By Kim Tae-gyu
Minister of Knowledge Economy Choi Joong-kyung reiterated that the ministry will put forth efforts to launch alternative cheap gas stations as fuel prices keep rising.
During an interview with Business Focus last Tuesday at his office at the Gwacheon Government Complex, Choi introduced the idea of economy gas stations (EGS), expected to offer substantial discounts compared to the current ones.
``We expect that EGS will provide gasoline and diesel at lower prices than nearby rivals while the quality will be equivalent to that of other filling stations,’’ Choi said.
``Through securing oil products at lower prices and jettisoning unnecessary services, we will encourage the advent of EGS, which will also minimize the margins in the distribution processes.’’
The Ministry of Knowledge Economy (MKE) announced the policy on the EGS in late July, which will take advantage of public land offered at cheaper prices and oil supplied by state-run agencies with bulk discounts.
The ministry said that the new gas stations will not offer gifts or car washes to clients, in order to reduce costs and eventually gasoline and diesel prices.
In the long term, the ministry expects that such service stations will carve out double-digit market shares. Toward that end, it is thinking of various measures including offering subsidies.
Choi said that the domestic market for fuel is an oligarchy dominated by four refiners that have shunned competition between them as well as gas stations based on various tactics.
``We cannot let the market decide the prices of fuel because it is not that competitive. If we sit idly to let the refiners fix the prices, it would result in increased burdens for people,’’ he said.
``In the current situation, we cannot do anything even when refiners and service stations increase their bottom lines with thicker margins. Hence, we will debut a model gas station, which will supply fuel at lower prices.’’
He added that existing gas stations will not have to worry.
``What we are trying to do is to do away with bubbles in gasoline prices by showcasing ways that other players can easily imitate. They do not have to worry too much about their new competitors,’’ Choi said.
``Korea is a big economy with a high level of rationality. Any government policies will meet the general expectations of the people.’’
The appreciation of oil product prices throughout this year has been picked as the main culprit for soaring inflation, which topped 4 percent during the first half of this year and is above the country’s official target of 3 percent.
To bring the prices under control, the Seoul administration required refiners to lower oil prices by 100 won per litter earlier this year and they did so for three months, from April to June.
But they raised prices back again this month, which prompted the MKE to work on other ways of trimming down the price tags of oil products.
Asked about his previous remarks that executives of conglomerates receive overly large paychecks, Choi hesitated to speak out and just said: ``Personnel policies are up to each company.’’
But the lifetime bureaucrat insinuated his antagonism once again against their high remuneration.
``I took issue with the salary of executives last month with a view to asking our big businesses to take the lead in dealing with youth unemployment to spearhead economic growth,’’ he said.
``It is true that executive salaries have risen too much in the aftermath of the 1997 Asian currency crisis. It is also true that conglomerates do not do their best in creating jobs for our youngsters.’’
While delivering a speech to members of the Federation of Korean Industries on July 30 in the business lobby’s annual forum, Choi urged chaebol to cut down executive payrolls and hire more young talent.
He iterated the significance of recruiting young local talent instead of experienced workers.
``Hiring youngsters is like nurturing future warriors. In the case one merely cares about short-term topics, they will lose over the long haul. Accordingly, we need to give opportunities to young people,’’ Choi said.
``Let’s say a Korean company sacks new recruits to hire experienced workers abroad. What if they just leave later for its global competitor with the managerial knowhow and inside data of the Korean corporation? Should we foster local talent from when they are young, they wouldn’t do that.’’
With regard to the prices of electricity, Choi did not elaborate and just said that the ministry will make a decision later.
``It is crucial to raise electricity charges to meet generation costs. But the uncertainty of the global economy such as high oil prices and recent inflationary pressures means we have many things to factor in,’’ Choi said.
``In this climate, I cannot say anything about the plan to raise energy bills. We will take all the elements into account including inflation as well as supply and demand of electricity before making any decisions.’’
Earlier this month, the government increased electricity rates by 4.9 percent on average but that was lower than its original plan to increase rates by more than 7 percent.
Today, electricity revenue covers just above 85 percent of costs. Subsequently, the MKE hoped to up the figure but could not do so in the face of strong opposition from related ministries, which were concerned about inflation.
Worse, the MKE has failed to implement the policy of aligning electricity rates to fuel procurement expenses, which continue to go up due to rising values of coal and liquefied natural gas this year.