It's hard to see how Korea Development Bank's bail-out of Daewoo Engineering & Construction promotes restructuring at Korea, Inc..

On June 28th the eighth-biggest, Kumho Asiana, said it would sell its one-third stake in Daewoo Engineering & Construction, one of its biggest units. Past governments have coddled chaebol, but the current one says free-market principles should prevail. Regulators say that they have been urging banks to take a hard line with nine struggling chaebol, including Kumho Asiana.

In addition to Daewoo, Kumho Asiana owns Asiana, the country’s second-biggest airline, and petrochemical, tyre, life-insurance, resort and transport businesses. As with other chaebol, descendants of the founder still control the business. In 2008 it used its airline and Daewoo to become the biggest shareholder in South Korea’s biggest logistics company, Korea Express. That acquisition, along with the purchase of Daewoo in 2006, has left it with debt of 15 trillion won ($11.8 billion). Moreover, the 18 South Korean banks and other investors that had bought almost 40% of Daewoo alongside Kumho Asiana are likely to exercise an option in December to sell the conglomerate their shares at a price of 31,500 won—over three times the level of June 26th. So Kumho Asiana needs to find another 4 trillion won.

The likely buyer of Daewoo is the state-owned Korea Development Bank. It has said it will create a special private-equity vehicle to that end. Several weeks ago it offered to buy Kumho Asiana’s holding at a 30% premium to the market price. That would still leave Kumho Asiana about 1.7 trillion won short of its obligations under the put option, according to CLSA, a broker.

Korea Development Bank has also said that it will give Kumho Asiana the “right of first refusal” if it decides to sell the Daewoo stake. This idea has Seoul’s financiers fuming. They do not see why the bank should be doing Kumho Asiana any favours. In its current form, they argue, its offer to buy the shares amounts to a bail-out. They note that Korea Development Bank is also in negotiations to buy a unit of Dongbu group, another indebted chaebol. They worry that the lender will end up impeding genuine restructuring.

The Economist argues chaebol are flusher with cash than before 1997. But, cash reserves gambling on derivatives is not a sign of corporate health. Restructuring is needed to cut unemployment and promote small and medium business sector expansion.

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• Do I abandon the green? Or, will Iran get a less creepy, more "rebel" rebel leader and really start rioting? 07:44:37
• Why Can't We Have a Better Media! RT @KimcheeGI http://bit.ly/11jFTG Meet Bobby Egan, NJ restaurateur who hangs w/members of nK's UN 07:42:17
• Any worse than American Idol? RT @BuddhistBuzz An imam, a priest, a rabbi, and a Buddhist monk meet 10 atheists http://url4.eu/3Qjf 07:38:37
• RT @TAMILTODAY Sri lanka President told the Cabinet"I do not mind asylum countries putting up visa offices in the IDP's http://short.to/iazc 07:35:35
• @KimcheeGI NK is blowback for bad US policies in Asia, starting with Nixon pullback b4 Japan and ROK ready to lead. in reply to KimcheeGI 07:33:38
• @KimcheeGI NK news is US is debased to level of court drama. Little disc. of NPT reform. Every regime has rent-seeking 'crats and pols. in reply to KimcheeGI 07:31:43
• US needs better allies, more democracy, fewer clients RT @cominganarchy article defending coup in Honduras http://tinyurl.com/lzhu4k 07:27:47
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• RT @TAMILTODAY Sri Lanka forces using forceful acts & forcibly sexually harassed towards tamil IDP refugees http://snipr.com/lo8ft 07:21:30
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• Kicking a mannequin? RT @kdrum Today's news: You won't have Sarah Palin to kick around anymore. 07:09:16
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• RT @FT Burmese elite enjoy times of plenty http://tinyurl.com/n75zgp 07:06:38
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• RT @DavidCornDC There's no scandal a little money or the right staff of cocksucking pros can't overcome. 08:44:15
• Quitting looks better than failing now in America RT @normative Wait, isn't a Republican governor going bughouse "politics as usual" now? 08:42:18
• It just shows how campaign pros dominate politics, not politics or people RT @csmonitoronline Palin’s decision to resign http://tr.im/qOGw 08:39:01
• @DavidCornDC After all, the handlers and PACs DO run the system. How dare she decide for herself! in reply to DavidCornDC 08:34:53
• @Dram_man it's navel-gazing and mourning for the lost opportunities in near farcical reporting. In future all pols will need permission. in reply to Dram_man 08:33:02

• RT @TAMILTODAY UN Chief asks SL to ensure children released by armed groups have access to care, protection http://bit.ly/1yMky2 22:10:58
• Not news RT @KimcheeGI RT @foxnews: POLITICS: North Korean Defector Describes Inner Workings of Isolated Regime. http://tinyurl.com/mzgk8a 22:04:17
• Jerking Off the South Koreans Again http://u.nu/9rpg 22:02:03
• Should I stop playing "English" poker with the kids for candy? @KingSejong http://tinyurl.com/n3knl4 14:56:02
• Little China on the Moon? How's the food? Gambling? @worldmeetsus Why the Next Man on the Moon Will Be Chinese http://tinyurl.com/mtqtv5 14:54:00
• I wish kim would have talked more about refugees. US debate on NK is so retarded @KingSejong http://tinyurl.com/knusbe 14:46:54
• Another form of advert until prosecutors crack it for libel @KImcheeGI @odissy Twitter hype raises eyebrows http://bit.ly/zRlmO 14:43:08
• Are Republicans this bitchy? In Russia, Poor Habits Make Deaths Outpace Births "Online NewsHour | PBS" ( http://bit.ly/GDxVw ) 12:43:04
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• American Fireworks Go Off Better than NK Duds http://u.nu/6jjg 09:06:37

I've always thought South Koreans pull this crap out of their asses just to keep interlopers off-balance.

South Korea's spy agency told lawmakers that Pyongyang notified its diplomatic missions and government agencies overseas that 26-year-old Kim Jong Un, the youngest of Kim's three sons, will inherit the leadership of the communist nation.

But Defense Minister Lee Sang-hee told the National Assembly on Tuesday that intelligence suggests a final decision has not been made. He did not elaborate.

His comments added to the murky succession drama in the reclusive country. The conflicting assessments come amid tensions over the North's May 25 nuclear test and signs that the regime is preparing to test-fire missiles in violation of U.N. Security Council resolutions.

Yangban-wannabe South Koreans might enjoy concocting this "drama", probably as they rot their brains watching dramas on TV. The rest of us are just tired of having to jerk South Koreans' pretensions about the value of their own intelligence, errr....gathering.

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It's half of what the United States should do about North Korean brinkmanship, but White House comments to questions about American strategy are still better than half-bad.

In an exclusive interview with McClatchy, White House National Security Adviser James L. Jones said of North Korea and its erratic communist dictator Kim Jong Il: "Our reaction will be dependent on what it is they do over the next few days, few weeks, whatever it is."

Jones said that the U.S. has "looked at a range of options that we have at our disposal" and is maintaining "an open and constant dialogue" with Russia, China, Japan and South Korea, all of whom share regional interests.

(...)

In addition, Jones emphasized that any international response to North Korea will also send a signal to Iran, which has its own nuclear ambitions that President Barack Obama wants to keep in check.

"What we do in North Korea is going to be watched very carefully by Iran and they'll draw conclusions there," Jones said. "So there's some metrics here that are really pretty global."

In an interview Thursday with the Associated Press, Obama described recent cooperation with Russia and China on North Korea as "fairly remarkable" and said that "the sanctions regime after the nuclear tests and the missile launches by North Korea have been robust in part because Russia and China have been willing to go further than they've been willing to go in the past."

Obama told the AP there "potentially is room for more later" in terms of getting Russia and China to agree to tougher sanctions on North Korea. However, Obama said, "What we're also trying to do is to keep a door open for North Korea to start acting in a responsible way, to recognize that a denuclearized Korean Peninsula is the only way that they are going to achieve the kind of commercial ties and development opportunities that can be good for their people. And we want them to know that path is still available."

Independence Day gives America the perfect opportunity to ignore North Korean petulance, and still fire off a few fireworks of their own.

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• RT @TAMILTODAY Rajapaksa’s actions speak louder than words http://tinyurl.com/lhy2pc 08:17:30
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It's comments like these North Korean refugees' that leads me to believe North Koreans are both much more cynical but also more astute about what is happening in their country.

"I don't want to say Kim Jong-il is bad," another refugee Choi said. "It's the people who report to him who are not doing their job right. They make false reports." Choi said she knew from experience that crop production is something that gets most often falsified "so as not to make the General worry."

Most refugees still call Kim Jong-il the "General" as has been taught to them by state propaganda and have bought into, at least partially, his carefully crafted cult of personality.

Park said she knows Kim often stays up at night worried about the lives of the people. "It is true that he has sacrificed so much for the people," she said. "The general has aged a lot," she said of her impression of seeing recent pictures of Kim looking frail and perhaps debilitated by the stroke.

I also think that the average North Koreans' ingenuity at gaming their own system will inhibit reform, not further it.

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The arrest by Japanese police this week of three men over an alleged attempt to send high-tech arms-making equipment to Burma at the behest of North Korean agents has deepened suspicions that Pyongyang is helping to arm Burma’s military junta.

Evidence of co-operation between the two pariah states has mounted in recent weeks. A US warship has been trailing a North Korean vessel believed to be carrying small arms to Burma in violation of UN sanctions, while Burmese exiles have published photographs of underground tunnels and bunkers that they said were built inside Burma with North Korean help.

Japanese police on Tuesday said the three arrested men – a North Korean citizen and two Japanese – had attempted to ship to Burma a magnetometer, a device used to measure the strength of magnetic fields. Export of “dual use” devices is restricted under Japanese law because they are employed in the manufacture of ballistic missiles.

The arrested men were identified as Lee Kyoung Ho and Yasuhiko Muto, operators of two export and trading firms, and Miaki Katsuki, president of a small electronics maker that is believed to have manufactured the device. They were detained on Monday in Kanagawa prefecture, west of Tokyo.

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I guess there's an inverse correlation between the number of Senate-confirmed employees and the actual chance two executive departments will coordinate a sanctions strategy against Pyongyang!

Today, the Department of State sanctioned North Korea’s Namchongang Trading Corporation — an importer of aluminum tubes, it seems — while the Department of Treasury sanctioned a North Korean front company, Hong Kong Electronics.

Or, maybe people do count for something.

The administration is focusing much of its efforts on freezing assets and cutting off financial flows that support North Korea’s trade in weapons, missiles and nuclear technology. These efforts are being led by Stuart A. Levey, an under secretary of the Treasury, who was one of the few senior members of the Bush administration to be held over by President Obama.

But later, when the State Department was trying to negotiate with North Korea over its nuclear program, the Treasury sanctions against the bank proved to be an irritant, and difficult to unwind.

Mr. [Philip S.] Goldberg’s primary task, another administration official said, would be “to make sure there is broader interagency coordination,” not just between the State Department and the Treasury, but also the Pentagon, the Commerce Department and the Department of Homeland Security.

Of course, we know conservatives will spin this as a sign of the socialist's bad faith, all the while smiling how, as with the decision to retain Gates at Defense, President Obama looks favorably Republican red, not pinko.

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