Singapore - Cold winter ahead for South Koreans

South Korea is not usually lumped with nations such as Indonesia and the Philippines when it comes to infrastructure deficiencies.

Indeed, the country prides itself on its high-quality transportation and communications systems. It is also eager to export its expertise in nuclear power.

This winter, however, South Koreans will be swallowing their pride to endure an unprecedented round of electricity rationing.

On Sept 15, a five-hour nationwide power outage left more than a thousand people trapped in lifts, stopped factory assembly lines and left major roads in gridlock as traffic lights failed.

As the country fumed, the influential Chosun Ilbo daily called for tough action. "Those who are responsible for the shameful blackouts... must be punished," it thundered in an editorial.

The first response of embarrassed officials was to search for explanations that avoided any reference to systemic failure. Since then, however, it has become clear that poor planning, delays in power plant construction and the reluctance of politicians to raise politically sensitive electricity prices were the main culprits.

As the September blackout revealed, reserve power now stands at dangerously low levels. Since it takes about four years to build a power plant from scratch, the only thing the government can do now is find ways to reduce demand. And this, in turn, could have a serious impact on economic growth.

On Nov 10, the government announced tough new energy-saving measures that will affect 14,000 factories and large office buildings across the country. Another 47,000 small and medium-sized commercial buildings are also involved.

All will be required to maintain indoor temperatures at 20 deg C or less during the coming winter. The mandatory energy saving measures will begin on Dec 5 and continue until Feb 28.

Most major corporations in South Korea are equipped with emergency generators. But if the power shortages continue, as now seems likely, they may be forced to cut production or delay expansion plans.

South Korea is home to the world's largest chipmaker Samsung Electronics, as well as runner-up Hynix Semiconductor. The country also houses Posco, a major player in the global steel industry. All are heavy electricity users.

Successive governments have kept electricity prices artificially low in order to hold down inflation and appease voters. Korea Electric Power Corp (Kepco) figures show Britain's electricity price is about twice that of South Korea, while Japan's is around 21/2 times as much.

It is not just consumers who have benefited. Analysts say that Hyundai Steel Co, the nation's second-largest steelmaker, paid just 303.9 billion won (US$264 million) for its electricity consumption last year. The figure would have reached 808.3 billion won if the company were based in Japan.

Keeping electricity prices down has almost certainly encouraged a rapid rise in demand. In 2009, national per capita consumption was 8,833 kilowatts per hour compared with 5,607kw in Britain and 7,818kw in Japan.

Kepco, meanwhile, has been struggling to remain viable. The company's debt reached 33.4 trillion won last year.

With more blackouts likely, and electricity price rises a near certainty, the problem could also have an impact on next year's parliamentary and presidential elections. Earlier this month, an independent candidate shocked the political establishment by winning election as mayor of Seoul.

Civic activist Park Won Soon now holds the second most powerful political position in Korea, a job traditionally seen as a stepping stone to the presidency.

Political disillusion, say commentators, runs deep in society, with many younger voters avoiding both the ruling conservative Grand National Party and its left-wing opponents.

Politicians are keenly aware of both the political and economic fallout. Blaming Kepco for the problem, President Lee Myung Bak gave its officials an angry tongue-lashing. "It makes my blood boil... I feel ashamed of even talking about it," he said.

The last time Mr Lee reprimanded government officials so harshly was earlier this year when he blamed financial industry regulators for not acting more quickly on signs of trouble in the nation's savings banks.

The President's public rebukes have become famous. One incident soon after he became president involved a visit to a local police station where officers were believed to be dragging their feet over the investigation of a child rape case.

Such public reprimands might get the police to investigate criminal cases with greater enthusiasm, but they are unlikely to compensate bank depositors or help resolve the electricity shortage.

Electricity rationing in particular is likely to be around for some time. Mr Lee may wish to put at least some of the blame on his predecessors. But his government will be judged on how quickly and efficiently it can resolve the problem - and restore the nation's pride.

Bruce Gale

The Straits Times

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