Transcript Governance of Extractive Industries in the Republic of

Governance of Extractive Industries
in the Republic of Korea: A Brief
Introduction
Jae-Young Yu
Kangwon National University
Introduction
• ROK has the 15th largest economy in the world
• GDP: 29th in 1960  15th in 2013
• Average of 10% annual growth from 1962 to 1994
(http://www.worldbank.org/en/country/korea/ov
erview)
• Early stage of development; Domestic resources
played crucial roles (coal, tungsten, talc, lead,
zinc, iron, gold, cement, etc.)
• ROK heavily relies on the extractive industries
• Annual mineral resources consumption in
2012:
– 23 trillion KRW (ca. 23 billion USD)
– 94% of it imported
– Domestic mining occupies only 0.18% of GDP
• (Source: Yearbook of Minerals Statistics,
KIGAM, http://mici.kigam.re.kr/portal/)
• Annual Energy consumption in 2012
– ca. 279 MTOE (petroleum 38.1%, coal 29.1%, LNG
18.0%, nuclear 11.4%)
– 96% of it imported
• Source:
http://www.index.go.kr/potal/main/EachDtlPa
geDetail.do?idx_cd=2781
Policies
• Basic direction
• Measures
• Basic direction Aims (Source; Handbook of Resources Development
Policies)
– Expand financial aid for the promotion of extractive industries from
private sector
• providing private companies more loans to promote overseas resources
development
• increasing financial aid from state-run banks
• creating more resources-development fund financed by the public
corporations
–
Continuing consolidation and specialization of the resourcesdevelopment public corporations
• increasing the investment to pursuit oil company M&A, purchase strategic
mineral producing blocks, and secure REE minerals
– Strengthening the cooperation in energy and mineral resources with
the promising resource-rich countries through summit diplomacy or
ODA
• preemptive search for the promising projects for the boosting packaged
resource development
• organizing and running a pan-governmental supporting system for
business feasibility assessment and close examination of detailed financial
assistance program
– Strengthening the infrastructure producing information, professionals,
and technology on the resources development
• [information] find means of sharing information between Energy and
Mineral Resources Development Association of Korea (EMRD) and other
related companies and organizations
• [professionals] increase matching fund to 10 BKRW for the specialized
university for resource development
• [technology] increase the portion of overseas resources development in
the corresponding budget of the government
• Basic directions
1.
Increasing financial aid through government and state-run banks
1)
2)
2.
Raising more private funds by rewarding tax benefits
1)
2)
3.
expand tax exemption & postpone the deadline of repayment
raise resource-develop funds contributed from the public-companies having the
corresponding specialties
Creating large-scale projects through well coordinated cooperation
between public and private sector
1)
2)
4.
allocate all the loans to the private companies to develop overseas resources
introduce various financing programs e.g. reserve based financing (RBF) and syndicate
loan
consolidate & specialize public corporations through M&A and purchasing active
producing blocks, bringing further investment from the private sector
organize “Korea consortium” consisting of public corporations, resource-related
companies and general trading companies capable of launching the big projects
Securing REE resources
1)
2)
3)
promote overseas development of REE essential for the domestic smelting and rapidly
increasing in import
designate 6 strategic minerals (bituminous coal, uranium, iron, copper, zinc, nickel)
and 6 quasi-strategic minerals (chrome, manganese, molybdenum, tungsten, lithium,
REE)
support securing projects from the REE-rich countries through strategic energyresource collaboration
5.
Strategic cooperation taking account of the characteristics of the
region and project
1)
2)
6.
Encourage packaged resource development
1)
2)
3)
7.
design collaboration customized to each energy-mineral rich country
support overseas resource development with the know-hows and network
obtained from ODA
prepare a pan-governmental system to support finding the projects with good
potential
reduce investment risk of the private companies by expanding financial aid and
sharing the risk by the public companies
diversify the packaged resource development by invoking the participation of
multiple parties
put more investment to the infrastructure to strengthen the
specialties
1)
2)
3)
equip information system gathering the information both from on/off line
network
provide more educational funds to the Specialized University for Resource
Development
increase R&D budget on overseas resource development
• Main Measures
– Establishment of Resources Cooperation Committee
• intergovernmental channel to discuss all the policies,
information and collaborations in extractive industries
• minister, vice minister, CEO’s of public and private extractiveindustry companies, presidents of research institute of the
corresponding fields.
– Human resources cultivation in oil & mineral
development
• nomination of 10 specialized universities for resource
development –provide educational funds to train graduates
and professors to be specialized in the field
• establishment of Academy of resource development –short
term training
– R&D on Resources Development Technology
• draw technology roadmap
• R&D funding through KIGAM
– Domestic Resources Development (Measures)
• continental shelf development projects
• gas hydrates development projects
• promoting domestic extractive industries
• Promoting Domestic Extractive Industries
– Reason
• Too much relies on the imported resources (metal 98.94%,
nonmetal 27.22%)
• Environment friendly development while strategically secure
minimum amount of the resources
– Current Status
• Production: domestic mining occupies only 0.3% of GDP in 2008
• Analysis of reserve: metal resources are absolutely deficient ,
while nonmetal supplies are acceptable
– Basic direction
• efficient development of economically valuable resources
• enhancement of the competitive edge through the advances in
technology
• more strict management and prevention of the “resources curse”
• improvement of the supporting system along with the change in
the environment of extractive industries
– Some principal projects
•
•
•
•
•
•
•
•
•
•
•
•
More basic surveys and reevaluation of the domestic resources
Promotion of exploration and efficient development of the metal deposits
upgrading of the equipment for better productivity of active mines
heightening the added-value and strengthening the competitiveness through
providing more funds to R&D
pushing it up to higher-levels by creating more added-values
more education to train the professionals having resources development
specialties
help to equip safety facilities to prevent mine casualties
tighter control of ‘resources curse’ for the sustainable resources development
further automation and informatization of mining management system
introduction of more electronic commerce by standardizing the qualities of
(mine) products
regular meeting of private-public sector joint council to promote more
investment in extractive industries
improving law and regulations for the advanced governance of the extractive
industries
• Promoting Overseas Resource Development
– Supporting system (services) for the overseas
resources development companies
• General procedures of overseas development
–
–
–
–
–
gathering information
purchasing a mining lot (or sector)
survey & exploration
Development
Production
• Reporting a development plan
– Reporting; Overseas Resources Development Business Act, Article
5
– Required forms and documents: Enforcement Decree of Overseas
Resources Development Business Act, Article 2
– Feasibility assessment; Enforcement Decree of Overseas
Resources Development Business Act, Article 7
– Complemnt of the plan; Enforcement Decree of Overseas
Resources Development Business Act, Article 5-2
• General Loans
– For both domestic and overseas development
– 60% of the project budget
» Exceptions: continental shelf projects: 80%
» Exceptions: Public-corporations: 100%
– through EMRD
• Fire Success Loans
– Return principal with surcharge only if it’s successful, otherwise it
evaporates
• Resource Development Funds
– Overseas Resources Development Business Act, (Chapter 3) Article 11
– can be raised by a resources development investment firm or private
equity fund (PEF)
– Benefits
» tax abatement on the dividends (Restriction of Special Taxation Act,
Article 96-1)
» Investment Risk Guarantee (Overseas Resources Development
Business Act, Article 13-8)
» Other general benefits