reliance Industries 6 x 110K minibulker, Formosa Plastics Marine 2 x 50K pc, European owner 1 x 300K VLCC and European 2 x capsize bulker. STX Dalian also got the order from Huafeng for 1 x 57.7K bulker and Jinhui 1 x 57.7K supramax bulker.
STX held a keel laying ceremony for its first LNG carrier, 173.6K for Elcano, which will be delivered in 4/2010.
Hanjin Heavy Ind won the order from Bocimar for 2 x 180K capsize, European owner 2 x 3400 teu boxships and J Lauritzen 2 x 180K caper, and Hanjin Subic with Yasa Shipping & Trading for 4 x 180K capesize bulk carriers.

Korea refiners, accounted for 25% of the tanker market, hired more single-hulled tankers than any other nation in the first half, even after the nation's worst-ever oil spill from Hebei Spirit. The government plans to ban the use of single-hulled completely in 2011. Korean refiners are increasing the use of double-hull vessels but it is not easy to secure sufficient number of tankers because of the limited market.
Hanjin Shipping has been reported to book 2+2 x 115K mini-capesize bulkers at China's New Times Shipbuilding at $65m, for the delivery of last quarter of 2010. It would be the first Chinese newbuilding contract for the Korean shipping giant. It placed orders for 4 x 82K kamsarmaxes at Tsuneishi for the delivery of 2012 and 6 x 180K capesizes at HHI last year for 2009-10 delivery.
HMM decided to acquire an additional 3% stake in Hyundai Securities. HMM will hold 23.17% in total, to keep management stability in Hyundai Group.