(1) The Process of Creating
The first step toward adjustment of the industry was the establishment of the Coal Industry Promotion Board (CIPB) in April 1987 by the Coal Industry Act. In May, ‘The Proposal for the Development and Rationalization of Coal Mines’ was made by CIPB. While the Proposal considered all of the problems of the coal industry, the most important point was that it suggested integration and scrap-down of small coal mines and enhancing productivity as the principles of rationalization. ##MORE_LAYER_BOX##
[Interview with the Former Chief Director of CIPB, Kwang Sik Kim]
Q1. In the process of creating the rationalization policy, what was the perspective of
MER, and what is the meaning of the EPB Plan?
MER did not seem to expect a sudden collapse of the coal industry, presuming that demand for coal would be maintained at the level of 20 million tons per year hereafter. However, coal as a home-heating fuel was being replaced rapidly by gas and oil, and coal stock was also increasing rapidly. Most mines were small and their mining conditions were bad: scarce reserve and low quality. There were only 30 mines with the annual output of over 100 thousand tons, which also had difficulties with respect to technology and finance, and in accordance with deep- mining. In contrast to MER, trying to maintain the current situation of the coal industry, CIPB judged that the adjustment of the coal industry was necessary for the survival of competitive mines, because demand for coal was decreasing.
I joined CIPB on April 17, just after it was established. On the request of MER, I made a plan for the coal industry. Though MER suggested ‘the New Coal Plan’ on the basis of my plan, it was basically the policy for maintaining the coal industry. I disagreed with that, and submitted CIPB plan to EPB. EPB judged that the adjustment of the coal industry was necessary for efficient financing, and adopted mine-closing as the government policy upon deliberation with MER. The decision of EPB was important because it guaranteed the government financial aid indispensable for the rationalization of the coal industry.
Q2. What do you think about the reasons why the re-employment of the dismissed workers and the revitalization of the coal-mining regions were considered little by CIPB?
In the rationalization of the coal industry, support for the mine-owners and dismissed workers was the most important. Various subsidies were paid to the dismissed workers and more than 7,000 won per ton were paid to the mine-owners for the elimination of their debts. With respect to re-employment of the workers, skill-training was a difficult problem. Since the workers could not afford to receive training, CIPB tried to secure the stability of their lives by the subsidy. Re-employment of the workers was difficult under the condition of the industrial structure at the time. In contrast with Japan, where it was possible for the dismissed workers to get jobs in the local industry, we could support the dismissed workers only by the subsidy in Korea because there was no job in the coal-mining regions. Though the workers could receive the subsidy for training by MOL if they wished, there were not many applicants. I do not agree with the opinion that the support for re-employment of the workers was neglected. CIPB made great efforts to support the dismissed workers in those days. Although CIPB discussed the revitalization of the coal-mining regions with the Ministry of Construction (MOC) and EPB, it was not the responsibility of CIPB. MOC was in charge of the businesses related to regional development.
Q3. What reactions did you expect from the workers and mine-owners to the rationalization of the coal industry?
I expected a great resistance from the workers to the rationalization because they would lose their jobs and subsequently, the purpose of living. Mine-owners were expected to face great troubles because they had to pay debts. To solve those problems, we discussed the rationalization many times with the workers and mine-owners. We tried to reflect their demands in the rationalization plan. Afterwards, we, in agreement with them, determined the contents of the support, we recommended the budget to EPB. Facing strong demands from the workers, we paid a compassionate allowance for retirement, school expenses, expenses for job-seeking, a special compassionate allowance in addition to a retirement allowance and unpaid wages, which may seem a little excessive. ##MORE_LAYER_BOX_END##
MER made a new plan, called ‘the New Coal Policy’ in June, on the basis of the CIPB’s Proposal. It is important that the New Coal Policy suggested such new directions as follows; the basis of policies shifted from maximum production to optimum production; ‘mining performance’ (calculated by multiplying productivity by calories) was introduced as a criterion for assessing rationalization; plans and support for closing mines were mentioned officially. To secure funding for closing mines, the cooperation of the Economic Planning Board (EPB) that supervised the government budget was needed. After MER received EPB’s cooperation in financing the coal policies, rationalization by scrapping down inefficient mines became the basis of coal policies. At last, the final plan for rationalization was determined, as the Coal Industry Council resolved ‘the Plan for Coal Industry Rationalization’ drawn out by CIPB in December 1988. ##MORE_LAYER_BOX##
(2) Law and Institution
The Coal Industry Act enacted in 1986 was the basic law backing up the rationalization of the coal industry. However, at the time of the legislation, this law aimed at incorporation of three existing laws concerning the coal industry rather than rationalization. In the amendment of the Coal Industry Act in December 1988, clauses concerning closing inefficient mines were added. The amendment allowed the Coal Industry Stabilization Fund to use its resources for closing mines and made it possible for the Coal Industry Subsidy to finance the Coal Stabilization Fund.
CIPB was an institution for implementing the rationalization of the coal industry on the basis of the Coal Industry Act (Figure 3=2). The purpose of CIPB was to implement efficiently policies for the rational development of the coal industry. However, it is obvious that the most important service of CIPB was closing mines. CIPB was under the dominant influence of MER which was supposed to appoint a chief of the board and director of CIPB. While CIPB was in charge of the implementation of the rationalization policy, three councils – the Industrial Policy Council, the Coal Industry Council, and the Mine-Closing Council – took parts in the decision-making process of the rationalization policy. ##MORE_LAYER_BOX##
(3) Financial resources
At the point when rationalization through scrap-and-build started, financial resources for rationalization comprised the Coal Industry Subsidy, the Coal Industry Stabilization Fund and the Coal Industry Promotion Fund. The uses and financial resources of these funds were stipulated by the Coal Industry Act. ##MORE_LAYER_BOX##
The Coal Industry Subsidy, which was financed by tax revenue imposed on the taxable amount of B-C oil, supported various businesses related to the coal industry: support for mine maintenance and prevention of mine pollution, support for workers’ welfare and revitalization of coal mining regions, support for mine equipment, investment in the Stabilization Fund and the Promotion Fund.
The Coal Industry Stabilization Fund managed by CIPB was used for the purpose of stabilization of the coal industry, among which support for mine-closing and price stabilization accounted for the largest share of payments from the fund. Most of the Stabilization Fund was financed by the Petroleum Enterprise Fund.
The Coal Industry Promotion Fund was established for rational promotion of the coal industry and stabilization of the supply-and-demand of coal and More than 60 percent of the money provided by the fund was used for loans for summer coal stock. The resource of the Promotion Fund comprised the governmental and non-governmental investment and loans, etc.