ed Botched 'resource diplomacy'

The pitiful realities of the previous administration’s bungled ``resource diplomacy’’ have been exposed nakedly through the National Assembly’s inspection of state affairs. It’s feared that the nation has suffered enormous losses as a consequence of overseas development projects carried out without due preparation ― just for short-term results.

Rep. Baek Jae-hyun of the main opposition New Politics Alliance for Democracy (NPAD) said in the parliamentary audit of Korea National Oil Corp. (KNOC) on Thursday that the state oil company is expected to suffer losses of about 1.7 trillion won from its failed investment in Harvest Operations, a Canadian oil producer, and its money-losing refinery North Atlantic Refining Limited. The two-term lawmaker said Harvest was already a nonviable company with a debt-to-equity ratio of 2,000 percent in 2009, when KNOC took over it.

Rep. Kim Je-nam of the minor Progressive Justice Party also revealed that Korea Gas Corp. incurred losses of about 660 billion won from its 1 trillion won investment in three gas deposits in Canada. Two of the three deposits have already collapsed, and the remaining one is headed for bankruptcy as gas prices plummeted in the aftermath of America’s full-blown production of shale gas. Korea Resources Corp. is expected to sustain losses of up to 2 trillion won from its botched copper mine project in Mexico.

These three energy-related state firms invested about 27 trillion won in 69 projects abroad from 2008 through 2012 during the Lee Myung-bank administration, but they managed to recoup only 3.7 trillion won so far. As a result, their debts snowballed.

All this shows that state companies pushed for overseas resource development rashly to produce results within the former president’s term in office. Given that it normally takes a long time from exploration to production in developing energy and resources, such a short-term approach was clearly mistaken.

This is not to say that there is no need for the nation to go on energy diplomacy. Rather, that’s badly needed, considering our poor natural resources. The key question is whether such overseas development projects, which require bold investment decisions because of the high risks, can be carried out coherently with a long-term perspective.

The previous administration’s energy diplomacy might have been doomed to failure. Most of the projects were led by cronies of former President Lee, including his elder brother Lee Sang-deuk, and there have been suspicions concerning the possible creation of slush funds.

So it’s imperative to dig deeper into what happed in the course of such massive investments. This should be done without fail in order not to repeat similar failures. The incumbent government ought to launch an investigation at once, and there should be an Assembly audit, if necessary.