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TOP STORY

Trade Deficit with Japan Balloons Further Despite a continuous trend of strengthening yen, the nation’s trade deficit with Japan was revealed to have widened further. According to the economic circle on January 12, the nation’s trade deficit with Japan marked $32.8 billion, posting the largest deficit for three consecutive years since 2006. Such figure has also exceeded the surplus reaped from trades with the U.S. and European nations. A government official remarked, “The reason that the nation is particularly generating a huge trade deficit with Japan is because that Japan is the only nation holding component materials needed for domestic high-end electronic products.” In fact, the component material sector accounts for two-thirds in last year’s aggregate trade deficit with Japan. During a Korea-Japan summit, President Lee Myung-bak disclosed a plan to proactively support Japanese firms’ advancement into component material complexes located in regions such as Gumi. Meanwhile, the bilateral free trade agreement (FTA) has been facing an impasse due to the large trade deficit with the recent analysis conducted by the Korea Institute for International Economic Policy forecasting the nation’s trade account over the next ten year to decline to $6.1 billion once the Korea-Japan FTA is being agreed owing to the effectuation of non-tariff. In other words, the country has not much to gain while Japan is likely hold competitive edge via the compromise of the bilateral FTA. Consequently, it was conveyed that the Korean economic circle has no intention to negotiate a bilateral FTA unless Japan opens doors for Korean farmhouses to pioneer into the Japanese agricultural product market or taking a ‘win-win’ stance to forge technology cooperation in the non-tariff sector such as the component material industry. In regards to the issue on resuming the bilateral FTA negotiation, the two leaders have

Tuesday, January 13, 2009 No. 3088

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agreed to continue a working-level negotiation during a Korea-Japan summit. [Eun-jung Kim / JYJ]

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OP-ED

Still High Commodity Prices in Korea When international oil prices and grain prices are plunging and an economic slump is persisting, commodity prices commonly draw downtrend. The consumer price rise of the Organization for Economic Cooperation and Development (OECD) 30 member states has halved in four months from its peak of 4.9 percent in July 2008 to 2.3 percent in November 2008. Narrowing down the scope into G7 nations, the figure has declined further steeply from 4.6 percent to 1.5 percent. For Korea, the figure has merely descended 1.4 percentage points during the same period. Witnessing a sharp or meager price fall compared to other countries is problematic. Although leaped raw material prices are being immediately reflected to product prices, the prices remain usually steady when decreased factors exist. Beginning early this year, Korea has started to see price jump in commodities such as detergents, sugar, edible oil, and soju. Korea’s consumer prices almost doubled last year to 4.7 percent from 2.5 percent in 2007 -- the largest drop in ten years. The commodity price rise also reached up to 5.4 percent. Prevalent uncertainty of the coming future keeps consumers from opening their wallets these days. In addition, gloomy predictions on minus economic growth and huge unemployment cases for this year released are also factors contributing to the current economic uncertainty. Fundamental countermeasures should be devised in order to prevent the vicious circle where frozen consumption on surging prices is leading to the deeper economic slowdown. The government is requested to conceive measures upon considering the fact that the price leap is driven by supply factors rather than sharp expansion in aggregate demand. Soaring exchanges rates has contributed in dragging up the prices; however, it is more essential to completely eradicate inefficiency and factors restricting completion in the areas of import, production, and distribution system. The government and the Grand National Party were conveyed to discuss measures against soaring prices during Lunar New Year holidays. We expect viable solutions instead of vacuous price monitoring or lip service to be drawn up. [Translated by Eun-jung Kim / JYJ]

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ECONOMY 16 Trillion Won to be Released Ahead of Lunar New Year Holidays 3.1 trillion won-scaled refund is to be provided for companies and ordinary people ahead of Lunar New Year holidays. When combining 13 trillion won to be supplied by the financial sector including local banks and guaranteeing institutes, the aggregate capital to be released during Lunar New Year holidays reaches 16 trillion won. According to the Ministry of Strategy and Finance on January 12, the government has disclosed measures to stabilize ordinary people’s livelihoods and prices during Lunar New Year holidays including such plans upon undergoing a high-level government-ruling party meeting. Taking the fund demand of firms and ordinary people during Lunar New Year holidays into consideration, the government has decided to inject total 3.1 trillion won before Lunar New Year holidays -- 65.8 billion won for dormant refund return, 70 billion won for oil tax refund, and 2-3 trillion won for early surtax refund. The government has also decided to implement, at an early stage, newly devised financial supports such as livelihood stabilization fund loan for unemployed households (27 billion won), special guarantee for low-credit self-employed business owners (100 billion won), and low-scale loan for traditional markets (25 billion won). In addition, total 13.225 trillion won is to be provided for the intensified SME capital support during Lunar New Year holiday -- the Bank of Korea is to release 277.5 billion won, Korea Development Bank 2 trillion won, Industrial Bank of Korea 1 trillion won, Kookmin Bank 750 billion won and Woori Bank 1 trillion won. Consequently, a special fund to be supplied during Lunar New Year holiday is to expand from 2.2 trillion won last year to 3.3 trillion won this year while the guarantee by Korea Credit Guarantee Fund and the Korea Technology Credit Guarantee Fund are also to be widened from 800 billion won to 3.6 trillion won. Funds are also to be provided to social welfare facilities such as regional childcare centers via collecting joint support capital amounting to around 4 trillion won from the overall public sector. In order for price stabilization during Lunar New Year holidays, 25 special monitoring items are to be daily checked until January 23, while the volume of those products will be expanded more than three-fold at the maximum centering on high demand products. [Eun-jung Kim / JYJ]

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COMPANIES Foreign Firms Look to Drastically Cut New Recruits in 2009 Amid a prolonged downturn in business conditions, not only domestic companies but foreign firms are also found to be drastically reducing university graduate recruits. The results of a ‘2009 foreign company recruit trends’ survey, conducted by internet job portal Job Korea on 89 major foreign firms with presence in Korea, showed that only two out of 10 companies had plans to newly hire university graduates this year. From among the 89 respondents, 67 firms had so far finalized their plans for recruiting university graduates this year. However, only 19 companies (21.3 percent) answered that they planned to newly add university graduates to their workforce. Meanwhile, 48 firms (53.9 percent) responded that there would be no new recruits, while other 22 companies (24.7 percent) had not yet set up plans on recruitments, whether recruits would be made or the recruitment period. The recruitment scale of foreign firms looking to hire this year totaled 694 employees. This is 34.5 percentage points lower than the number recruited during the same period last year and means that each company will hire an average 10 workers. The number of university graduates recruited by foreign companies last year amounted to 1,075 workers with each company hiring around 16 employees. As for the recruitment period, the highest number of firms with 57.9 percent answered that they would carry out recruits throughout the year, while 21.1 percent planned to hire in March. This was followed by 15.8 percent with plans to recruit in October; 10.5 percent in April, September and December; and 5.3 percent in August. The average annual salary (excluding bonuses and incentives) for four-year university male graduates at foreign firms in 2009 was found to be 27.15 million won. This is 0.7 percentage point higher than the 26.95 million won average starting salary for new university graduates at foreign companies last year. [Eun-young Sa / JYJ]

Hyundai Genesis Wins North American ‘Car of the Year’ Hyundai Motor’s premium sedan Genesis was named ‘Car of the Year’ by automotive

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journalists from the U.S. and Canada on January 11. Based on design, safety, handling and price, North American automotive journalists picked the Hyundai Genesis as the winning car and the new Ford F-150 as the ‘Truck of the Year,’ according to U.S. media. The Genesis garnered 189 out 500 votes, pushing ahead of other top finalists, Ford Flex and Volkswagen Jetta TDI, to take first place. The jury of auto journalists announced the results at the opening of the North American International Auto Show held in Detroit on this day. The Genesis is the first Hyundai Motor vehicle to win this prize Hyundai Motor has sold a total 6,167 units of the Genesis in North America since it first launched the model in mid-2008. [Eun-young Sa / JYJ]

POSCO’s Steel Mill Project Expected to Further Advance POSCO’s steel plant project in India that had been in a stalemate position is showing signs of advancement. POSCO India disclosed on January 12 that India’s Orissa state government has finally decided to grant POSCO mining lease rights on Kanhadhar area in Sundar district reserved with India’s more than 25 percent of iron ore, and recommended to the Indian central government. Consequently, once POSCO receives the Indian government’s approval, POSCO is to receive mining lease right on Kanhadhar area. The POSCO side explained, “A significant advancement has been achieved for the steel mill project in India. As the Indian central government had earlier pledged to immediately grant approval upon completing the recommendation from the Orissa state government, the central government’s approval regarded as the final procedure is anticipated to be finalized soon.” Once the mining lease is secured, POSCO plans to spur its efforts in steel plant construction via embarking on negotiation for land compensation with local residents. However, there is still a long path ahead with number of administrative procedures to be accomplished. On 2,500ha-scaled forests and lands located in Kanhadhar area, around 200 million tons of iron ore is conveyed to be stored -- such amount can be used for five years at POSCO’s combined steel mills and 20 years at POSCO’s facilities (4 million tons) to be installed in an Indian local plant.

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Meanwhile, besides 12 million ton-scaled steel mill project in India, POSCO has been pushing ahead the project on integrated steel plant construction in Van Phong, Vietnam. However, such move is facing uphill with the Vietnamese government requesting to transfer sites upon rejecting the construction project on $5 billion-scaled integrated steel mill. [Eun-jung Kim / JYJ]

LG Display Signs Long-Term LCD Contract with Apple LG Display will deliver LCD panels to the leading global IT firm Apple for the next five years. LG Display disclosed on Monday that it signed a contract with Apple last Friday to supply the U.S. firm with LCD panels for the next five years. It will also receive advanced payments of $500 million sometime this month. This contract was reported to have been agreed upon when LG Display President Kwon Young-soo and Apple Chief Operating Officer (COO) Tim Cook met during the recent ‘MacWorld Conference & Expo’ held in San Francisco. Under this contract, Apple will preferentially purchase goods from LG Display when using high-tech LCD panels in its products. This is not the first time that LG Display is supplying LCD panels for Apple monitors and laptops, but LG expects this long-term contract to enable the supply to extend to other products as well.

“This agreement to provide Apple, the leader in technological innovation, with a long-term supply will be an opportunity for LG Display to objectively gain recognition for its technical skills and supply capability,” said a LG Display official. [Eun-young Sa / JYJ]

FSC Vice Chairman Speaks of Support for Ssangyong Motor Contractors Financial Services Commission (FSC) vice chairman Lee Chang-yong disclosed on Monday that support measures are being devised for Ssangyong Motor contractors. Lee spoke on BBS Radio on this day to say, “It is difficult for the government to adopt concrete measures on the Ssangyong Motor issue ahead of the court ruling on legal management.” He added that, “however, to ensure that Ssangyong Motor contractors are not hit by the uncertainty following legal procedures, the company is setting up measures to maintain jobs.”

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The government is focused on seeking to secure the automaker’s major parts suppliers with alternative outlets other than Ssangyong Motor and is also reviewing plans to have the banking circle apply a prompt support program for small- and medium-sized enterprises so that these smaller business do not encounter black ink bankruptcy due to temporary financial difficulties. In regards to the matter that corporate restructuring is being delayed, Lee said, “As for companies with multiple debt, we are fine-tuning conflicting interests with banks while encouraging restructuring in the banking circle.” He added, “Banks have been reluctant to carry out restructuring in order to meet the year-end Bank of International Settlement (BIS) capital adequacy ratio, but this process will be able to gain speed with fine-tuning and encouragement from our side.” [Eun-young Sa / JYJ]

Auto Industry Resumes Operation of Plants Plants that had suspended operation at the end of last year, due to an excessive stockpile following sluggish sales, are getting back on track. So far, 10 listed companies informed the Financial Supervisory Service Data Analysis, Retrieval and Transfer System that they would resume production during January 1-12. Seven companies including Hyundai Motor, Tae Won Mulsan and Ssangyong Motor reported that they would resume production on January 5, the first day of public notices in the New Year. Hyundai Motor resumed operations at its Ulsan Plant No.2 (Santafe, Veracruz) on Monday, after it had come to a halt to carry out construction work to create a mixed production facility beginning late last month. Mixed production, which refers to a method of manufacturing multiple vehicle models in a single production line, enables Ulsan Plant No.2 to produce other vehicles at its SUV production line. The plant had stopped operations for a total 15 days, or eight days when excluding holidays, beginning from December 26 last year until January 9. Hyundai Motor’s Jeonju Plant truck production line is only working on an eight hour dayshift, while Ulsan Plant No.4 (Starex, Porter, Genesis coupe) is maintaining a system of eight hour dayshifts and six hour nightshifts. In the case of Kia Motors, Hwaseong Plant No.1 (Mohave, Forte) runs four hour day and night shifts, each, while Hwanseong Plant No. 3 (Lotze Innovation, Opirus) runs five hour day and night shifts, respectively. Meanwhile, Gwangju Plant No.2 (Sportage) operates for six hours during the day and Gwangju Plant No.3 (Bongo Truck) works for six hours on both night and day shifts. GM Daewoo, which is not a listed company, also ended its shutdown to resume the

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operation of its Bupyeong Plant No.2 that manufactures the Tosca and Winstorm. However, the production line of the Ssangyong Motor Changwon Plant, which puts out the Labo and Damas, is expected to resume operation beginning January 23. Renault Samsung Motors resumed operation from January 2 after halting production for eight days from December 24 to January 1. [Eun-young Sa / JYJ]

Korean Companies Benefit from China’s Efforts to Boost Economy SK Energy is in high spirits as orders for asphalt exports to China have increased beginning the end of last year. SK Energy had exported 10 million tons of asphalt to China until 2007, dominating 40 percent of China’s import market, and this margin has been widening recently. The company perceives an upward trend of 10 percent gains each month. This comes as the Chinese government has stepped up plans to widely stimulate the economy, making it difficult to independently procure a sufficient supply of asphalt, the basic raw material needed for building roads. “China is constructing several advanced facilities, but these facilities produce small amounts of asphalt oil such as bunker C oil,” said an official at SK Beijing. “There is much construction work being carried out but China, lacking a self-supply, has no option other than turning to Korea under the current circumstances,” the official added. The hopes of Korean companies are being realized as the Chinese government announced last November that it would inject 4 trillion yuan (775 trillion won) over the next two years to stimulate the country’s economy. SK Energy’s steady sales of asphalt have been increasing, while businesses related to infrastructure (SOC) such as railways, roads and airports, are expected to post favorable performances in China this year. Exemplary cases are Doosan Infracore and Hyundai Heavy Industries, which own excavator plants in China. Doosan Infracore (former Daewoo Heavy Industries), which holds a plant in Beijing, sold 12,000 excavators to China last year, recording over 10 percent growth from the previous year. “Sales are expected to increase sharply as economic stimulus effects become full-fledged,” said a company official. [Eun-young Sa / JYJ]

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GENERAL Economic Education Support Act Passed at National Assembly’s Legislative and Judiciary Committee Secondary school social studies teachers are to be educated on financial and economic issues four times a year during vacations, and take job training sessions on the economic sector via cyberspace during ordinary times. Moreover, economy and social studies textbooks used in secondary schools are to be modified centering on cases, and students are forecasted to become more familiar with living economy via vacation programs such as economic quiz competition, experiment on simulated stock market and visits to local corporate sites. The Legislative and Judiciary Committee under the National Assembly on January 12 has deliberated and passed an ‘economic education support act (the government’s revised bill)’ containing aforesaid plans. Once the act is passed at the National Assembly within a short period of time, an institute supervising economic education and regional economic education center are to be established by presidential decree, and annually supported with revenue of approximately 1.96 billion won from the Ministry of Strategy and Finance by 2013. An institute supervising economic education will be designated by the Minister of Strategy and Finance (MSF) through public subscription from economic education organizations nationwide, while it is also highly possible for a separate corporation to be formed via a joint effort by a number of economic education groups. A regional economic education center is forecasted to be operated and established nationwide after MSF Minister selecting institutions or organization recognized with competence to carry out economic educations. A regional economic education center is already being operated in the nation’s four regional economic zones (Chungcheong, Honam, Dakyung and Southeastern zone), while the number of centers is projected to expand to seven within the year, nine by 2012, and ten by 2011. An institute supervising economic education and a regional economic education center isn’t horizontally connected -- it will be constituted in the form of supporting respective economic educations via smooth mutual cooperation. [Eun-jung Kim / JYJ]

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Personnel Appointment of Economic Top-ranking Officials to be Outlined Soon As whether to accept the resignation that had been tendered by economic top-ranking officials at the end of last year is predicted to be decided within this week at the earliest, personnel appointment of successor posts is also projected to be finalized soon. The Ministry of Food, Agriculture, Forestry, and Fisheries (MIFAFF) official on January 12 said, “MIFAFF Minister Jang Tae-pyeong recently remarked that whether to accept resignations is likely to be decided this week. Although it isn’t sure yet, the issue is likely to be confirmed sooner or later.” Four MIFAFF top-ranking officials, chief of Planning & Coordination Office, head of Food Industry Headquarters, head of Fisheries Policy Office Head, and CEO of National Fisheries Research & Development Institute, had resigned on December 19 last year, but the final decision on whether to accept their resignations is still in talks. Consequently, with the vague status of aforesaid officials continuously impeding the work flow, it is possible for around one or two officials to step down from their posts. Minister Jang had previously expressed his intension to ask certain officials for their responsibilities saying, “MIFAFF is required to introspect upon a number of scandals occurred last year.” However, taking into account that there are some key issues to be immediately solved, an extensive reshuffle isn’t forecasted to be conducted. In case of Fair Trade Commission (FTC), Secretary General Lee Dong-hoon among four FTC top-ranking officials turned in their letters of resignations at the end of last year, and those resignations are conveyed to be accepted within this week. A FTC official stated, “Two candidates for the successor to Secretary General Lee were proposed to Cheong Wa Dae.” In addition, no single top-ranking official at the Ministry of Strategy and Finance has tendered resignation, and in case of Deputy Minister for Financial Affairs Lee Soo-won, although he was appointed as the head of emergency economic team at Cheong Wa Dae, his post at MSF is to be continuously maintained. However, FTA Promotion & Adjustment Authority, among seven MSF top-ranking officials, had been vacant even before an en masse resignation by top-ranking governmental officials. [Eun-jung Kim / JYJ]

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NEWS BRIEFING Senate to Vote on Release of Second Half of Bailout This Week The Bush administration is expected to ask Congress for a second $350 billion from the government bailout program designed to aid the financial industry passed in October. Obama’s economic adviser, Larry Summers, briefed Sunday (local time) on the Wall Street bailout and an economic stimulus package that the new administration is going to carry out as soon as the president-elect takes office on January 20. Within the next few days, lawmakers are to vote on whether to block the funding of the remaining $350 billion in the Troubled Asset Relief Program (TARP). The idea of this vote in Congress would be to make the money available to the incoming administration as soon as Obama takes the oath of office. Under the bailout law, the Treasury Department will be able to access the second half of $350 billion money unless Congress passes a resolution rejecting the request within 15 days. The Bush administration is to request for the funds as early as today (Monday), Bloomberg reported. [JYJ] GM Seeking Additional U.S. Government Loans Despite the U.S. government loans provided by the Bush administration at the end of last year, General Motors Corp is seeking for additional funds once again. On top of the $13.4 billion in U.S. government loans that have already been pledged last year, GM, which has been hit hard by declined car sales from the year of 2008, is conveyed to seek further loans from the government. The $13.4 billion in the U.S. aid was initially forecasted to last through March this year. "The $13.4 billion is consistent with what we asked for through the first quarter under our downside market scenario, which is the way the market is running," Wagoner said. "We will obviously review the whole plan and at that point we'll see what requirements are. But for now we think we're well covered through the period we asked to be provided," Reuters reported.

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In an attempt to boost cash and withstand sluggish demand, the ailing automaker is planning to eliminate brands and dealers, seeking to sell its Saab unit. At the Detroit auto show held on Sunday (local time), GM’s Chief Executive Officer Rick Wagoner said the company has found interested parties for its Saab brand, but no details about prospective buyers have been made on this day. [JYJ]

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