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Saturday, December 6, 1997 Published at 19:19 GMT


South Korean business giant collapses
image: [ Halla Group: interests included shipbuilding and engineering ]
Halla Group: interests included shipbuilding and engineering

One of South Korea largest business conglomerates has failed only two days after the International Monetary Fund approved a $60 billion package to rescue the country's battered economy.

The Halla group, a shipbuilding and engineering conglomerate, says its three core units will apply for special court protection against creditors because of massive financial problems.

The group, the twelfth largest in South Korea, is believed to have debts of more than $5 billion - 20 times the value of its equity. The Korea Stock Exchange has suspended trading in Halla shares.

At a news conference, the Halla Vice-Chairman, Park Sung-Suk, said its core companies had made huge losses over the past few years, and could not remain afloat once banks started calling in their loans.

The collapse looks set to take its toll on Britain. Nearly 200 jobs in the South Wales valleys are now under threat at a subsidiary of the Halla Group.

The 17m factory, which makes fork lift trucks and earth-moving equipment, opened just a year ago.

It was once hailed as a turning point for the local economy. Now the community is worried about negative effects that closure will bring.

The Halla Group's failure follows desperate efforts by managers to stave off receivership. At the end of last month Halla's shipbuilding company announced plans to lay off half its 6,000 workers.

Halla is the sixth major conglomerate to face financial collapse this year, a process which has saddled South Korea's banks with more than $30 billion in bad debts.

One of the country's investment banks in South Korea has also gone bust since the IMF bailout. The Coryo Investment Company was declared bankrupt after defaulting on loan repayments.

However, shares on the Korea Stock Market closed slightly up on Saturday as investors, especially individuals, brushed aside the latest bad news about the Halla group.

The composite index ended up 1.61 points, or 0.37%, at 435.73 as record 111.68 million shares changed hands. The previous record trading volume was 111.19 million shares, set on Thursday.

The BBC Seoul correspondent says that a combination of reckless expansion and easy credit from state-controlled banks is the root cause of South Korea's problems.

Under the terms of the IMF agreement, the government has promised to force mergers and even liquidation of the weaker financial institutions.

It is also promising to weaken the power of the family-owned business groups which dominate the economy. This process is expected to lead to high levels of unemployment not seen in South Korea for many decades.

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