Only 22 of 78 companies posted net profits last year


A slew of Korea’s largest conglomerates rushed into natural resource development abroad over the past four years with government support, but seven out of 10 lost money.

Seventy-eight companies under the nation’s top 30 private business groups in asset value were involved in overseas resource development as of last September, according to Chaebul.com.

Only 22 of them, or 28.2 percent, however, reaped net profits.

Kim Young-hwan, chief of the parliamentary committee on knowledge economy, said the government has tended to exaggerate the outcome of resource exploration abroad, pointing to the stock manipulation scandal involving a company with diamond mining rights in Cameroon. The Foreign Ministry’s energy envoy is under investigation for alleged involvement in stock-rigging of CNK International through overstating the diamond reserves at a mine in the African country.

“There will be discussions at the National Assembly to check for possible errors not just regarding CNK, but across all resource development projects abroad,” Kim said.

It has been a key policy of the Lee Myung-bak administration to encourage global resource development.

While worth backing considering skyrocketing oil prices, resource exploration and development usually takes at least five years, and often does not guarantee profits, according to Kim Pil-soo, a senior researcher at Hyundai Research Institute.

“It would be better to acquire profitable overseas companies in this field, but this would cost trillions of won,” he said.

The number of chaebol subsidiaries in overseas resource development rose sharply from 50 in late 2008 to 71 a year later and peaked at 79 by the end of 2010.

LG Group has 19 under its wing, up from 13 in 2008.

STX Group and Youngpoong Group saw the numbers rise from four to nine, and from one to five, respectively. Samsung Group established three more in the same period making 11. Tongyang Group launched two more.

SK Group, with energy business at its core, nearly doubled the number of such firms from 14 in 2008 to 26 in 2009, but reduced it to 14 as of September last year. SK Innovation sold off its Brazilian subsidiary which developed three oil fields last year for $2.4 billion.

Of the 78 chaebol subsidiaries in overseas resource exploration, 14 were set up in the United States, and another 14 in Australia. Ten were in Indonesia, seven in Canada and five in Malaysia.

Only one of the seven such companies under Hanwha Group and one out of five belonging to Youngpoong made money. Tongyang’s two natural gas developers posted net losses.

By Kim So-hyun (sophie@heraldcorp.com)