This is the first in a series of specials highlighting the economic achievements of President Lee Myung-bak during his first three years in office. President Lee will mark the third anniversary of the inauguration of his five-year term on Feb. 25. — ED
By Kim Tae-gyu
Semiconductors, shipbuilding, home appliances, steel and automobiles are the products that catapulted Korea from an economic backwater to one of the world’s most industrialized countries.
Yet, Asia’s fourth-largest economy has struggled to find future cash cows over the long haul since the aforementioned businesses are expected to eventually tail off.
A host of candidates such as information technology (IT) and biotechnologies have emerged but suspicions linger. In this climate, an unexpected savior has surfaced in nuclear power generation.
Over the waning days of 2009 a Korean consortium led by Korea Electric Power Corp. (KEPCO) won an $18.6 billion contract with the United Arab Emirates, beating favored contenders from France, Japan and the United States.
Under the largest-ever energy deal awarded in the Middle East, the consortium is supposed to build the first reactor by May 1 of 2017 and one more over the next three years.
Should Korea sign a follow-up pact to operate the facilities, its value could double to approximately $40 billion ― the country is optimistic of winning the additional agreement.
``In order to chalk up sales of $40 billion through exports, you need to ship around a million luxury sedans or more than 60 of the latest double-decker passenger jets,’’ IBK Securities analyst Jung Min-kyu said.
``On a more positive note, demand for nuclear power keeps rising. In consideration of the country’s technical edge and price competitiveness, nuclear plant exports are projected to become a next-generation growth engine.’’
Within the next two decades, more than 500 nuclear power plants are expected to be built as the world does its best to cut down on its overly high reliance on fossil fuels to mitigate climate change.
Upbeat about the UAE deal, Korea is looking to grab around a fifth of the market. Toward that end, it is putting forth great efforts to nurture specialists and forge dedicated taskforces.
KEPCO and other consortium participants were well aware back in 2009 that they needed to open their account in nuclear exports in order to jump into the lucrative race.
But things were not so good for the Korean team, which was composed of Hyundai Engineering and Construction, Samsung Construction and Trade and Doosan Heavy Industries as well as KEPCO.
Against such global powerhouses, Areva of France and the General Electric-Hitachi alliance of the U.S. and Japan, it had been regarded as an underdog in the three-way rivalry.
Areva and the GE-Hitachi partnership were also strongly backed by renowned politicians and influential bureaucrats of their countries, who avidly lobbied for their corporations’ victory.
However the atmosphere seems to have tilted in favor of the Korean team thanks in no small part to the brisk diplomatic efforts of bureaucrats and businessmen under the stewardship of President Lee Myung-bak.
Lee made an unscheduled visit to Abu Dhabi a few days before the UAE decision to underpin the Korean firms competing for the project and he is believed to have played a crucial role in the country’s triumph.
The feat allowed Korea to join the rank of nuclear power exporters following the U.S., France, Canada, Russia and Japan.
After winning the mega-sized contract, the state-run KEPCO and its partners have held talks with countries including Turkey and Mexico to seek other agreements.
The initiative of exporting nuclear power plants is no bed of roses since criticism has emerged of late that the country conceded too much to clinch the UAE contract.
The first controversy was about the military dispatch of some 130 combat troops to the UAE earlier this year after obtaining parliamentary approval last December amid an opposition boycott of the vote.
They are supposed to help train Special Forces there for a couple of years. Opposition parties claimed that the deployment was part of the nuclear plant contract.
The opposition parties also took issue with the Export-Import (EXIM) Bank of Korea, which pledged to lend up to half of the $18.6 billion that the UAE is allowed to repay over almost three decades.
These prompted critics to argue that Korea signed a secret deal with the UAE, promising overly favorable terms.
Knowledge Economy Minister Choi Joong-kyung flatly rebutted the suspicions, particularly those on the EXIM Bank, as groundless.
``It is general practice to combine exports of big-sized infrastructure with financial leases ― such advanced countries as the U.S. and Japan also have adopted this strategy,’’ Choi told a recent press conference.
``The possibility that the UAE will not repay the loan is very thin as the country operates a huge-sized national wealth fund.’’
KB Investment & Securities researcher Choi Won-yol pointed out that the jitters have been generated because the UAE contract is Korea’s first case of exporting nuclear power facilities.
``The world has no choice but to reduce the use of fossil fuels because climate change has come to the fore. But the alternative renewable energies are still relatively low in cost effectiveness,’’ Choi said.
``Before alternative energy sources gain commercial viability, nuclear power will be the go-to sources for quite a long time. Subsequently, the market’s prospects are very good.’’
Choi added that KEPCO and other players will be able to take advantage of the hard-earned opportunities with the full support of the Lee administration.
``As far as nuclear energy is concerned, Korea is ahead of the curve in construction costs, unit operation costs and the construction period,’’ Choi said.
``After current hitches are resolved, the country is expected to win other big contracts for nuclear power generation across the world.’’