South Korea to Sell Tobacco Corp. (fwd)

[Robert Weissman <rob@essential.org>]

Friday July 3 5:36 PM EDT 

S.Korea to privatize giant state-run firms

By Jean Yoon 

SEOUL, South Korea (Reuters) - South Korea said on Friday it was selling all
or part of the government's stakes in 11
state-run firms, including Pohang Iron and Steel Co (POSCO), the world's
second-largest steelmaker. 

Planning and Budget Commission chief Jin Nyum said $6-8 billion worth of
foreign funds would be generated by the end of
1999 through the privatization. 

"We will pursue intense structural reform in state-run companies to wipe out
the 'bubble' and inefficiency," Jin told a news
conference. 

"The size of these firms was simply blown out of proportion as a result of
reckless management in the absence of a true
owner," he said. 

Analysts welcomed the move, calling it a step in right direction at a time
of cash shortfall. But they said the long-awaited
blueprint lacked details, and expressed scepticism about its execution. 

"It's a smart move to attract foreign money needed for economic revival
through privatization of state companies," said Tae
Chung, head of research at SG Securities. 

"But the plan was short on details and simply a confirmation of the
principles of privatization." 

Richard Samuelson, head of research at SBC Warburg Dillon Read, said Korea
was heading the right way in privatization,
but the plan offered little access to foreign investors. 

"Privatization is good. But if you are going to dramatically alter how
state-run companies are run, from the foreign perspective,
you might want to encourage foreign takeover of one or two state-run
companies," he said. 

The news immediately triggered a harsh backlash from union groups, fearing
layoffs would come with privatization. 

The hard-line Korea Confederation of Trade Unions said its metal unions
would begin an indefinite strike from July 14. 

Budget chief Jin said POSCO and four other companies would be "immediately
privatized" and the government would
gradually divest its shares in the other six. 

Other firms named for immediate privatization were Korea Heavy Industries
and Construction Corp, Korea General
Chemical Corp, Korea Technology Banking Corp and the National Textbook Co Ltd. 

The six to be gradually privatized are two big utilities -- Korea Telecom
Corp and Korea Electric Power Corp (KEPCO) --
and Korea Tobacco and Ginseng Corp, Korea Gas Corp, Daehan Oil Pipeline Corp
and Korea District Heating Corp. 

Jin said a second phase of privatization and restructuring plans would be
announced in mid-July. 

He said the 26.7 percent stake in POSCO owned by the government and the
Korea Development Bank would be sold to
local and foreign investors. Most shares would be sold through depositary
receipts abroad and the remainder offered to the
public and company employees. 

POSCO's individual ownership ceiling would be raised to three percent soon,
later to five percent and removed altogether in
late 2001. The aggregate foreign shareholding limit, now 30 percent, would
be scrapped, starting in August. 

Analysts said the market was little moved, as it digested the news. POSCO
shares closed at 43,800 won ($32), up 3.55
percent, but lower than its morning high of 46,000 won. 

The Korea Stock Exchange Composite Stock Price Index closed at 308.53
points, down 1.04 percent or 3.24 points. 

Jin said Korea Telecom, the nation's leading telecom operator, would be
listed on the exchange at "an early date." 

The date has been repeatedly postponed due to the impact it could have on
the already sagging stock market. 

When listed, Korea Telecom's shares would be the second largest capitalized
stock on the exchange after KEPCO. 

Jin said the government would sell about a 10 percent stake in Korea Telecom
to a leading global communications firm, or
firms, by issuing new shares by 2000. 

Jin said Korea Telecom will also make public offers abroad and sell part of
the government's stake to company employees,
institutional investors and individuals by 2000. The government could sell
its remaining 33.4 percent stake in Korea Telecom
after 2001. 

 07-04-98 5 State-Run Firms Scheduled for Privatization by Mid-July 

     By Chun Sung-woo Staff reporter 

     The Planning and Budget Commission yesterday announced plans to
privatize five state enterprises and their 21
     subsidiaries by mid-July as part of its sweeping public sector reform. 

     The five companies are Pohang Iron & Steel Corp. (POSCO), Korea Heavy
Industries and Construction Corp.,
     Korea General Chemistry 

     Corp., Korea Technology Banking Corp. and National Textbook Corp. 

     However, six other state-owned companies _ Korea Telecom, Korea Tobacco
& Ginseng Corp., Korea Gas Corp.,
     Daehan Oil Pipeline Corp. and Korea District Heating Corp. _ will be
privatized on a step-by-step basis until 2002, it
     said. 

     ``Privatization of the enterprises is intended to raise their
management efficiency, while lessening taxpayers' burden
     stemming from the heavy cost of economic restructuring,'' said
commission chairman Jin Nyum, during a news
     conference. 

     In the case of POSCO, the 26.7 percent equity held by the government
and the state-run Korea Development Bank
     will be sold to domestic and foreign investors, but the individual
stock ownership will be limited to 3 percent. 

     By the end of 2001, the commission will remove the ceiling on the
individual stock ownership and foreign investment in
     it. 

     Korea Telecom will be directly listed on the Korean stock exchange,
said Jin, adding that his commission would come
     up a list of additional state enterprises and their affiliated units to
be privatized by mid-July. 

     ``Korea Heavy Industries and Construction Corp. will be put to an
auction for both Korean and foreign investors, with
     part of its stock being sold to its employees,'' Jin said, adding that
the state-run heavy equipment maker is seeking a
     strategic alliance with foreign investors wanting to establish an Asian
base to produce power generators. 

     Industry sources said that Alstom of France has shown much interest in
the purchase of the power generator division of
     Korea Heavy. 

     As to Korea Telecom, the government will sell about 10 percent of its
stock to foreign multinational telecom companies
     in a strategic deal. It also plans to list it on the local stock
market, then offer 18 percent of the shares on the New York
     and London exchanges. 

     In privatizing Korea Tobacco and Ginseng Corp., the 35.3-percent
government share will be sold until the end of
     2000, he said. As for Korea Electric Power Corp. (KEPCO), the
government will first privatize its power generation
     division. 

     Power industry sources say that scores of foreign companies from the
United States, Britain, Spain, Germany and
     Singapore have sounded out the possibility of taking over two thermal
power plants that the KEPCO will put on sale in
     October. 

     Korea Gas Corp. will be privatized after its capital will be increased
to about 250 billion won by the end of next year. 

     In terms of the number of employees and sales amount, the 11 state
enterprises and their 21 subsidiaries are equivalent
     to about 75 percent of all public firms. 

     The government expects an inflow of about $8 billion in foreign capital
from the privatization of the 11 state companies
     and their 21 units, Jin said. 

     In order to maximize the selling price of the companies, the commission
is reviewing various options including equity or
     asset sales and offering of exchangeable bonds, chairman Jin said. 




                                                                   

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