hankyoreh

Overseas resource development investments by administration

The Board of Audit and Inspection (BIA) released results on July 14 from its investigation into a performance assessment for overseas resource development projects. The overall picture is something we’ve known for some time from multiple revelations, but it’s still utterly disheartening to see confirmation of just what an embarrassment the Lee Myung-bak administration’s much-touted “resource diplomacy” has been.

The BAI calculated a total of 35.8 trillion won (US$31.4 billion) in investments in 169 overseas resource development projects by South Korea since 1984. Twenty-eight trillion won (US$24.6 billion) of that was invested during the Lee administration years of 2008 to 2013. The results of that massive investment have been paltry to say the least. In the case of petroleum, the amount actually imported was 2.2 million barrels, or just 0.4% of South Korea’s share. Even that was mostly brought in through three pilot efforts. The bigger problem, though, is that overseas resource development projects aren’t something we can just put a stop to once when they‘re no longer feasible and start generating losses. The BAI concluded that an additional 46.6 trillion won (US$40.9 billion) will need to be investment in 46 projects going ahead. That’s over 12 trillion won more than the 34.3 trillion won (US$30.1 billion) in additional investments predicted back in April. More than 22 trillion won (US$19.3 billion) will need to be invested through 2019. The term “bottomless money pit” never seemed more appropriate.

It‘s infuriating enough to see all that taxpayer money being cast to the winds, but it’s a burden that is going to fall squarely on the public‘s shoulders. Not only will most of the additional investments take the form of debt, but future tax money will be needed to address the growing financial risks for the public enterprises that executed the projects. Last year, the Korea National Oil Corporation and Korea Resources Corporation had debt ratios of 221% and 220%, respectively. By 2019, those are projected to rise to 320% and 692%.

Most of the blame for this falls on the Lee administration for its reckless decision to push overseas resource development as a showy, “results-oriented” state project without sufficient preparations or transparency. A perfect illustration is the KNOC’s decision to acquire the Canadian company Harvest, which already had 1.5 trillion won (US$1.3 billion) in confirmed losses after suddenly spending 4.5 trillion won (US$4.0 billion) to acquire underperforming projects. On the surface, this was the decision of a public enterprise working in resources. But we’ve seen plenty of evidence to suggest the process was guided by Blue House and administration power holders.

Spending on the once highly controversial free school meal program comes out to just over two trillion won (US$1.8 billion) a year. That’s chicken feed compared to the tens of trillions of won in taxpayer money wasted by an irresponsible administration. The Lee administration‘s resource diplomacy push wasn’t just a failure of government policy. We need to get to the bottom of things before it’s too late, and assign responsibility where it is due.

Please direct questions or comments to [english@hani.co.kr]