Directions of Regional Cooperation through Grafting
Saemaul Undong in Construction of Power Plants in Developing Countries *
- Author: Ham Woo-Shik, Lee Sang-Yup
- Publish: Korean Journal of Local Government & Administration Studies Volume 28, Issue2, p45~62, June 2014
Recently, the deregulation or privatization of the electric power industry becomes a global trend, and many power companies in advanced countries plan to expand overseas competitively to secure a base of new projects in order to overcome growth limits due to slowdown in growth and power demands of the country and promote profits. In this circumstance, various strategies for success should be discussed. Overseas power business secures global competitiveness, so if it is judged that there is competitiveness after a close inquiry into feasibility, an atmosphere of utmost support should be formed. Overseas power business should compete with other countries, and by the characteristics of the construction of power plants, it should focus on a regional cooperation project to minimize the residents' opposition so that it can promote residents-friendly construction of power plants.
This study will analyze the case of Korea Midland Power Co., Ltd. (hereafter, KOMIPO) to promote the effectiveness of regional cooperation projects in the recent overseas expansion of the electric power industry as an aspect of measures to secure the competitiveness of public institutions. KOMIPO's power business in Indonesia is carrying out an exemplary regional cooperation project, and especially, it has effectively grafted Saemaul Undong on to that. Through a study on this, policy implications for projects of the construction of power plants in developing countries will be drawn and a chance to share knowledge will be obtained. The neighboring areas of the construction of power plants in Indonesia are very underdeveloped compared with other areas, so they envy the South Korea's rural development movement that succeeded in poverty reduction by mobilizing the potential of the societies in the 1970s. KOMIPO has promoted regional cooperation projects grafting Saemaul Undong on to the areas adjacent to power plants since 2010, and the residents' responses are very high, so this study will introduce it as it can be a leading model of the future overseas power business of power generation companies.
최근 전력산업의 규제완화 혹은 민영화가 범세계적인 추세가 되고 있고, 선진국의 많은 전력회사들은 자국 전력수요 성장의 둔화로 인한 성장 한계의 극복 및 수익 증대를 위한 신규 사업거점을 확보하기 위해 앞을 다투어 해외진출을 꾀하고 있다. 이와 같은 상황에서 성공을 거두기 위한 다양한 전략들이 논의될 필요성이 있다. 해외 발전(發電)사업이 세계적으로 경쟁력을 확보하고 있는만큼 면밀하게 타당성을 검토한 후 경쟁력이 있다고 판단되면 전폭적인 지원 분위기가 형성되어야 할 것이다. 해외 발전사업의 경우 다른 국가들과 경쟁을 해야 하고, 발전소 건설의 특성상 주민들의 반발을 최소화할 수 있도록 지역협력사업에 역점을 두어 주민친화적인 발전소 건설이 추진되도록 해야 할 것이다.
그동안 민간자본의 세계화 및 해외투자에 대한 연구는 많이 있었지만 경제관련 기반시설 및 서비스를 공급하는 공기업의 해외 진출 사례, 특히 발전소 건설에 있어서 지역협력 등에 대한 연구는 거의 없는 실정이다.
이에 따라 본 연구에서는 공공기관의 경쟁력 확보방안의 한 측면으로서 최근 전력산업의 해외진출에 있어서 지역협력사업의 효과성 제고를 위해 한국중부발전 사례를 분석하였다. 한국중부발전의 인도네시아 발전(發電)사업에서는 모범적인 지역협력사업을 펼치고 있고, 특히 이에 새마을운동을 접목하여 효과를 거두고 있다. 이에 대한 연구를 통해 향후 해외 발전사업에 대한 정책적 함의를 도출하고 지식을 공유하는 계기로 삼고자 하였다.
인도네시아 발전사업 주변지역의 경우 다른 지역에 비해 낙후도가 심해 1970년대 한국 농촌사회의 잠재력을 총동원하여 빈곤퇴치에 성공한 농촌개발운동을 선망하고 있다. 한국중부발전에서는 2010년도부터 발전소 주변지역을 대상으로 새마을운동을 접목하는 지역협력사업을 추진하고 있고, 주민들의 호응도가 매우 높아 향후 발전사들의 해외 발전사업에 있어서 선도모델이 될 것으로 판단되어 본 논문에서 소개하였다.
Saemaul Undong , Developing Countries , Regional Cooperation , Construction of Power Plant
Recently, public enterprises have been promoting overseas expansion to raise their corporate value and secure competitiveness. Public enterprises' globalization and foreign investment have a few characteristics as compared to private capital. First, they are under the state control, so they can enjoy a special resource of national credibility and at the same time, cannot but have a close relationship with the government's political will. Second, mostly, they take the infrastructure and service supply for the homeland and national economy as the targets of their projects. Third, since they are public enterprises on the background of the state, they can lead or support the global space domination of capital or support by jointly entering with private companies with low credibility or without any experience of entry and playing a bridgehead role (Kim, Yong-chang, 2012: 1-2).
Regarding foreign investment business, independent power market is in the limelight. Overseas independent power market is a massive growth industry in which a plant construction cost of about 360 billion dollars is invested annually by 2035 with the world economic growth. The orders of overseas power plants placed on the domestic businesses in the 1970s have been revitalized at a high growth of about 30% a year, which have made a major contribution to the domestic economic growth. Especially, in the power generation markets in developing countries in Asia and the Middle East, the major markets of the overseas power plant industry, a shift to Independent Power Producer (IPP) method is rapidly made, with a lot of advantages such as reducing financial procurement costs through resolving the lack of the capital held or maximizing the leverage effect.
Recently, the government enacted provisions on the promotion of overseas business of public enterprises and granted autonomy and flexibility for overseas business management to public enterprises that promote energy and resource power business, and to promote overseas business and increase competitiveness, active overseas business promotion environments have been created, such as autonomy in the operation of manpower and organization, the collection of information about specific overseas business, the negotiation and conclusion of contracts, the employment of agents, and the flexible operation of overseas business management and supervision. Accordingly, the domestic power generation companies such as Korea Electric Power Corporation (hereafter, KEPCO) and construction companies with expertise in Engineering, Procurement, Construction (EPC) Contract are actively participating in overseas IPPs.
Traditionally, the electric power industry is a typical basic industry and mostly has been regulated directly and indirectly by the government or been owned by the state due to its natural characteristic, and as a benefit in return, it has been a non-competitive industry enjoying locational superiority by entry restriction. In addition, the electric power industry is a typical domestic industry of domestic production and consumption, requires large investment, and has a long gestation period of investment costs, so it has been known that it is difficult to develop international industry(Ham, Woo-Sik, 2013. cite at second). However, recently, the deregulation or privatization of the electric power industry becomes a global trend, and many power companies in advanced countries plan to expand overseas competitively to secure a base of new projects in order to overcome growth limits due to slowdown in growth and power demands of the country and promote profits. In this circumstance, various strategies for success should be discussed.
Lee Myung-bak government has developed overseas energy projects very actively; however, recently, the brakes have been put on indiscreet project development by the pressure of politicians. Indiscreet overseas expansion has problems, but it is not desirable to denounce even projects with very high feasibility like overseas power business. Overseas power business secures global competitiveness, so if it is judged that there is competitiveness after a close inquiry into feasibility, an atmosphere of utmost support should be formed. Overseas power business should compete with other countries, and by the characteristics of the construction of power plants, it should focus on a regional cooperation project to minimize the residents' opposition so that it can promote residents-friendly construction of power plants.
Till now, there have been various studies on private capital globalization and foreign investment, but there are few studies on cases of overseas expansion of public enterprises that supply economic infrastructure and service and especially, regional cooperation for the construction of power plants.
Thus, this study will analyze the case of Korea Midland Power Co., Ltd. (hereafter, KOMIPO) to promote the effectiveness of regional cooperation projects in the recent overseas expansion of the electric power industry as an aspect of measures to secure the competitiveness of public institutions. KOMIPO's power business in Indonesia is carrying out an exemplary regional cooperation project, and especially, it has effectively grafted
Saemaul Undongon to that. Through a study on this, policy implications for projects of the construction of power plants in developing countries will be drawn and a chance to share knowledge will be obtained.
The neighboring areas of the construction of power plants in Indonesia are very underdeveloped compared with other areas, so they envy the South Korea's rural development movement that succeeded in poverty reduction by mobilizing the potential of the societies in the 1970s. KOMIPO has promoted regional cooperation projects grafting
Saemaul Undongon to the areas adjacent to power plants since 2010, and the residents' responses are very high, so this study will introduce it as it can be a leading model of the future overseas power business of power generation companies.
Private capital power generation project by an IPP refers to a private sector-led power generation project that constructs power plants using private capital and collects the investment through operation for a certain period, and developing countries in Asia etc. are lacking infrastructure development budget of each government, so they satisfy demands for power by the private power generation method that can collect investment after advance investment (Ju, Sang-hyeon, 2013). Most IPPs in developing countries are carried out in various types, such as the existing power companies' participation with their share, BOT (turn over to the ordering body after a long-term operation about 20 to 30 years) and turn-key construction (turn over to the ordering body after completion and a test). The recent major trend is the BOT type (securing resources by participation with share and collecting investment after a long-period operation. IPP in BOT can be divided largely into two types: direct collection of investment through power transaction by power purchase price and volume and collection by a Power Purchase Agreement (hereafter, PPA) with the electric power corporation of the relevant country.
Most recent overseas IPPs promoted by KEPCO and power generation companies are promoted with PPA. PPA can reduce risk factors by direct contract with the seller more than the method of collection of investment by the power market.
The execution of the IPP method is a project in the long-term from conclusion of contract, design, construction and operation after completion, and it brings about changes in profitability by the reliability of information about the relevant country and the credibility of data.
Several theoretical discussions and developments have been carried out in studies on Foreign Direct Investment (FDI), but most studies have been with private companies. But there are only a few studies on public enterprises. Recently, the role of transnational public enterprises controlled by the global economy and FDI is receiving attention since they have purposes, motives and strategies for foreign investments different from those of private companies (Kim, Yong-chang, 2012: 4-5).
There are several studies on public enterprises’ governance, organizational characteristics, privatization, , resource development, resources-linked overseas expansion strategy, overseas new city export policy and domestic companies’ strategies for entry into overseas infrastructure market (Lee, Won-hee & Lee, Chang-yong
et al., 2011; Im, Young-mo et al., 2010; Choi, Jin-cheol et al., 2009).
Kim, Yong-chang (2012) examined the public enterprises' foreign investment characteristics of the state control and the national socio-economic infrastructure and the theoretical genealogy of foreign direct investment, and analyzed the global trend of foreign direct investment since the 1970s, changes of the Korea’s foreign investment system and the trend and characteristics of its foreign investment.
et al., (2012) discussed the role of public enterprises for entry into the overseas railway market and effective strategies for receiving orders of overseas projects through reviews on the cases of entry into the overseas railway corporation and orders received by domestic public enterprises to provide a base to increase the possibility of the overseas entry of the public enterprises.
Sohn, Jeong-min (2011) analyzed the moderating effect of the use of local network on overseas subsidiaries’ strategic role and performance with 121 foreign investment companies.
Like above, despite drawing the political implications by close research on the development state and promotion processes of overseas businesses through case studies are very significant for the competitiveness improvement of public institutions in the future, there are only a few studies on the public enterprise competitiveness improvement measure. Especially, there is no study on the regional cooperation of the overseas power business, and especially, there is no study applying
As KOMIPO started its overseas business development after being separated from KEPCO in 2001 with the launching of the Overseas Business Team in the Construction Department in 2004 and its organization was expanded to the Overseas Business Development Department in 2005, it entered the international IPP market in earnest(Ham, Woo-Sik, 2013. cite at second). The purposes of entering overseas IPP are to respond to these changes and demands in the era of the privatization of the electric power industry and unlimited competition, maintain consistent corporate growth, and grow as a global company through accumulating technology and improving international competitiveness.
Currently, KOMIPO is focusing its construction and operation of local power plants on Cirebon Coal-fired Power, Tanjung Jati 3, 4 O&M, Wampu Water Power and Semanka Water Power in Indonesia, which is growing rapidly as a next generation economic power; Navanakorn Complex Water Power in Thailand; and Boulder Solar-light Power in the U.S.
1) Risk factors of overseas government
One of the most important factors in the overseas business promotion process must be reducing the risk factor of overseas government.
KOMIPO is pursuing the method to develop projects through partnership with influential local companies for effective negotiation for the licensing by the local government. Resolving issues such as land acquisition as the core local risk of the green field power business, environmental impact assessment, corporation establishment, project permission and government guarantee, it effectively managed licensing, the major risk of overseas companies effectively using its experience and influence of influential local partners.
In the case of Cirebon project which KOMIPO entered Indonesia for the first time in 2006, about 200 individual lands were obtained through the local partners timely, and the local environmental impact assessment of the Ministry of Environment was completed earlier than due date. The Wampu water power project, developed dominantly by KOMIPO in 2009 achieved recognition about the business viability guarantee as new government guarantee system of Indonesia based on the credit of KOMIPO and the support of the influential companies as local partners, so the business development capability of KOMIPO was estimated internationally.
One of the factors to cause the risk of the foreign government is lacking of understanding about the opposite government’s project, so there are many cases of delay and failure of the project in the demanding process of the excessive compensation. However, KOMIPO is excluding the project about involving or the excessive compensation of the opposite government, regardless of the business value by considering the transparency of the project in the first project selection step preferentially. Generally, in the case of the concession type projects from the privileged class of the government, local projects promoted by the local government and the encouragement type projects through agents, the project processes may be uncertain or may not be conducted by the public procedure, generally. KOMIPO considers the participation of the local electricity generation board in bidding competition business preferentially, and they participated in the encouragement type project for the transparent and open process and method securing the national long term generation expansion planning and central government guarantee.
Securing the stable fuel supply condition is a very important factor for the project success. For KOMIPO, obtaining the fuel is important, and the promoting the development of the coal-fired power and gas complex power plants should be stable by the fuel suppliers' participation in the first stage of shareholder organization. The change of the fuel cost should be connected to the basically electricity rate for avoiding the change risk of long-term fuel cost.
Selling electric power is the only profit source of an IPP, and the minimum purchase energy should be guaranteed for the collection of stable investment for 25 to 30 years in the long-term. In the case of KOMIPO, the electricity generation board is guaranteed for 80% utilization of selling electric power generally for the facility life period. In the case of low credit of local electricity generation board, the government guarantee that the opposite country government guarantees these obligations is required.
An overseas IPP needs large-scale funding of about hundreds of millions to billions, and an international project financing method in which export financial institutions, international financial organizations and syndicated loans participate is used for the procurement of competitive and influential resources. KOMIPO is securing the favorable financial conditions of Korea export-import bank through O&M and equipment supply participation of domestic companies.
2) Interests opposition between the participants
The various actors can jointly participate in the foreign investment business. In the policy decision process, the actors who pursue the self-interest adjust or reject the policy by their interests to influence the project, so appropriate adjustments of the various actors' interests and distributing the roles are very important for the successful promotion of the projec(Ham, Woo-Sik, 2013. cite at second)t.
The successful promotion of the power business in Indonesia was possible by the minimization of conflicts between interested parties based on the IPP project know-how of KOMIPO.
3) Negotiation of maximization of investment profit
For the success of the project, drawing the maximum profit through the negotiation is very important. For the maximization of investment profit, Engineering, Procurement and Construction (EPC), and the amount negotiation is very important.
KOMIPO selected the EPC vendors that were qualified by the initial step of business development as candidates, and suggested the development capacity and facility adjusting the fundamental owners' requirements for competitiveness. The power business of Indonesia minimized the EPC cost by securing price competitiveness through the international competitive bidding.
4) Training the overseas business professional manpower
For the success of the foreign investment project, professional and systematic know-how, promotion planning and workforce of the company for the entire project are required.
KOMIPO judged that securing the professional manpower was urgent for the simultaneous overseas business, so it sent two people per country for training local experts. There are the various efforts such as the regular internal and external training programs based on the pool and the overseas business reserve personnel for training the overseas business professional manpower. As a measure for the business development capability reinforcement, there are the project management, project contract, project finance for development, customized training system and job training by external professional organizations.
1) Necessity of applying Saemaul Undong
The developing countries are hoping benchmarking of success factor of
Saemaul Undongfor their rural development strategy establishmen(Ham, Woo-Sik, 2013. cite at second)t. Especially, the underdeveloped level of neighboring areas of power plants in Indonesia is higher than other areas, so they desire the successful rural development movement with the poverty reduction by the potential of Korean rural societies in 1970s.
China and Japan focus on the material capital for the assistance contribution about developing countries, but the local areas are recognizing that learning the spiritual assets, such as the self-help and cooperation through the spontaneous rural development spirit like
Saemaul Undongis effective for the sustainable rural development (Park, Young-ho, 2013). Approaching through Saemaul Undongcan be said to be Korea’s inherent development, cooperation product, differentiated from those of other contributor countries even on a small scale.
Saemaul Undongis effective for the contribution to the enlightenment of the farmers and improvement of income from the regional cooperation fund on a small scale, and it can make the development experience of Korea a brand. Especially, it can definitely contribute to making a friendly atmosphere with the residents in the neighboring areas for the construction of power plants.
2) Applying principles of Saemaul Undong
For applying the
Saemaul Undongto the local cooperation project of developing countries, the principles should be considered as follows.
First, it is the customized approach. The philanthropic project of
Saemaul Undongis closely related to the social domains such as the residents' culture, consciousness and lifestyle (Park, Young-ho, 2013), so the successful experience of Korean Saemaul Undongmay decrease the possibility of success uniformly.
As a result of a review of the project items through a total of five expert interviews, conference at the place of business, KOMIPO found that the educational gap of the residents in the areas adjacent to power plants is bigger compared with other regions and recognized that they did not have hope for the future about their children, so it focused on the improvement of the educational environment of elementary schools. Examination of local information and demand by village level increased the possibility of success of the regional cooperation project.
Second, it is the private-public cooperative method. KOMIPO conducted the project with KOICA in Public Private Partnership (PPP) method (within 50% of the project cost was supported). The effect of the regional cooperation was increased by the close cooperation with NGO such as Plan Korea and Good Neighbors.
Third, the reform of awareness. Self-help and self-reliant spirit of the farmers in underdeveloped countries were lacking, and they had the sense of helplessness, so they accepted the poverty as fate. For reforming their pre-modern awareness, the
Saemaul Undongspirit focusing on education is needed.
Fourth, it is the residents' participation and sincerity. The success of
Saemaul Undongmay be depending on giving the ownership and endogenous development vision to the residents, but the strategy of promoting Korean Saemaul Undongshould be rejected. Through the residents' participation in the areas adjacent to power plants, they have developed their own capabilities and showed sincerity for the development support in KOMIPO. Officials, including the president of KOMIPO actively participated in local events, and received the residents' responses.
Fifth, it is training the village leaders. For the
Saemaul Undong, the strong leadership of the central government and the local government, and village, and the voluntary participation of the residents and the consistent promotion system are necessary, and it should be combined with sharing know-how of Korean Saemaul Undongand the educational program for the village leaders. The rural societies in Indonesia show the solid characteristic of group-centered community bound together by a common destiny and the solidarity and traditional leadership, so it should be approached with the small tribe or indigenous village unit for increasing the absorbing capacity of Saemaul Undong. In the case of rural residents, it should be focusing on improvement of educational environment based on the residents' children to avoid the benefit state like the demanding monetary compensation or provision of food for the price of the Saemaul Undongproject and the village meeting participation, and it should approach with the sincerity of KOMIPO, gradually.
1) Background of promotion
KOMIPO conducted the substantial global Corporate Social Responsibility (CSR) activities in Indonesia for overseas business promotion(Ham, Woo-Sik, 2013. cite at second). The creation of a friendly atmosphere of the local community is needed for new project promotion in the future. By spreading the spirit of
Saemaul Undong, the material support like the school construction and the spirit enlightenment movement should be conducted.
2) Project of construction of elementary school
The project of building the elementary school in poor communities was for the purpose of the improvement of the educational environment of the vulnerable class in Indonesia. It was conducted by KOICA and PPP method. The project period was Oct. through Dec. 13, 2011 and the total project cost was 810 million won. By building 1st, 2nd and 3rd elementary schools, it received good responses from the residents.
3) Construction project of small hydro power plants
For the purpose of the poverty reduction and self-reliance of the energy of the low-income group in Indonesia, the small hydro power plants which can be operated by the low-income group in the local community were built. The total project period was Jan. 2013 through Dec. 2013, and total project cost was three billion won. Through the project of construction of power plants to increase the expertise of KOMIPO, energy self-reliance was pursued by supplying the power in the areas where there is no power.
4) Support project of medical services and solar lighting
It showed that the volunteer efforts such as the free medical screening activities, mural painting based on three villages of Sumba island in Indonesia, and it supported the pharmaceuticals and solar LED lantern, and educational activities and sports activities were conducted for children and youth.
5) Technology and education project inviting model laborers to South Korea
It invited model laborers from Cirebon and Tanjung Jati Power Plants in Indonesia and the Chief of Tanjun Jai in the Indonesia's Electricity Generation Board to South Korea and passed down technologies of operation and maintenance of power generation facilities.
6) Drinking water support and sanitation facility support project
It supported drinking water facility and sanitation facility for the 1st and 2nd KOMIPO schools as an additional project in the establishment of elementary schools.
7) Promotion of Saemaul Undong
Saemaul Undong in Koreaand delivered it to the 3rd Elementary School and residents when the completion of a small hydro power plant.
1) Strategy promotion of minimizing overseas business risk
In an overseas construction project for which lots of funds are mobilized, financial support is essential. To combine overseas construction with finance effectively, it is necessary to solve guarantee-related difficulties, devise funding measures and globalize Korean banking facilities(Ham, Woo-Sik, 2013. cite at second). To look into them concretely, in the short-term, companies should reinforce risk management themselves, and the reinforcement of the role of public sector banking facilities should be promoted, while in the medium- to long-term, banking facilities exclusively in charge of overseas construction should be established, and the government's support and regulatory reinforcement to promote global banking facilities should actively be discussed (Samsung Economic Research Institute, 2012b). Especially, in a new direction, it is necessary to use global infrastructure fund with the merits of an increase of credibility of the project and the application of a favorable interest rate.
Substantially, one of the most important factors in an overseas business promotion process is to reduce overseas government risk factors. Especially, licensing problem is a considerably important influencing factor for the successful promotion of the project. In Indonesia power business, efforts to resolve regulations-related obstacles and reinforce the entry barrier of competitor should be made through consistently forming and maintaining intimate relationships with the local government and officials in the electricity generation board. Especially, to form local culture and network, it is necessary to foster local experts and establish dedicated local organizations.
Securing stable fuel supply conditions in power business is a very important factor for the success of the project. In Indonesia power business, the maximum stability was secured by the conclusion of a fuel supply contract with the Indonesia Ministry of Electricity on the composition of the source of supply and supply price based on partnership with major local fuel suppliers. In addition, through thorough negotiations, the risks of overseas business were minimized by concluding a contract on the condition of the minimum purchase energy (Take or Pay) and securing to secure mass sale power distributors to secure stable profits in electric power sale, which has an important implication for the future overseas expansion of public institutions.
2) Establishing the co-operative governance system between public sector and private sector
To create the maximum synergy effect, it is urgently necessary to establish a cooperative governance system between private companies and public enterprises. Overseas competition for orders is virtually characterized by national competition. Thus, a private company should actively ask for help from a public enterprise over an affair with which it could hardly cope itself and the public enterprise also should actively support the private company to create the maximum synergy effect.
In Indonesia power business, domestic public power enterprise's high financial credit and excellent power business capability and private company's acquisition of local information, use of various consulting companies and capability of establishing a human network will be effective responses to Japanese or Chinese companies' expansion of local influences.
3) Establishment of credibility
Entry into overseas business is a project that can be seen simply as a business. Orders of overseas business are not placed just by a private company's technology, so pioneering a new market should be approached from a mid- and long-term perspective with sincerity. By making consistent efforts: e.g. meeting and building friendship with officials or agents in cooperation of the opposite country, an amicable local public opinion should be created in the prospective area of construction of power plants and a lot of efforts should be made for social contribution activities.
Inviting opinion leaders (chiefs and school teachers) near power plants operating in Indonesia to South Korea, carrying out commissioned education in professional educational institutes, inviting excellent laborers in Indonesia local power plants and passing down South Korea's excellent development operation technology are good methods. It is necessary to organize college student volunteers and visit the sites in Indonesia and reinforce the ties. Reinforcement of the ties with the areas should consistently be promoted: i.e. KOMIPO staff working in Indonesia visit local villages periodically and deliver scholarship.
Regional cooperation projects developed by KOMIPO in Indonesia power business, especially cases that have earned residents' popular sentiment by grafting
Saemaul Undongwill be very significant precedents when individual power generation companies enter overseas power business in the future. It could have positive effects such as the promotion of company image, and bringing about a change of recognition to companies that do their Corporate Social Responsibility (CSR) instead of pursuing profits only.
4) Establishment of specific overseas business promotion strategy
For a foreign investment project to succeed, professional and systematic know-how and promotion plans are required for the entire project. KOMIPO could establish expertise such as selection method, construction design and amount negotiation through establishing overseas business EPC participation vendor selection standards in Indonesia power business promotion and through this, it could promote project profits by selecting excellent power generation companies.
By securing and operating a training plan for the operation and maintenance of power plants for KOMIPO's unique local adoption technology, it could successfully promote a project by reducing operating risk through early selection and sufficient training of local manpower.
In the future, the following should be considered in grafting
Saemaul Undongon regional cooperation projects in overseas power business.
1) Flexible approach
Saemaul Undongis a project area requiring a high degree of professionalism and planning ability, so it should be approached by modification and supplementation for the local conditions.
2) Accumulation of social capital
Social capital refers to the credibility between members and systematic capability or the social capability like cooperative spirit, and in the areas adjacent to power plants' self-development, the local government's effort is important, but at the same time, the power of social capital should be accumulated within rural communities. For this purpose, a program to promote forming village community near power plants should be operated. Conversation with residents should consistently be promoted so as to ensure the residents that
Saemaul Undongimplants confidence and contributes to the resolution of a problem of poverty through rural modernization and local community development in the areas adjacent to power plants.
3) Differentiation in village community unit
The areas adjacent to power plants often have different level of formation of village communities, the urgency of reduction of residents' poverty, residents' self-help consciousness and cooperative spirit, even within the same local community, so they should be developed by aboriginal projects by the promotion of an appropriate
Saemaul Undonggraft work by village level.
4) Establishment and spread of success stories
A preferentially strategic example project should be developed into a village with relatively more self-help and cooperative spirit, and a story of success should be created to extend this to neighborhoods.
5) Cooperation system between institutions and organizations
In South Korea, there are local universities (Hanseo University etc.) operating global overseas volunteers for rural societies in developing countries, so it is necessary to establish a cooperation system between institutions and organizations, in which power generation companies pay minimum cost and college students do volunteer work in the areas adjacent to power plants local during their vacation.
IPP in developing countries has a lot of parts that cannot be controlled by companies in South Korea such as politics and economy of investment target countries and the period of the project for BOT type IPP requires a long period, so there is a great possibility of changes in circumstances, that is, uncertainty in the relevant project with investment target countries. Thus, the key to success of the project is to what degree the expected uncertainty in the future is minimized.
Accordingly, KOMIPO is doing its best for risk management in overseas business, focusing on promotion of construction and operation of power plants in Indonesia, which is emerging as the next generation economic bloc, and it also is promoting overseas business in parallel with resource development in the other areas(Ham, Woo-Sik, 2013. cite at second). Entering the age of privatization of electric power industry and era of unlimited competition, meeting these changes and demands and maintaining consistent growth as a corporation, it is making active efforts to accumulate technology and improve international competitiveness. This case has a great implication for Korean public enterprises in promotion of overseas expansion.
In the future, the following would be necessary for the revitalization of power generation company's overseas business.
First, fund and taxation support for overseas expansion of public institutions should be expanded (Ju, Sang-hyeon, 2013). Export-import bank's fund support for active overseas expansion of public institutions is necessary, and active fund support and taxation support through EDCF should also be expanded.
Second, deregulation of overseas expansion of public institutions is necessary. Flexible operation of overseas business budget should be possible, and autonomy of overseas business profit disposal should be expanded: e.g. Allowing preferential use of overseas business re-investment through internal reserve.
Third, in overseas expansion of public institutions, functions of providing information and consulting should be reinforced. Export-import bank's comprehensive support function of overseas expansion should be expanded, and overseas expansion information and consulting service exclusively for public institutions should be provided for KOTRA.
Fourth, incentives for overseas expansion is lacking, so the attraction of overseas expansion companies should be expanded further.
It is necessary to graft
Saemaul Undongin order to make promotion of regional cooperation project in overseas power business not temporary dispensation, but sustainable development of the areas adjacent to power plants. The regional cooperation project developed by KOMIPO in Indonesia should be more powerfully and consistently promoted so that it can be a leading model for overseas business in the energy sector. Saemaul Undongappeared in criticism of Western local community development, and in the early 1970s, when it started as a rural self-help movement, it was strongly characterized by local community development movement, but its concept gradually developed into the characteristics of modernization of the country and social reform movement (Kim, Young-mo, 2003). Also, in addition to economic support, public enlightenment and residents’ participation were the major source of its success.
In the promotion of overseas power business, when
Saemaul Undongis grafted on a regional cooperation project, the main directions should be 1) improving the educational environment through supporting educational infrastructure; 2) granting motive to residents; 3) attracting competition in good faith between villages; 4) establishing a governance system in which the local government and a power generation company support residents' activity; and 5) approaching local residents with sincere attitude. Saemaul Undongshould not stick to Korean style since it is a Korean rural development model. Because the situations in the times when Saemaul Undongwas carried out in South Korea and today's rural reality of developing countries are different, Saemaul Undongshould be used as Korea's brand and the core should be Korean style, but its details should be flexibly applied according to local conditions.