Korean exporter collapses

Press, 21 April 1979, Page 18

Korean exporter collapses

NZPA staff correspondent i Hong Kong I The collapse of South! Korea’s twelfth largest “general trading company,’’ Yulsan Industries, has sent shockwaves through the nation’s business community.

Companies attaining the official status of a general] trading company obtain special Government incentives, and are encouraged to develop export markets. Executives move to and from the trading companies and Government positions. The all-purpose general trading company concentrating on exports has been cited by New Zealand businessmen on occasions as a model of what this country should be aiming to establish. The concept is not under strong attack in South Korea, but the situation of Yulsan has forced Korean economists to re-examine the working of the system. Yulsan, some bankers say,' focussed on export expansion, and did not give sufficient attention to other aspects of its business. A result was that when the South Korean Government blocked exports of cement, plywood, and steel bars in order to have domestic companies meet unex-

pectedly high local demand,it Yulsan’could not cope. The Yulsan group last] year exported more than;: SI66M worth of products.] 1 Its interests ranged through, I shipping, construction, ser- i vice, and manufacturing in- i dustries. Extraordinary interest at- i taches to the trouble of Yulsan, because the South Korean Government has used 1 Yulsan, and similar trading companies as the backbone i 'of its successful economic development. The Yulsan group is esti-ji mated to have . debts in excess of S3OOM, and its col- - lapse resulted earlier this ; month in the arrest of its senior executives on charges i

of embezzlement and foreign exchange violations. i The presidents of three of ' South Korea’s five major I banks who were involved in I loan transactions with the group have resigned, and 1 one has been charged in! connection with his activities concerning Yulsan. Opposition members of! the Korean National Assembly are reportedly querying whether Government friends of the company encouraged bankers to give loans to the group without demanding normal security. A number of foreign bankers, however, believe the group’s troubles sprang largely from its over-depend-ence on export markets.