[Overseas Resource Fire Sale] Amid This, Strengthening Resource Security... Government Steps Misaligned

Emergency Plan for Resource Crisis Established... Ministry of Industry Orders Related Research Service
"Establishing Supply Measures While Selling Prime Assets at Bargain Prices Is Nonsense"

[Sejong=Asia Economy Reporters Haeyoung Kwon and Sangdon Joo] The government is preparing to establish emergency plans based on various scenarios to respond to resource crises such as an oil shock. The government explained that this is to assess the current domestic resource supply status amid changes in the global energy market and to enhance practical resource development capabilities in response to internal and external crises. However, some criticize that selling off key overseas resources while claiming to strengthen 'resource security' is contradictory.

According to the Ministry of Trade, Industry and Energy on the 6th, a research project titled 'Korean-style Resource Security Diagnosis and Evaluation·Analysis Development' was recently commissioned.

An official from the Ministry of Trade, Industry and Energy said, "This is to diagnose the domestic situation and lay the foundation for crisis response training to strengthen resource security capabilities," adding, "The aim is to shift the core of resource policy from the existing ‘quantitative expansion’ to ‘security enhancement.’"

As the demand for materials and components has surged due to the Fourth Industrial Revolution, triggering a global resource acquisition war, the need to establish policies for this has also increased. In February, U.S. President Joe Biden signed an executive order aimed at reducing dependence on China for rare earth elements (17 difficult-to-obtain elements including lanthanum and yttrium) essential for smartphones, batteries, and more, and finding stable supply solutions.

Through this research project, the Ministry will assess the supply status of key mineral resources such as oil, gas, copper, nickel, and rare earths. It will specify crisis scenarios for resource supply and analyze their impacts. The plan is to prepare response measures for each scenario through so-called ‘stress tests.’

The government currently operates an oil stockpiling system and holds the authority to issue oil supply stabilization orders, rationing, and overseas resource import orders when necessary, but there are almost no specific response plans for supply crises by resource type.

Policy efforts to strengthen the substance of resource development are commendable. However, considering the government is selling off valuable overseas assets it already owns, there is considerable criticism that resource security will remain an empty slogan. Following the government’s plan to sell all overseas resources of the Korea Mineral Resources Corporation, last month it sold the Chilean Santo Domingo copper mine, essential for future industries such as electric vehicle batteries, at half the investment principal.

It is true that the debts of the three resource public enterprises?Korea Gas Corporation, Korea National Oil Corporation, and Korea Mineral Resources Corporation?reached about 56 trillion won as of the first half of 2020, indicating severe financial distress. In particular, the debt ratio of the Mineral Resources Corporation soared from 85.4% in 2008 to 6905% in 2015. Currently, with a capital erosion amounting to 3.36 trillion won, calculating the debt ratio is impossible.

However, the resource industry points out that rather than abolishing the 'MB (former President Lee Myung-bak) resource diplomacy' in a purge-like manner, the state should protect core resources necessary for the country, even if it requires tax input.

A resource industry official criticized, "It is nonsense that the government is creating countermeasures for resource supply crises while selling valuable assets at bargain prices," adding, "While there is agreement on the importance of resource security, the government is entangling itself by approaching overseas resource development as a purge of the previous administration’s wrongdoings."

This content was produced with the assistance of AI translation services.