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South Korean Industrial Action Worsens

By Yoo Choonsik, Reuters, Wed 25 June 2003 05:58 AM ET

SEOUL (Reuters)—South Korea’s government held an emergency meeting on Wednesday as a campaign of strikes to block reforms and raise pay widened to the transportation and car making sectors, threatening to stall economic growth.

Unionized workers from the country’s top automaker, Hyundai Motor, started a 10-hour strike over two days in support of a higher pay claim and may stage a longer strike later this week. Elsewhere, more than 50,000 workers from a broad union group, the Korean Confederation of Trade Unions, staged a four-hour strike.

Industrial action also spread to the transport sector, with 22,000 unionized workers out of 30,000 rail workers set to walk out indefinitely from Saturday over privatization plans, a union leader said.

With the economy already on the verge of its first recession in five years, more industrial disruption would dismay investors—especially as international ratings agency Fitch Ratings began a review of the country’s sovereign debt grade on Wednesday.

Underlining the growing risks facing the economy, HSBC bank slashed its forecast for the country’s economic growth this year to 1.9 percent from 3.4 percent.

Real damage from these strikes may be limited to specific industries but a problem is that they can become a seed for more extensive troubles depending on how the government handles them, said Lim Ji-won, economist at JP Morgan Securities.

The government of President Roh Moo-hyun, a former labor lawyer, has been criticized for talking tough but acting soft on unions during negotiations.


Prime Minister Goh Kun, who said those leading illegal strikes would be held responsible, said after the emergency meeting it continued to prefer to negotiate with strikers.

The emergency meeting was arranged a day after the 39,000-strong union at Hyundai Motor voted to strike over its pay claim.

The government’s basic principle toward labor-management relations lies on the fact that we will seek to solve problems through dialogue and compromise between the labor and management, Goh said in a televised speech.

The prime minister said politically motivated strikes or industrial action without any direct link to working conditions would not be tolerated.

The industrial stoppages are taking place despite South Korean wages growing almost twice as fast as growth in labor productivity over the past three years, according to recent data.

The commerce ministry quoted data last week from the Korea Productivity Center as showing wages per hour at manufacturing companies grew 10.4 percent on average every year between 1999 and 2002, against a 5.5 percent rise in labor productivity.

The unemployment rate stood at 3.4 percent in May.

Analysts have criticized the four-month-old government, which came to power with strong support from unions and the young, for having a confused labor policy.

In general terms, if the new government’s policy stance had not created confusion, the country’s stock price would have gone much higher, said Lim at JP Morgan.

The Seoul stock market’s price-to-earnings multiple, a common way of comparing share price levels at rival markets, now stands at eight times, about half the level for the Taipei market, one of South Korea’s main regional rivals.

Roh’s government was involved in a deal at the weekend to delay for at least three years a merger between two banks, caving into a four-day strike by unionized workers at Chohung Bank. The government had called the strike illegal.

In the past few months, threats of a strike by unionized rail workers had led the government to scrap a plan to privatize some railway operations, and truck drivers in the country’s largest port city won higher payments and other benefits after a strike.