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  Korea Report - January 2007
  Author : Hwang & Co     Date : 07-02-09 12:59     Hit : 44538    
Topics.

-President Roh proposed constitutional amendment on presidential election.
-Ruling party is on the verge of breaking up.
-Lee Myong-bak, ex CEO of Hyundai, became favorite for the presidential election in Dec.
-Government tightens housing market to hold sky rocketing house price.
-Korea and USA ended 6th round of FTA talks with no gain.
-Bilateral talk between NK and USA held in Berlin.
-USA Force Korea complained the delay of relocation of US military bases and transition of wartime operational control.
-Korea's trade deficit in trade hit record high.
-HMC again hit by union's habitual strikes.
-FTC to investigate Qualcomm for abusing its position with local firms.
-CEO of Big 3 yards concerns the market in 2007.
-Korean shipbuilders expand their production in China.
-HHI is to build Wartsila's DFDE engines for LNG Carrier.
-John Frederiksen acquired 9.7% stake in STX Corp and Sammy Offer added 5.9% stake in Hanjin Shipping.
-DSME made joint venture shipping company with NNPC.
-Lee Jin-bang elected as chairman of Shipowner's Association and Park Kyu-won promoted to president of Hanjin Heavy Ind.
-KLC continues expansion.

GOVERNMENT AND SOCIETY

President Roh Moo-hyun shook political circles by proposing a constitutional amendment that would allow future presidents 2 consecutive 4-year terms. The Constitution, last revised in 1987, stipulates a single-term presidency of 5 years, as an antidote to past authoritarian rulers' attempts to prolong their power. He also said the single term causes a costly mismatch of the presidential term and the legislature's four-year term. The opposition Grand National Party protested against it, raising concerns that the amendment could be abused to manipulate voters in the upcoming presidential election in Dec. The president is expected to introduce the proposal to the National Assembly in Feb or March.

Former Justice Minister, Chun Jung-bae, deserted the ruling Uri Party despite renewed efforts by President Roh to prevent the governing party from breaking up. Chun became the fourth lawmaker in a week to leave the party in rock-bottom popularity ahead of Dec presidential election. His departure is the biggest casualty for the troubled party. Resignation of the 4 law makers reduces Uri's seats to 135 of the 296-member parliament. Speculation is mounting that some 30 lawmakers of the governing Uri Party may be on the verge of leaving the party en masse to form a new political group in the run-up to the Dec presidential election.

With the image of successful CEO of gigantic constructing company and his much acclaimed achievements as former Seoul mayor, Lee Myung-bak of the opposition GNP led all of New Year opinion polls for potential presidential candidates. He commanded an average 43% in approval ratings in 14 surveys conducted by Korean media outlets between Dec 27-29, widening his margins among runners-up, former Prime Minister Goh Kun and former GNP chairwoman Park Geun-hye. Park garnered 13-25% of support while Goh hovered 10-18%. Lee was once chief executive of Hyundai Group's construction arm which significantly contributed to Korea's development since the 1960s. During his tenure as Seoul mayor from 2002-06, Lee completed challenging projects such as restoring the Chyeonggye Stream and successfully overhauling the city's tangled mass transportation system.
Former PM Goh dropped out of the presidential campaign in the wake of falling public approval and lackluster support from political circles, after he saw a failure to develop alliances with ruling and opposition lawmakers to create a new party to challenge the stronger GNP.
 
House prices in Korea rose 11.6% in Dec on year, picking up from Nov¡¯s annual rate of 9.8% and underlining concerns the sector could be fuelling inflationary pressures. The prices rose 1.9% in Dec alone, the second-biggest increase in 2006 following 3.1% in Nov. Total mortgage loans have nearly quadrupled to KW217 tril over the past 6 years as soaring apartment prices have prompted households to buy homes on debt.
Korean government decided to tighten the apartment construction market with a number of new strict measures, amid warnings over a possible real estate "bubble burst." The debt-to-income ratio for mortgage lending has been set at 40% throughout the banking sector while interest rates on housing loans are climbing. The government is to request builders to disclose construction costs in Seoul and designated zones from Sept in a move to further bring down the apartment prices. The obligation to disclose has been already placed on state-run housing projects since last year. The government is also to set a price ceiling on new homes. Furthermore, under the government's new antispeculation policies, BOK has ordered lenders to raise reserves against their deposits to 7% from current 5%, forcing banks and insurers to draw back around KW5 tril from borrowers. The experts are beginning to worry that, in the worst-case scenario, the inability of households to repay debt under the tightened lending rules could deal a fatal blow to banks, triggering a Japan-like crisis in the coming years. 
 
A draft plan to reform the troubled public employees' pension is facing fierce opposition from both public servants unions and civic groups. The proposal dictates that public employees will see over a 3% rise in pension contributions, while their overall benefits will be reduced by more than half. The contributions will be increased gradually from the current 5.5% of monthly taxable income to 6.6% by 2008 and to 8.5% by 2018. The retirees begin to receive pension payments from the age of 60. But this will be raised by 12 months every 2 years from 2023 before settling at 65 in 2031. The Budget Ministry estimates the 46-year-old pension scheme will post a deficit of KW670 bil this year, with the loss soaring to KW18.1 tril in 2030. Despite a snowballing deficit, the public employees' pension provides far more generous benefits to subscribers than the national pension scheme for private sector workers and self-employed people. The unions, however, noted that the higher benefits are a complement the public sector salaries which are relatively lower than in private companies.
 
Korea and USA held the sixth round of their free trade agreement talks in Seoul. Pressure has heated up on both sides, as they hope to conclude the negotiations by March to meet the July 1 expiration of the Bush administration's trade promotion authority. Fast-track authority allows the current administration to negotiate a FTA deal without congressional approval. USA is Korea's second-largest export market after China, while Korea is the seventh-largest market for USA.
Washington wants wider access to Korea's beef, pharmaceuticals and automobile markets. Seoul wants the easing of US antidumping rules and wider access to the US textile markets. In the sixth round, Seoul and Washington made progress with improved offers in the industrial tariff area, which covers over 500 products worth over $1.9 bil in trade for USA and 655 products worth $1.6 bil in trade for Korea. The sixth round of talks ended in Seoul with wide gaps remaining in some key areas such as trade remedies, automobiles and pharmaceuticals.
About 3,200 farmers and workers gathered in Seoul and marched through the city to the Shilla Hotel, which is the venue for the FTA talks. Authorities deployed a total of 15,000 police to shield the talks' venue from protesters and 2,000 riot police guarded the hotel to inspect all vehicles and individuals entering the building.
Under the trade pact, US negotiators want Seoul to remove its 40% tariff on US beef imports, putting the pressure of changing its conditions for US beef import, which some US officials criticize as "unreasonable" and "invented." By agreement, Korea allows only bone less meat from cattle aged 30 months or younger. This has led Seoul to reject 3 shipments, since the Agriculture Ministry lifted in Sept 2006 a three-year import ban of US beef over fears of mad cow disease. Korea was the world's third-largest market for American beef imports before the ban.
Top trade officials of Korea and USA have agreed to exercise some flexibility to complete their eight-month-long FTA talks. Korean Trade Minister and US Trade Representative agreed, on the sidelines of an annual World Economic Forum held in Davos, Switzerland, to order their negotiators to show flexibility to make more progress in a seventh round of talks, which is crucial to seal an agreement in time. A seventh round is scheduled for mid-Feb in USA, about a month before the US set deadline.
 
The Seoul Central District Court found the 8 former activists not guilty of forming a pro-NK organization and attempting to topple the dictatorial Park Chung-hee administration. They were hanged April 9, 1975, only 18 hours after a lower court convicted them of organizing a clandestine revolutionary group called Inhyeokdang. Their appeals were immediately rejected by the Supreme Court. In Dec 2002, their families applied for a retrial of the case. In a full courtroom, the audience, which included family members of the students, started applauding and burst into tears when the court cleared them of all charges, including breaching the Emergency Measure Law and the anticommunist National Security Law.
 
A Seoul lower court dismissed a 7-year-old civil suit filed against tobacco company KT&G Corp by cancer patients and their families that the company was to blame for the lung cancer that killed a family member. The court also turned down a class action suit by 6 lung cancer patients and their family members, citing that there is no evidence to prove that the lung cancers of the plaintiffs are directly caused by smoking. The judge admitted a correlation between smoking and the plaintiffs' illnesses, but said there was no evidence to prove that KT&G did not warn consumers properly about the dangers of nicotine addiction and the smokers should take primary responsibility to the result of their smoking. KT&G shares rose 0.7% on the day.
 
Gale International, a New York-based developer, plans to start its 3 building ventures in Korea in Feb, valued at around $800 mil. The venture, called New Songdo City Development LLC, will begin construction of a 65-story building, a park and a hotel in the city of Songdo, near Seoul, for completion by 2009.
Gale has already teamed up with the construction unit of Posco to develop part of the city at a total cost of $25 bil for a period of 10 years, which will build 50 mil sq ft of office, 30 mil sq ft of residential space and 10 mil of retail spaces, on 1,500 acres of reclaimed land.
 
Wages at Korean companies have been increased by an average of 4.8% last year. The number of companies that froze or reduced wages fell, and companies without labor unions showed larger wage hikes. Wages increased by an average of 7.6% in 2000, 6.7% in 2002, 5.2% in 2004 and 4.9% in 2005.
The number of HIV/ AIDS cases in Korea rose by 10.4% last year. A total of 751 new HIV cases amongst Koreans - 689 men and 62 women - were reported in 2006, up from 680 in 2005. As of Dec, 4,580 cases had been reported. Thirty have died.
An earthquake registering 4.8 on the magnitude scale shook the east coast of Korean peninsula and was felt in most parts of the country. The earthquake occurred at the estimated epicenter at about 23 km west of Gangneung, with no serious damage or injuries reported.

NORTH KOREA AND NATIONAL DEFENSE

Top nuclear negotiators from USA and NK met in Berlin without the presence of China, which is hosting the six-party talks and often arranged meetings between 2 hostile members. After ending the first day of talks, USA expressed it was a useful discussion and hoped to see the multilateral talks resume in Feb. The Berlin meeting was the first time Washington held direct talks with Pyongyang under President George W. Bush's administration. At the last round of Beijing talks, NK continuously requested USA to lift the financial restrictions, while Washington demanded NK report all of its nuclear facilities and programs, and accept inspectors from the International Atomic Energy Agency in exchange for economic aids. US officials denied series of bilateral meetings between USA and NK, but said they would use bilateral contacts with the NK when they are helpful to prepare for the six-party talks. NK has long sought direct bilateral dealings with USA as a way to boost its status internationally.
The six-party talks, among 2 Koreas, USA, China, Japan and Russia, aimed at resolving NKorean nuclear issues will resume on Feb 8 in Beijing. The first step in talks would likely require NK to take a preliminary move such as halting the operation of a five-megawatt reactor at the Yongbyon nuclear complex and admit international inspectors. In return, discussion of political and economic aid will follow. Separately, USA may release $13 mil in NKorean assets frozen in a Macau bank.

Seoul said it has been maintaining a close watch on the possibility of NK carrying out a second nuclear test but with no particular indications of imminent detonation. NK deems it has failed to rattle Washington enough with its first test on Oct 9 and that it remains determined to continue developing its nuclear weapons to draw further attention. Tens of thousands of NKoreans, including high level officials, gathered in Pyongyang to defend their government¡¯s right to develop nuclear weapons. NK often refers to its nuclear weapons program as a necessary deterrent against the threat of a US attack against them. USA and SKorea warned NK of severe consequences if Pyongyang conducts a second atomic test. The leaders of ASEAN urged NK, in their annual summit, to cancel any plans for a second nuclear test.
 
Gen. Burwell Bell, commander of US Forces Korea, expressed his regret about a possible delay of the relocation of US military bases on the Korean Peninsula, saying he will "fight" against any further postponement of the plan. He also reiterated the US position that the transition of wartime operational control to the Korean army should occur as early as 2009. Bell insisted the Korean government's reported plan to delay the base relocation until 2013 is against his pledges to provide US soldiers and family members in Korea better living conditions. In 2004 Seoul and Washington agreed to move facilities and troops from the Yongsan Garrison and 2nd Infantry Division near the border with NK, to Pyeongtaek, by 2008, becoming the main base for USFK under a global-wide US troop realignment plan. In Oct, 2 sides agreed to transfer wartime control from Washington to Seoul between 2009-2012 in a measure to patch up rifts between the allies concerning a target year. Korea is sticking to its original target year of 2012 while the USA contends that 2009 is more appropriate. Furthermore, late last year, 2 countries agreed to raise Korea's share of the budget required for maintaining US troops here by 6.6% for 2007 and 2008, paying KW725.5 bil for 2 year.

Gen. Burwell Bell reemphasized the need to revise the UN Command's roles and missions, ahead of the transition of wartime operational control. For wartime operations, he stressed the importance of continued UNC access to its rear bases in Japan. The 16-member multinational UNC maintains 7 bases in Japan, mandated to aggregate troops from member nations and provide logistics support to the forces in contingencies on the Korean Peninsula, as the UNC will be the leading body in deterring war on the peninsula after the transition of wartime control, while the US military becomes an expeditionary force dealing with regional conflict. He also hinted that the US military aims to consolidate its command system with SKorean armed forces under the UNC in wartime after the transition of wartime control.

ECONOMY AND POLICY

The Korean economy expanded at a slower-than-expected pace in the fourth quarter as exports lost steam amid KWon's rally against USDollar and JYen. Asia's third-largest economy grew a 0.8% from third quarter, bringing the country's 2006 economic growth to 5%, barely matching the central bank's forecast. The government has revised down its 2007 growth estimate to 4.5% from the previous 4.6%, citing the global economic slowdown and sluggish consumer spending.
The Finance Ministry outlined its economic management policy for 2007 that domestic private consumption will rise only 3.9%, due to the poor job market and low household savings. The gloomy forecasts has led the government to front-load budget spending for 2007, planning to spend 56% of its KW200 tril budget in the first half, to help boost depressed construction investment and private consumption.
 
The country's export surged 21.4% on year to total $28.21 bil in Jan after rising 13.8% in Dec, powered by overseas demand for ships, steel products, chips, and automobile parts. Imports rose 21.5% to $28 bil, resulting a trade surplus of $210 mil in Jan, compared with the surplus of $200 mil recorded in Dec 2006.
The Korean export is expected to rise 10.4% to $360 bil in 2007, recording a trade surplus of $17 bil in 2007, despite the protracted gains in KWon against the USDollar. KWon advanced 8.6% against USDollar last year, eroding exporters¡¯ profit.
Korea¡¯s trade surplus in digital electronics reached a record $53.3 bil up 15.6% on year in 2006. Exports of digital products rose 11.8% on year to $114.8 bil, while imports increased 8.7% to $61.5 bil.
The price of Dubai oil fell to around $50 per barrel in Jan, down over $10 from its 2006 average, as mild weather in USA reduces demand for heating fuel and oil-producing countries remain reluctant to cut their supply to push prices up. The downward energy costs are fueling optimism that the Korean economy may rebound faster than expected. Korea spent about $56 bil in oil imports last year, up over 30% from 2005.
The country's trade deficit with Japan hit a record high at $25.3 bil in 2006, a 3.9% increase on year, while a surplus with its largest export market, China, dropped for the first time in 5 years. A chronic deficit in trade with Japan became the main factor in Korea's shrinking current account surplus.
Korea posted a record deficit in its service account last year driven by a boom in overseas travel and education, rising to $18.8 bil from $13.6 bil in 2005. The ballooning service deficit offset a solid performance on the export, bringing down the current account surplus to a four-year low of $6.1 bil in 2006.
Foreign direct investment in Korea fell 2.9% on year to $11.2 bil in 2006, the second straight year of decline. Investment by foreign businesses reached $12.7 bil in 2004 before falling to $11.5 bil in 2005.

The government decided to ease regulations on overseas investment and expand tax incentives in a bid to cap the rapid appreciation of KWon. Private investors are to be allowed to spend up to $3 mil in real estate investment abroad, up from current $1 mil. The government will exempt domestic investors from tax on capital gains from overseas equity funds for 3 years starting from the first quarter. Small-size foreign asset management firms will be allowed to tap local consumers as the government is set to downgrade the minimum equity requirement to KW1 tril from KW5 tril. They can also sell funds invested in real estate and commodities here from Feb.
Local banks are aggressively selling overseas equity funds as investors are increasingly looking to invest in bullish emerging markets. The Industrial Bank of Korea saw its tax-exempt funds invested in overseas assets increase more than 17% to KW208 bil in Jan alone. Kookmin Bank saw a 36.3% jump in Jan. Lenders are also launching a wide variety of fund products to better tap the ballooning demand for overseas investment. Of all overseas funds, nearly KW9 tril of local money is invested in China and other industrializing economies, far above KW120 bil invested in USA.
The local banking sector is likely to undergo another dramatic upheaval this year amid overheated competition for expansion. Woori Bank's KWon-denominated loans soared 32.7% on year to KW98.6 tril as of Dec 26. Hana Bank posted a 28.9% gain to KW73.8 tril. Loans issued by the Industrial Bank of Korea also surged 23.3%, while Shinhan Bank and Kookmin Bank grew relatively slowly by 10.8% and 10.7%, respectively.
 
Foreign investors have increased their combined stake in Hana Financial Group to 80.2%. Hana Financial, the holding company for the country's fourth-largest lender Hana Bank, has Temasek Holdings, as its largest shareholder with a 9.9% stake, followed by US investment bank Goldman Sachs with 9.3%. From, 37.1% in 2003 of Hana shares held by foreigners, surged to 68.4% by the end of 2004 and has since been rising. Kookmin Bank has the highest level of foreign holdings of 82.7%. As for Shinhan Bank, the third-largest lender, foreigners control 58.9% of its shares with another 20% in the hands of Korean-Japanese investors. Lone Star Funds of USA has a controlling stake in Korea Exchange Bank, with its total foreign holdings at 77.1%.
It is concerned that as the government opened the gate too wide for global investors, without basic measures to protect the management of local banking sector, it may become harder for banks to seek a long-term plan, as foreigners prefer short-term measures that boost share prices.

CYuan equaled the Hong Kong dollar's fixed rate for the first time in 13 years, fueling debate over whether to scrap the city's exchange rate link to the USDollar. CYuan rose 0.11% to 7.7988 to USDollar. Hong Kong's de-facto central bank prevents the Hong Kong dollar trading more than 5 cents either side of 7.8 per U.S. dollar.
China's trade surplus swelled 74% in 2006 on year to a record $177.3 bil, putting more pressure on the government to let the CYuan strengthen. An increasing surplus in 2007 may lead China to make CYuan more flexible, as the currency is ultimately the solution to reduce the trade surplus. China's foreign-exchange reserves topped $1 tril for the first time. A record trade surplus that flooded the economy with cash helped stocks to more than double last year.
 
CHAEBOL

Samsung Group maintained its outstanding No 1 ranking among Korean chaebols to achieve record revenue of KW146 tril in 2006. Hyundai Motor held No 2 with KW93 tril, followed by LG Group of KW80 tril, SK Group KW70 tril, Lotte and GS Group with the same KW30 tril, POSCO KW25.7 tril, Hanhwa KW23 tril, Kumho Asiana KW18.5 tril and HHI Group ranked 10th with KW17.1 tril.
 
Samsung Electronics (SEC) has developed the world's first dual-image liquid crystal display, which is expected to be used for folder-type mobile phones. The new display is capable of producing 2 different images simultaneously on its front and back side.
SEC recorded the largest-ever revenues in the fourth quarter of last year. The revenues rose 3% from third quarter to KW15.69 tril. The company ended 2006 with KW58.97 tril in revenues, also the highest in its history. Operating profit reached KW2.05 tril, down by 3.9% on year. Its net profit was up 7% to KW2.35 tril from the previous quarter, but down 8.5% on year. SEC is the world's largest LCD producer, the world's third-largest handset maker and the biggest chip maker.
Lee Jay-yong, 39, the only son of Samsung Group Chairman Lee Kun-hee, assumed the post of chief customer officer at SEC, stepping closer to the top seat of Korea's largest business group. The execution of his authority, in some cases, could go beyond decisions made by presidents of SEC's 4 major business units including the semi conductor, telecommunication network, LCD and digital media branches.
Asia Money named SEC Best of Asia in the field of Corporate Governance, Transparency, Shareholders Relationship and the Best Big corporation Management.
IFI Patent Intelligency named SEC the Big 2 in the world in the number of patent registration in 2006. It registered patents on 2453 cases following IBM¡¯s 3651.
 
The promotion of Lee Jay-yong to chief customer officer at Samsung group has rekindled public and corporate interest in the children of the nation's major chaebols. Chung Eui-sun, 37, the son of HMC Group chairman Chung Mong-koo, has already led Hyundai's affiliate Kia Motors since 2005. Chung Yong-jin, 39, the son of retail giant Shinsegae chairman Lee Myeong-hee, was promoted to vice chairman late last year. Heather Cho, 33, the eldest daughter of Korean Air's chairman Cho Yang-ho, got promoted to managing vice president of in-flight service and catering. Chung Ji-yi, 30, the eldest daughter of Hyundai Group chairwoman Hyun Jeong-eun, was promoted to managing director of Hyundai Ubiquitous & Information Technology, late last year.

Hyundai Motor Co (HMC) have been hit by habitual strikes which have repeated every year since the union was launched in 1987. HMC decided late last month to pay workers a 100% bonus as agreed, because the company's production reached only 97% of its initial target. The management and labor agreed on the terms of incentives that stipulated if the automobile production surpasses its initial production goal, 150% bonus will be given; if it was more than 95%, a 100% bonus; and 90-95%, a 50% bonus.
HMC, which underperformed its target last year, was set to make a fresh start when it held a New Year ceremony at its Ulsan plant. But the unionized workers attempted to block executives from stepping onto the platform, when the CEO and 10 security guards were injured and 3 were hospitalized. The ceremony was cut short while workers continued to disrupt it, demanding for the full 150%.
HMC took a tougher stance by pursuing the largest-ever corporate civil suit, filing KW1 bil lawsuit against the labor union and its 26 key members. Since its launch in 1987, the nation's largest union's strikes have resulted in the loss of 335 working days, in lost production of nearly 1.05 mil vehicles and , totaled loss to more than KW10.5 tril.
Ignoring mounting public criticism against them, the unionized workers continued rally. A collaboration of 115 civic groups in Ulsan called on the union to cancel its plan to strike. The Korea International Trade Association urged the immediate withdrawal of the walkout plan, expressing its regret over the "illegal strike which only weakens the country's competitiveness." Labor Minister urged the union to withdraw at once its illegal strike, which defies the law, national economy and public sentiment. The government declared the Hyundai strike illegal because it was not put to a general vote by union members before it began.
HMC settled a nearly 20-day dispute, paying the remainder of year-end bonuses on condition they recover production losses caused by union action since late Dec. Labor Minister expressed disappointment, asserting that such attitudes were not a remedy to the union's habitual illegal actions. Business organizations welcomed the settlement of the strike which has damaged the nation's largest automaker and a major contributor to national exports. Civic groups strongly criticized the company's decision, threatening to boycott HMC produced cars, as the company's loss from strikes falls onto consumers through higher prices. Internet users called for a Hyundai car boycott campaign, complaining that the walkout at Hyundai forced work stoppage at many parts suppliers where workers receive salaries less than half the levels at Korea's largest automaker.
HMC accounts for 4.6% of the nation's total exports and 40% of vehicle exports. The union is one of the most well-funded in Korea as it collects more than KW7 bil annually in membership dues, and total funds coming in at KW10 bil.

Another agony waits for HMC. Prosecutors requested a six-year prison sentence for HMC Group chairman Chung Mong-koo on embezzlement charges. Chung, 68, was indicted last May on charges of embezzling over KW90 bil of company funds, raising about KW69.3 bil in slush funds and causing over KW210 bil worth of damage to the companies and affiliates through breach of trust. Chung was released on bail last June on the grounds of poor health after spending 2 months in prison.
 
LG Group, the nation's fourth-largest conglomerate, marks the 60th anniversary of foundation in 2007, aiming to maintain its leadership in Korea's consumer electronics and chemical industries. The group aims at KW92 tril in sales in 2007, up nearly 10% from last year. LG Electronics aims to achieve KW4 tril in global sales and invest KW3.1 tril this year, with a target of propelling itself into the world¡¯s top 3 electronics makers in terms of profit, market share and shareholder value. LG Petrochemical plans to invest KW105 bil to double the annual output of its BPA facilities from 130,000 tons.
 
Korean contractors won a record $25.4 bil worth of foreign industrial plant orders in 2006, 60.6% jump on year.
The Korean and Algerian governments signed a MOU for the construction of luxury residences, schools, hospitals and other amenities in 6 mil sq m area near Algiers, worth of KW2-3 tril. Korea Land Corp, a state-run land developer, will lead 5 Korean builders in the urban project, starting July to complete the construction by the end of 2011. Hyundai Construction won the order from City Development of Singapore, to build $98.81 mil worth condominium in One Shenton Way for the completion in 38 months.
Doosan Heavy signed the contract with Glow Energy of Thailand to construct oil fired power generation plant of 115 MW in Rayong Meptaput, worth $170 mil.
 
Doosan Group is to raise its investments by 70% to KW1.5 tril in overseas business and technological development this year. Its heavy industries arm is scheduled to build a Vietnamese plant in Dung Quat this year to produce desalination and heat generating equipment from 2009. Doosan Heavy Industries and Construction also plans to tap into the nuclear power generator market in USA, Europe and China through Doosan Babcok Energy. It targets KW16 tril in sales and KW1.3 tril in operating profits this year.
 
Lotte Confectionery and US Hershey have agreed to establish a joint manufacturing facility in Shanghai to produce chocolates for the Chinese market with the $80 mil joint investment, in the hope to get a firm grip on China's growing chocolate market.
Fair Trade Commission was reported to form an exclusive team to investigate US wireless technology company Qualcomm Inc, which is suspected of abusing its market dominating position in its business with local companies. The US company dominates the market for technology and chips for CDMA.

MONETARY AND ECONOMIC INDICES

Korea Composite Stock Price Index started the month at 1435, plummeted to 1355 following the biggest drops in 3 months since the day NK conducted a nuclear weapons test, on the foreigners¡¯ selling in the fear of global burst of the bubbles and Korean authority¡¯s tougher rules for mortgages, recovered to 1390 and ended the month at 1360.
Foreign investors increased their holdings of KOSPI-listed shares every year for 4 years since 2000, controlling 42% of the stocks in 2004 by market capitalization, from 30.3% in 2000. However, they became net sellers from 2005, reducing their total market cap to 39.7% in the end of 2005, and 37.2% in the year end 2006.
The exchange rate of KWon against USDollar has kept relatively stable throughout the month, in the box of 925-941-943-941, however, KWon against JYen continued strengthened, breaking 780 against JY100 for the first time since forex crisis in 1997, as JYen rose above 120 against USDollar. The foreign exchange reserve in Jan expanded by $1.27 bil from Dec to reach $240.23 bil.
BOK predicted inflation will remain manageable in the range of 2.5% this year, as cost-push factors such as oil prices and the foreign exchange rate are stable while there's not a big pressure from the demand side. BOK targets annual gains in the consumer price index between 2.5-3.5% for 3 years from 2007. The central bank kept the overnight call rate steady at 4.5% since Dec 7. The yield on 3 years corporate bond maintained in the box of 5.3-5.42% through the month. Korea¡¯s unemployment rate rose slightly to 3.3% in Dec from 3.2% in Nov due to fewer job offerings in the manufacturing sector.
 
SHIPBUILDING AND SHIPPING

CEO of Big 3 yards voiced same concerns on the prospect of 2007. They anticipated global market atmosphere worsened in 2007, due to weakened USDollar, shaky raw material and shrunken volume of new building orders. They vowed to enhance their competitiveness by maximizing their IT technologies, improving logistic system, saving cost through block fabrication plant abroad and clearing nonessential assets.
Korea¡¯s top-three shipbuilders have set a target of $35 bil in new building orders this year, down from last year¡¯s record $37.4 bil. HHI expects $13 bil worth of orders, compared with $14.1 bil last year, DSME has set a target of $11 bil in orders with a backlog of around $22 bil, and SHI also lowered this year¡¯s target to $11 bil from last year¡¯s $12.3 bil.
Korean shipyards are expected to see their sales rise 18% this year, on the back of continuous construction of high-priced ships, forecasting to log $26 bil in exports this year, compared with last year¡¯s $22 bil. HHI expects this year¡¯s exports to grow to $9.2 bil, from last year¡¯s $8 bil, while DSME raised its forecast to $7 bil from $5 bil.
Seeking cheap labor and plentiful manufacturing sites, Korean shipbuilders are rushing to move parts of their production to China. STX Shipbuilding plans to construct the block factory in Dalian to produce 500,000 tons of blocks a year. It also plans to construct a shipyard in the area to build bulk carrier, pure car carrier and petrochemical products. STX is to invest a combined $84 mil for the 2 projects. SHI has been operating Chinese production unit SHI Ningbo, with an annual capacity of 120,000 tons since 1997 with the plan to expand its capacity to 200,000 tons. In addition, the company plans another block factory in Rongcheong, capable of 500,000 tons a year by 2008. DSME plans to begin from July producing hull blocks in Yantai, increasing the capacity there from the initial 30,000 tons a year to 200,000 tons by 2011.
HHI signed an agreement with Wartsila to establish a company to produce electrically driven dual fuel engine for LNG Carriers with the total investment of $68 bil on the basis of 50-50 joint venture. It plans to deliver 100 units of engine in the range of 5,700-17,100 KW starting second half 2008.
John Fredriksen acquired a 9.7% stake in STX Corp, the holding company for the STX Group including STX PO, STX Shipbuilding, STX Engine and STX Energy operations, spending $60m through his Greenwich Holdings. Fredriksen has earlier invested in both Hanjin Shipping and HMM to harvest a good gain in a fairly short period of time.
DSME agreed to form a venture with Nigerian National Petroleum Corp to ship oil and cargo. The sales will rise to $1.3 bil as operations pick up. The unit will begin by shipping oil out of Nigeria and will expand into transporting LNG, chemicals and containers. The move may help DSME company win contracts to build oil and gas platforms in the African country and to transport the fuels.
Park Kyu-won, senior executive VP, promoted to president of Hanjin Heavy Ind.
 
HHI won the orders from Marmaras Navigation for 2 x 160K crude-oil tankers, which will be built in Hyundai Samho. HMD agreed with Overseas Shipholding Group to build 2+2 x MR pc, OMI Corp 2 x 37K pc and Gulf Energy Maritime 1 x 75K.
Hyundai Samho secured from Irano Hindi for 1 x 159K tanker and Metrostar 2 x 165K tankers. Hyundai Samho achieved the record to build 20 mil DWT in 7 years and 2 months after it started the building, the shortest period in world shipbuilding history.
DSME secured the order from Hamburgsud for 5+1 x 4710 TEU container ship. SHI got the order from BG Group for 2 x 170K DFDE LNG carrier. STX won the contract from Emirates Trading Agency for 1 x 51K pc. INP from Pontecorvo 2 x 8K ethylene carriers and Sekwang Shipping 4 x 20K IMO II/III chemical tankers. SLS got the deal from ST Marine for 4 x 51K pc, SLS J 3 x 49.7K pc. C&Heavy Industries got from Target Marine 6+4 x 81.1K post-panamax bulkers, and SPP Top Tanker 2 x 50K pc, 2009, Dae Sun with NGM Energy 2+2 x 25K chemical tankers.
 
Lee Jin-bang, president of Korea Line, was elected as the chairman of Korean Shipowners¡¯ Association which has 95 member shipping companies.
The major shipping companies recorded disappointing performance due to high fuel cost, strengthened KWon and falling freight. Hanjin posted the sale of KW6.513 tril and shrunken operating profit of KW149.1 bil, while HMM had KW5.816 tril and KW113.9 bil, Korea Line KW1.115 tril KW89.2 bil, HeungA KW507.6 bil KW1.114 bil, respectively.
Samy Ofer acquired again 5.49% stake in Hanjin Shipping for KW108.5 bil, in addition to his earlier procurement of 7.26%.
Korea Line continues its expansion. It is reported to place order for further 2 x 174K capesize bulkers at Namura Zosen for the delivery 0f 2010-2011 and 1 x 205K bulker at Universal Shipbuilding for 2012. KLC currently has 2 x 107K aframax tankers at Namura Zosen. KLC chartered in 2 x 170K bulker newbuildings for 10 years from a newly established Daehan Shipping, to be constructed by Daehan Shipbuilding for 2008 -2009. KLC has already demonstrated its cash power to spend $230m on newbuildings in Nov last year for 2 x 51K pc at STX and 2 x 205K bulkers at Universal. In addition, KLC has secured more supramax bulkers, such as 55.6K Bianco Dan (2004) for 3 years, 56K NB Yasa Pembe for 2 years and 53K Volme (2004) for 12-14 months.