21290 March 2000 FKThEA The [nvironmentdl Dimension of the Crisis: A Step Bdck or A New \Vdy forwdrd? 1 ~ ir Korea The Environmental Dimension of the Economic Crisis: A Step Back or a New Way Forward? Environment and Social Development Unit Korea Institute East Asia & Pacific Region for The World Bank Environmental Security ()2000 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. Manufactured in the United States of America First Printing March 2000 The findings, interpretations, and conclusions expressed in this study are entirely those of the authors and should not be attributed to the World Bank, to its affiliated organizations or to members of its Board of Executive Directors or the countries they represent. The maps that ac- company the text have been prepared solely for the convenience of the reader; the designations and presentation of material in them do not imply the expression of any opinion whatsoever on the part of the World Bank, its affiliates, or its Board or member countries concerning the legal status of any country, territory, city, or area, or of the authorities thereof, or concerning the de- limitation of its boundaries or its national affiliation. --> Printed on Recycled Paper Cover by Beni Chibber Rao This note was written by Sang-Don Lee, Taek-Whan Han, and Yong-Kul Won of the Korea In- stitute for Environment and Security and a World Bank team comprised by Jean Aden, Gio- vanna Dore and Judith Moore of the Environment and Social Development Unit of the East Asia & Pacific Region. Messrs. Songsu Choi (EASUR), Kirk Hamilton (ENV) and Heinz Unger (EASES) provided peer review. Editorial and layout assistance was provided by Katherin George Golitzen. Contents Abbreviations and Acronyms vi Preface vii Executive Summary ix 1 Introduction 1 2 Environmental Quality Indices 6 Air Quality 6 Water Quality 9 Solid Wastes 11 Recycling and the Deposit Refund Scheme 13 3 The Environmental Impacts of the Crisis in Selected Sectors 15 Changes in the Composition of Industrial Outputs and Impacts on Pollution Intensity 15 The Urban Transport Sector 23 Land Use Control 24 The Energy Sector 32 Summary of Effects at the Sectoral Level 35 4 Environmental Policy - Changes and Setbacks 37 Deregulation 37 Air Quality Controls 38 The Environmental Budget 39 The Economic Crisis and the Environmental Movement 42 The Economic Crisis and the Environmental Movement 42 5 Conclusions and Recommendations 44 Hii Boxes Box 1. The Financial Crisis in Korea Box 2. Environmental Concerns in the Seoul Metropolitan Region Box 3. The Controversial Legoland Project in Inchon, Kyonggido Box 4. Requirement to Employ Enviommental Engineers Scrapped Figures Figure 1. Percent Change in Air Quality at City Hall, Seoul. January-July 1997 / January-July 1998 (1997 = 1 00) Figure 2. Percent Change in Air Quality at City Hall, Seoul. August- December 1997 / August-December 1998 (1997 = 100) Figure 3. Change in Water Quality at Paldang Dam, January-July 1997 / January-July 1998 (1997=100) Figure 4. Change in Water Quality at Paldang Dam (August-December 1997 / August-December 1998) Figure 5. Relative Price of Diesel Fuel to Unleaded Gasoline, Monthly Trend 1996-1999 Figure 6. Share of MOE Budget in Total Public Expenditure Figure 7. Share of Environment-Related Expenditures in the Government Budget Tables Table 2.1 Concentration of Major Air Pollutants at City Hall, Seoul, 1996- 1998 Table 2.2 Air Quality at Yochondong, Ulsan City, 1996-1998 Table 2.3 Wastewater by Watershed, 1997 and 1998 Table 2.4 Wastewater by Industrial Estates, 1997 and 1998 Table 2.5 Water Quality at Paldang Dam, 1996-1998 Table 2.6 Water Quality in Tanchon Creek No. 5 Station, 1 996-1997 Table 2.7 Generation of Solid Wastes 1 991-1998 Table 3.1 Changes in Production for Domestic Demand and for Export Among Pollution-Intensive and Non-Intensive Industries Table 3.2 Change in Industrial Production for Domestic Demand and Ex- ports in Pollution-Intensive Industries Table 3.3 Discarded Wastes (April, 30, 1999) Table 3.4 Industrial Water Inflow/Wastewater Outflow in the Ban-Wol Dyeing-Industry Estate, 1997-1998 Table 3.5 Industrial Wastewater Treatment Record in the Tae-Gu Waste- water Treatment Facility, 1997-1998 Table 3.6 Domestic Demand for Clothing, 1990-1998 Table 3.7 Number of Livestock (Selected years 1970-1998) 'I'able 3.8 Wastewater Generation from Livestock, 1991-1997 Table 3.9 Beef Supply and Demand in Korea in MT (Selected years 1970- 1998) iv Table 3.10 Pork Supply and Demand in Korea in MT (Selected years 1970- 1998) Table 3.11 Number of Automobiles Registered 1993-1998 Table 3.12 Registered Vehicles by Type 1997 and 1998 Table 3.13 New Passenger Car Sales (Excluding Imported Cars ) 1997-1999 Table 3.14 Energy Consumption in Korea 1970-1997 Table 3.15 Energy Consumption by Sector 1993-1998 (est.) Table 3.16 International Comparison of Consumer Oil Prices, 1997 Table 3.17 Fuel Tax Rates, 1999 Table 3.18 Gasoline and Diesel Fuel Prices Table 4.1 Enforcement Record of Air and Water Quality Standards for In- dustrial Pollution Sources, 1997 and 1998 Table 4.2 Changes in the Environmental Budget, 1997-1999 Maps IBRD No. 30536 Korea: Major River Basins and Cities IBRD No. 30537 Zones under Seoul-Kyonggi Metropolitan Regional Planning v Abbreviations and Acronyms BOD Biological Oxygen Demand CO Carbon Monoxide COD Chemical Oxygen Demand DO Dissolved Oxygen FKI Federation of Korean Industries GDP Gross Domestic Product KEPCO Korea Electric Power Corporation KRIHS Korea Research Institute for Human Settlements KYDI Kyonggi Development Institute LNG Liquefied Natural Gas IMF International Monetary Fund MOE Ministry of Environment MT Metric tons NGO Non-Governmental Organization NO2 Nitrogen Dioxide NO, Nitrous Oxides OECD Organization for Economic Cooperation and Development POSCO Pohang Steel Company ppm Parts per million SMEs Small and Medium Enterprises SO, Sulphur Dioxide SO. Sulphur Oxides SS Suspended Solids TSP Total Suspended Particulates TOE Tons of Energy Equivalent WB World Bank WHO World Health Organization vi Preface This policy note covers observed through the World Bank has been environmental trends and policy re- obtained. sponses during the 18 months fol- The task team expresses its ap- lowing the onset of the economic preciation to numerous individuals crisis in Korea, from March 1998 in Korea for their cooperation and through October 1999. It is one of invaluable advice in the preparation several reports prepared by the East of this review document. The team Asia and Pacific region of the also wishes to thank Ms. Kristalina World Bank, on environmental im- Georgieva, Director of the Envi- pacts of the economic crisis in sev- ronment Department, and Mr. M.G. eral East Asian countries, including Sri-Ram Aiyer, Country Director, Korea, Indonesia, the Philippines Korea, for their support and valu- and Thailand. able guidance. The preparation of this review paper is based on desk and field re- views over a six-month period, and is a first step toward mapping both crisis-linked and longer-term envi- ronmental trends in Korea. It bene- fited directly from ongoing work by the World Bank in Korea and from discussions with other multilateral agencies and bilateral donors. Measures to address selected prior- ity issues raised in the note are planned under a technical assistance project with the Ministry of Envi- ronment, for which a Japanese grant vii Executive Summary Korea's rapid economic growth over little evidence that environmental the last three decades has produced regulations were weakened or that impressive achievements in peo- environmental enforcement has be- ple's welfare-increased income, come less stringent. Environmental reduced infant mortality, improved air quality indices improved slightly life expectancy at birth, increased during and immediately following literacy, and expanded employment the crisis, but have tended to revert opportunities. This economic ex- to pre-crisis levels as the economy pansion has been accompanied by improved. Water quality indices substantial environmental costs, have been relatively insensitive to however. The Government and local changes in the economy. In addition communities have undertaken sev- to this, there have been some eral initiatives to address these changes in the composition of in- mounting environmental problems. dustrial outputs, both for domestic These include establishing a legal demand and for exports. The main and institutional framework for en- driving force of this change was ap- vironmental governance, phasing parently declining incomes, high in- out leaded gasoline, improving en- terest rates, rising foreign exchange ergy efficiency, and investing in air rates, and low international oil and water pollution abatement. prices. The shift has favored pollu- The economic crisis threatened tion intensive industries, in particu- to cut short efforts to improve envi- lar in the export sector. If these ronmental management and cause shifts persist, environmental policy Korea to lose some of its earlier and regulations would need to be gains. The actual impacts of the cri- revisited to protect environmental sis have proven to be complex, quality. however, and the observed changes The World Bank's 1999 draft subtle. To Korea's credit, there is Country Assistance Strategy (CAS) ix x Korea: The Environmental Dimension ofthe Economic Crisis set out a medium-term development have been some undesirable signs at framework for Korea. The CAS ar- the sectoral level: ticulates several critical elements that are required to revive sustain- * Industrial production has shifted ableandequitablegrowth including slightly in a more pollution- able~~~~~ an'qial rwh intensive direction. This shift is restructuring the financial sector, re- apaent for.smal sand iedium storing corporate competitiveness, apparent for small and medium- and enhancing social and environ- bea mnitoring. butmano mental protection. It further sug- gests that sustainable recovery is be genuinely structural or per- possible only if adequate attention is sistent. given to preserving the environment * Observations of the livestock through better management of natu- and textile/dyeing sectors do not ral resources, effective enforcement indicate a strong negative envi- of regulations, and implementation ronmental impact due to the cri- of prudent taxation policies. This sis. Some unemployed urban provides a window of opportunity to workers have returned to rural re-examine the relationship between areas, but the additional pressure growth and the environment, and set on the natural resource base is the foundation for a more holistic not believed to be significant. and proactive approach to conserva- Given the current budget con- tion and management. straints of many enterprises, This review paper looks at how however, there may be instances the economic and financial crisis of increased pollution intensity has impacted the state of environ- at the specific site or sub- ment in Korea by (i) identifying the sectoral levels. channels through which the eco- * There is potential for declining nomic changes have been translated water quality at industrial and into environmental consequences; agro-industrial sites. Given the (ii) assessing how government ad- current budget constraints of justment and adjustment related many enterprises, there may be policies designed to respond to the a lack of attention to maintain- crisis affected the environment; and ing environmental controls, and (iii) recognizing possible win-win instances of increased pollution opportunities or trade offs between emissions at some facilities, par- economic policies and the environ- ticularly in livestock operations ment related to these interventions. and small and medium enter- prises, including textile and dye- SUMMARY OF THE IMPACTS OF THE ing sectors. CRISIS * The contribution of vehicle Although total pollution emis- emissions to ambient pollution sions appear to have gone down is high and seems to be growing. over the last year and a half, or at Changes in registration taxes least remained about the same, there have made it less expensive for Executive Sumimary xi households to have more than materials have not been required one car, and changes in the fuel to carry any financial guarantees tax structure continue to favor or liability insurance. Hence, diesel fuel over gasoline. These when businesses closed during trends could signal new prob- and after the crisis, many aban- lems in the future, including in- doned their toxic wastes on-site. creased traffic congestion in ur- The government was reluctant ban areas and serious transport to assume wholesale responsi- related air pollution. bility for these sites, although * Most of the major environ- the most serious were addressed, mental issues in Korea are di- and fortunately, as the economy rectly or indirectly related to strengthened, some private remediation has taken place. land use management-for ex- ample, poor water quality is di- Nevertheless, environmental li- rectly related to watershed pro- ability regimes must be tection and traffic congestion is strengthened, and clear envi- related to urban/industrial den- ronmental dispute resolution sity. Since the onset of the cri- mechanisms established. sis, business associations and ENVIRONMENTAL POLICY local governments have fought RECOMMENDATIONS for land deregulation in the name of economic revitaliza- The most important challenges tion. This pressure has been currently confronting the Ministry most acute in Kyonggido, where of Environment are insufficient re- various land use regulations sources and institutional capacity have been lifted to encourage a for: (i) assuring comprehensive construction boom. In the monitoring of and compliance with densely urbanized regions of environmental standards while rely- Korea, relaxation of land use ing increasingly on industry self- planning and controls must be reporting; (ii) establishing a frame- carefully monitored. The ensu- work for efficient management of ing long-term environmental environmental liabilities; (iii) en- and social costs of open space couraging the vital small and me- losses and poorly planned de- dium-size enterprise sector to im- velopment may offset any short- prove environmental compliance term economic gains. and reduce pollution intensity; and The most visible environmental (iv) ensuring that new investments impact of the crisis has been in the industrial sector and their fi- abandoned hazardous wastes nancing are guided by environ- from defunct businesses. Ko- mental due-diligence processes. rea's environmental laws have Thus, the Ministry of Environment had a serious loophole regarding needs to strengthen and upgrade its hazardous wastes. By law, busi- existing tools for resource alloca- nesses involved with hazardous tion, monitoring and enforcement, xii Korea: The Environmental Dimension of the Economic Crisis planning, pollution prevention, and land use controls may be miti- investment appraisal. gated or avoided. Strengthening the following ar- eas of environmental management would improve the foundations for integrating environmental consid- erations into economic decisions as the economy returns to growth: A methodology should be de- veloped for measuring environ- mental quality --environmental accounts and performance indi- cators, mainly at the firm level. This information should be gathered to provide firms with accurate assessments of the en- vironmental costs associated with their products and proc- esses. In particular, a better un- derstanding of the behavior of small and medium-size enter- prises would facilitate more ef- fective environmental regulation of this sector, and provide needed information to SMEs on environmental management and best practices. * The ability of the Ministry of Environment and selected finan- cial institutions to assess and minimize environmental risks and liabilities when appraising investment or corporate restruc- turing proposals should be en- hanced. Information and train- ing materials are needed on the legal basis for environmental risk assessments and environ- mental due diligence in credit assessment. With better analyti- cal controls in place, many of the dangers of deregulation, in- dustrial shifts, and relaxation of 1 Introduction Before the 1998 financial crisis, Since the mid-1990s,2 the Min- economic development in Korea istry of Environment (MOE) has fo- consistently outpaced the ability of cused on pollution prevention rather policy and institutional mechanisms than end-of-pipe solutions and to control its environmental effects. started promoting regulations for In response, starting in 1980,1 Kore- environmentally friendly manage- ans made serious efforts to ment. Systems were established to strengthen their environmental initiate an environmentally friendly management institutions. Some of enterprise certification program,3 to the most important measures im- plemented include the mandatory use of low sulfur/clean fuels to 2 Kim Young Sam's Government (1993- abate SO, (sulphur oxide) pollution, 1997) emphasized economic globalization and entry into the OECD and took several important the introduction of a sophisticated environmental policy steps. First, the Ministry system of emissions fees for ten at- of Environment became a first-tier cabinet level mospheric pollutants, the establish- agency in late 1994. Second, the Ministry of Environment introduced new control measures ment of packaging regulations, and such as a volume-based garbage collection fee a deposit-refund system to provide system. Third, after two toxic spills in Nakdong incentives for producers to collect River the Government announced a National incentivs for prducers t collectPlan to Provide Clean Water in 1994. This am- and recycle containers, lubricants, bitious plan failed-although the Government household appliances, and other dif- spent about 17 trillion won on it between 1994- ficult-to-recycle items. 1998-largely because of a lack of coordination fIcult-to-recycle ltemS. between water and land use policies, inadequate investment in physical and institutional infra- structure, and limitations in enforcement capa- I The Environmental Administration was es- bilities. tablished in 1980 under the Ministry of Health and ScialAffars. I 198, th Koren Costi-3 The certification system requires that en- and Social Affairs. In 1987, the Korean Consti- terprises assess the environmental impacts of tution was amended to include a citizen's right business activities using a life-cycle analysis for to a clean environment, and in 1990, the Basic products and implement detailed pollution miti- Environmental Act was passed to establish and gation programs throughout the system. Certi- expand the authority of the Ministry of Envi- fied environmentally friendly enterprises may be exempt from regular inspections by the Gov- I 2 Korea: The Environmental Dimension of the Economic Crisis support compliance of Korean in- mental management throughout the dustries with OECD regulations, crisis. Nevertheless, some crisis- and to develop environmental ex- induced pressures on air, water and port products. Approximately 122 land are visible that may have short- workplaces have already been certi- and long-term impacts. fied as "Environmentally Friendly During the first phase of the cri- Enterprises," including several large sis, declining industrial emissions, chaebols, such as Hyundai, Sam- declining automobile sales and a sung, Pohang Steel Company trend toward purchase of smaller (POSCO), LG Chemicals, Doosan, vehicles contributed to improved air and Hanhwa. quality, particularly in the Seoul MOE also increased its reliance area. In January-August 1998, a on private sector self-monitoring 10.6 percent decrease in industrial and compliance, and on decentrali- production-14 percent for heavy zation of environmental manage- and chemical industries and 1.8 per- ment. Yet both of these trends have cent for light industries-compared raised concerns among the public, to January-August 1997, resulted in because of the potential inability of a 10-20 percent reduction in indus- the private sector to pay the costs of trial emissions. In addition, the compliance and because of the dif- higher price of imported fuels led to ficulty of maintaining a nationally increased energy conservation and consistent system of policies and an associated overall reduction in enforcement while undergoing the air pollution. These air quality im- decentralization process. provements were temporary, how- There were concerns among the ever. By December 1998, car sales environmental community that the and the size of vehicles purchased financial crisis would threaten prior climbed again, and several key am- environmental gains and that Korea bient parameters, including SO2, would fail to seize the opportunity ozone and carbon monoxide (CO), presented by the crisis to position it- nearly reached or exceeded pre- self for greater environmental com- crisis levels. Furthermore, industrial petitiveness when the economy re- plants' investments in equipment, petoveness when the economy re- including pollution abatement covers. Attempting to identify the eqimet delndbv4 ecn effect of the economic crisis and re- equipment, decined by 46 percent lated policy reforms on the envi- during the crisis period, suggesting ronment was not easy, because it that, as industrial production recov- ronentwas u tt iasotecpacse ith ers, the capacity to control intensi- was difficult to Isolate Impacts that fe olto lw a eiae resulted directly from the crisis. In fled pollto lo my bemade fact, the Korean Government should quate. The possibility of increases be generally applauded for main- in industrial pollution intensity ac- taiing its emphasis on environ- companying recovery should be monitored and addressed, as the ef- fect of these phenomena on aggre- ernment, and certified small and medium-size gate pollution loads is not clear. enterprises are eligible for special support loans. Introduction 3 The economic performance of drop in production during the reces- the small and medium enterprises sion might result in a reduction of (SMEs) sector was particularly wor- pollution emission between 10 and risome for Korea, especially consid- 20 percent. Yet the benefits of this ering that SMEs comprise 99.5 per- reduction could be offset by finan- cent of Korea's businesses and em- cially distressed SMEs intentionally ploy about 78.5 percent of the na- trying to evade the regulations, and tional workforce. In 1996, the SME inability of the authorities to enforce share of production and value-added standards strictly. This will be par- activities in Korea was 46.8 and ticularly true as production re- 47.2 percent of the nation's total. sumes.5 About 50 percent of the total value Other environmental improve- of SME shipments was estimated to ments linked to the crisis have been be due to subcontracts with larger found mainly in sectors strongly in- firms, up from 34 percent ten years fluenced by the sharp depreciation before. In spite of such a remarkable of the won, such as increased recy- performance, SMEs suffered from cling and declining solid waste gen- sluggish domestic demand, financ- ing onstains, ad dificltie inerathon. These effects have been un- ing consraits,anddificutieven, however. For example, recy- the collection and sale of bills. As cling increased in sectors where re- the won sank, the increased cost of cycled materials could compete raw materials also became a large with more expensive imported ma- burden and forced many SMEs out terials, such as waste paper, but not of business. Because of the impor- in other sectors. tance of SMEs in the economy, and rising numbers of SME bankrupt- cies, the Government established six new venture capital companies to minimal, while it is burdensome for small firms. expand and promote SME start-ups, As 64 percent of firms in the dye industry have and set aside billions of won in spe- less than 100 employees, pollution abatement cial support funds to cover SMEs in costs are an important factor for the industry. This evidence partially supports the hypothesis the service and light industry sec- that the pollution intensity of SMEs is higher tors. Furthermore, SMEs are be- than larger firms in Korea. See Korea Economic lieved to have generally higher en- Research Institute (1995). More direct evidence is provided by Shin (1999), who reports that the ergy and pollution intensities over- pollution intensities of small firms are higher all than larger firms.4 Therefore, the than mid-sized firms in the dyeing industry in Korea. For instance, the wastewater generation from small firms is 9.98 tons per one thousand 4 Although there is insufficient systematic yards of dyed textiles, whereas it is 2.16 tons evidence to prove this hypothesis in Korea, per one thousand yards from mid-sized firms. there is a great deal of scattered data that sup- Myung-Kyo Shin, Building Infrastructure for R ports it. In the dye industry in 1993, for in- & D and Application, Korea Institute for Indus- stance, the share of the total cost of pollution trial Technology, 1999. abatement expenditures was 9.2 percent for 5 As the won/dollar rate rose, export-oriented firms with less than 100 employees, 4.7 percent sectors and those with less dependence on for- for firms with employees of 100-299 and 0.7 eign inputs benefited relative to other sectors, percent for firms with more than 299 employ- affecting sector shares, and therefore potentially ees. The difference is significant. For larger affecting pollution loads. firms, the pollution abatement expenditure is 4 Korea: The Environmental Dimension of the Economic Crisis On the negative side, the risk of provement of environmental indica- costly environmental damage has tors over the longer run. It is impor- increased. Stocks of abandoned in- tant to note, however, that the Gov- dustrial wastes have accumulated on emient has maintained its stated the premises of closed or bankrupt commitment to (i) pollution preven- businesses, particularly the waste tion at the source; (ii) harmonization treatment companies that previously of development and conservation accepted industrial wastes for objectives; (iii) implementation of treatment. MOE responded proac- the polluter-pays principle; (iv) use tively to the health and environment of economic incentives to induce risks posed by these stocks by enterprises to voluntarily reduce monitoring more than 500 sites pos- emissions; and (v) transparency in ing the most immediate risks (about environmental policies through in- 2 percent of which were identified formation dissemination and com- as hazardous wastes). Incremental munity participation. budgetary resources have been se- Koreans clearly understand that cured to treat the worst cases, with economic recovery that relies on the burden of treatment and disposal expansionary macroeconomic poli- shared with the private purchasers cies without structural reform will of the closed or bankrupt busi- continue to be extremely vulnerable nesses. In addition to this, MOE has to internal and external shocks (see lobbied the National Assembly to Box 1). The Government's focus on pass legislation requiring industries stimulating the economy could to put waste treatment guarantee ar- weaken its capacity for environ- rangements in place. mental management by cutting en- Due to the crisis, there was a re- vironmentally related budgets, re- duction in environmental expendi- laxing enforcement of environ- tures from 2.47 percent of total pub- mental regulations, and eroding en- lic expenditures in 1997 to 2.32 per- vironmental standards. Reduced cent in 1998. To Korea's credit, pollution levels due to declining in- however, environmental expendi- comes and production activities tures were not cut any more se- would temporarily mask the impacts verely than other sectors. Although of such policy setbacks. inspections of regulated industries have been maintained, and violation The present study identifies how rates apear mnthaine? rmained ation some of the changes from 1997- rates appear to have remained at 1999 impacted the state of environ- pre-crisis levels, there may be a ten- ment in Korea. Following this in- dency toward inconsistent enforce- mentin Cha. prowides in ment. As for the private sector, troduction, Chapter 2 provides an firms have been forced to dramati- overview of the environmental im- cally reduce new investments, and pact of the economic crisis on dif- there has also been a decline in pol- omy; Chapter 3 outlines the impacts lution abatement investments by in- of the crisis on selected sectors such dustry. This bears watching and a s on ened corstruch could in turn slow the pace of im- as industry, energy, construction Introduction 5 and manufacturing; and Chapter 4 the foundations for integrating envi- investigates crisis-induced changes ronmental considerations into eco- in environmental policy. In the nomic decisions. Conclusion, the main results are summarized and recommendations made for improving environmental quality in Korea and strengthening Box 1 The Financial Crisis in Korea In the past thirty years, Korea has experienced one of the highest economic growth rates ever seen in history. The government successfully pursued an export-led, outward oriented high-growth strategy in recent decades, and thanks to developed countries' growth in import demand and direct foreign investment and lending, Koreans have achieved substantial expansion in their economy and living standards. The government-led strategy concealed structural weaknesses in the economy, however. Korea's high growth rate required concurrent increases in imported capital goods and raw materials. Despite high saving rates, large amounts of foreign debt were incurred to finance the domestic boom. The high level of debt, combined with an undeveloped financial sector, inflexible exchange rates and faulty macroeconomic policies, made the economy vulnerable to adverse external developments. Initially, the Asian financial crisis seemed to spare Korea. By September 1997, Korean banks began to have difficulty rolling over their short-term debt, however, and the Bank of Korea shifted foreign exchange reserves to the bank's offshore branches. External financing conditions deteriorated significantly and the stability of the economy was threatened. By early December, the won depreciated by over 20 percent against the US dollar and usable foreign exchange reserves declined from US$ 22.5 billion at the end of October to US$ 6 billion. The IMF intervened with a three year Stand-By Agreement amounting to about US$ 21 billion. The World Bank and the Asian Development Bank provided about US$ 14 billion in financial assistance and extensive technical assistance. In addition, interested countries pledged US$ 22 billion as a second line of defense--for a total package of US$ 58.4 billion. The program aimed to bring about changes in the current account, build up foreign exchange reserves, and contain inflation through a tightening of monetary policy and some fiscal measures. It also included a range of structural reforms in the financial and corporate sectors to address the root causes of the crisis. The positive impact of the program announcement was short lived, and the won fell sharply in second half of December. Confidence was undermined by doubts about the gov- ernment's commitment to the program as leading candidates for the December presidential election hesitated to publicly endorse it. Moreover, with more information becoming available about the state of financial institutions, the level of usable reserves and short-term obligations due, international markets became concerned about a widening financing gap. By January 1998, after the IMF-WB program had been strengthened, some signs of stabilization emerged. The won appreciated moderately against the US dollar (it recovered almost 20 per- cent from its late December low) and the current account moved into surplus. In February 1998, a new government took power. Based on a tripartite accord between business, labor and the government, commitments were made to both strengthen and ease the implementation of the reform agenda. Reforms included shoring up the social safety net, increased labor-market flexibility, corporate restructuring, and enhanced corporate govern- ance. By May 1998, Korea had made substantial progress. The won appreciated, permitting a further easing of the interest rates to almost pre-crisis levels. Output was projected to decline by 4 percent for FY 1998199, inflation decelerated and was expected to average 9 percent during the year, and the current account surplus was expected to reach nearly US$ 35 billion, almost 10 percent of GDP. By the end of 1998, about US$ 27.2 billion in financing had been disbursed, including $18.2 billion from the IMF and $9 billion from the World Bank and the Asian Development Bank. 2 Environmental Quality Indices The actual impacts of the crisis have tries. Korea's air quality has stead- proven to be complex and the ob- ily improved. In particular, the served changes subtle. Environ- Government has promoted the use mental air quality indices improved of cleaner fuels, such as liquefied slightly during the crisis, but have natural gas (LNG) and low-sulphur tended to revert to pre-crisis levels oil, as well as low-emission vehi- as the economy improves. Water cles. Transportation accounts for quality indices have been relatively more than 40 percent of Korea's air insensitive to changes in the econ- emissions, followed by industries, omy. In addition to this, there has and power generation.6 been an increase in recycling rates Although concentrations of sul- as higher foreign exchange rates and phur dioxides and suspended par- lower domestic income levels cre- ated a new economic environment latesave improve ov the for the solid waste and recycling lde, cncentrations ofoni sector. What follows is an overview trous oxi of the environmental impact of the generally increased each year be- crisis b medium. cause of the rising number of vehi- cles on the roads. In the beginning AIR QUALITY of 1998, as a result of the recession, this trend reversed in some areas, The 1990 Air Quality Preservation and all forms of atmospheric emis- Act is the basis for current air- sions fell. By the end of 1998, how- pollution control policies. The Act ever, emissions in some areas re- prescribed emission limits for turned close to the levels registered twenty-six substances; these stan- in the same period in the previous dards have been tightened in three- year. yearly steps throughout the decade. By 2000, emission limits should be 6 Korea Ministry of Environment, Environ- comparable to other OECD coun- mental White Paper 1999, p. 199. 6 Environmental Quialitv Indices 7 According to data collected at all, air pollution was below the the City Hall monitoring station in Government's (and WHO's) annual the center of Seoul, the city's air average air quality standards, but quality improved remarkably be- still at levels that can impact human tween 1996 and 1998. In 1998, the and ecosystem health. Figures I and Table 2.1: Concentration of Major Air Pollutants at City Hall, Seoul, 1996-1998 SO2 PM 10 Ozone NO2 CO _(P.PEL . e ! L . vlPPt~~~~~~~~~~~(P X-M- Standard 0.03 ppm 80 liglm 0.06 ppm 0.05 ppm 9 ppm (ann. (ann. (8-hr avg.) (ann. (8-hr avg.) avg.) avg.) avg.) Annual average concen- 0.013 n.a. 0.012 0.035 1.4 tration in 1996 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Average concentration from January to July 0.01157 64.3 0.015 0.0334 0.0117 1997 Average concentration fromJanuarytoJuly 0.004 46.7 0.014 0.0311 0.0113 1998 Average concentration from August to Decem- 0.0102 54.0 0.0092 0.0212 0.9 ber 1997 Average concentration from August to Decem- 0.0118 51 0.0122 0.0178 2.26 ber 1998 Note: The average is obtained by simply averaging the data monthly reported. Source: Ministry of Environment average concentration of sulphur 2 illustrate the relative changes in dioxide (SO2) dropped significantly air quality in 1998 in Seoul com- during the first six months com- pared with the same time periods in pared to the same period in 1997 1997. and 1998 (Table 2.1). There is a Table 2.2 illustrates industrial seasonal fluctuation in SO2 concen- . a area air quality from the Yochon- tration; generally concentrations are dong Monitoring Station (Ulsan higher in the winter and lower in the City). Air quality there has also summer. Suspended particulates been improving-most likely as a also declined dramatically during result of the reduction in production this period-from 64.3 pig/m3 in t3 g/rn3 in outputs by many of the industrial January-July 1997 to 46.7 Ag/m' in enterprises. Average concentrations January-July, 1998. As can be seen of SO2, total suspended particulates in Table 2.1, the average concentra- (TSP), ozone, and CO decreased tions of nitrogen dioxide (NO2), and from 1996 to 1998 in the January to CO also decreased between 1996 and 1998. In late 1998, however, City Hall area and the cause is not identified. CO concentrations rose dramatically The average CO concentration for the Seoul relative to the previous year.7 Over- area, obtained by averaging the figures for the sites in Seoul, only mildly increased from 1 . 14 7 This "dramatic" increase in CO concentra- ppm in August-December 1997 to 1 .18 ppm in tion is. however. a phenomenon confined to the August-December 1998. s'~ AuKorea / hc, 1 n -ii7rhoh1c0o1 [)iwcn Sion ofthe Economic C'risis Table 2.2: Air Quality at Yochondong, Ulsan City, 1996-1998 S02 TSP Ozone NO2 CO Standard (ppm) _rn) ( m 0.03 ppm 80 pglmJ 0.06 ppm 0.05ppm 9 ppm (ann. avg.) (ann. avg.) (8-hr avg.) (ann. avg.) (8-hr av Annual average concentra- 0,03 102 0.018 0.015 1 tion in 1996 Average concentration 0 03 101.7 0.0157 0.0141 0.91 from January to July 1997 Average concentration 0 021 79.6 0.0146 0.0156 0.83 from January to July 1998 Average concentration from August to December 0 0318 89.2 0.0146 0.0134 0.86 1997 Average concentration from August to December 0.01425 84.5 0.01625 0.018 0.57 1998 Note: The average is obtained by simply averaging the data reported monthly. Source: Ministry of Environment 120 80 20 0 S02 PM10 Ozone N02 CO _Jian.-duI. 1997 Ijsn-ul. 1998 Figure 1: Percent Change in Air Quality at City Hall, Seoul January-July 1997 / January-July 1998 (1997 = 100) Source: Ministry of Environment 300 250 o 200 r 1501 00 100 S02 PM10 Ozone N02 CO Pollutant aAug.-Dec.1997 EOAug-Dec.1998 Figure 2: Percent Change in Air Quality at City Hall, Seoul August-December 1997/August-December 1998 (1997 = 100) Source: Ministry of Environment En7ironmental Quality Indices 9 July periods. Average NO2 concen- susceptible to possible relaxation in tration increased, however. enforcement of regulations. Based on the data collected at key WATER QUALITY monitoring points in the major rivers, however, water quality has Water quality standards have been improved slightly, implying that as developed for both wastewater (ap- production levels have gone down, plicable to individual facilities that effluents have gone down as well- generate wastewater) and effluents although other factors could play a (final outflow at wastewater treat- part in the reductions, such as ment plants). By 1996, there were changing levels of compliance with 1,379 monitoring stations in opera- industry standards by individual tion at lakes, rivers, and industrial firms. It is important to note, how- sites (at both water supply and ever, that budget transfers to local wastewater facilities). In 1996, over governments for water quality pro- 28,000 businesses were designated jects increased sharply in 1997, al- as wastewater discharge facilities lowing local investment in sewage and subject to control. About 24 treatment facilities and other percent of the facilities were located wastewater infrastructure.8 The im- upstream on the Han River, which provements seen in 1998 may be re- flows through the Seoul metropoli- lated to these budgetary transfers. tan area. Of these, 90 percent are SMEs. Overall, the volume of wastewa- ter generated was reduced to Experts expected to find that 4,068,000 cubic meters in 1998 water quality had worsened between from 4,874,000 cubic meters in 1997 and 1998. Unlike air quality, 1997. The quantity of untreated which is largely determined by en- wastewater remained at the same Table 2.3: Wastewater by Watershed, 1997 and 1998 (Unit: thousand cubic meters per day) 1997 1998 Watershed Generated Discharged Un- Generated Discharged Un- treated treated Total 4,874 2,618 4,068 2,614 Han River 745 457 574 384 Naktong River 1,026 452 671 491 Kum River 268 170 340 196 East Sea 625 534 651 545 Yellow Sea 828 347 77321 South Sea 568 69 426 275 Source: Ministry of Environment ergy use, and thus sensitive to level, however: 2,618,000 cubic me- changes in fuel prices and levels of ters in 1997 and 2,614,000 cubic economic activity, water quality is meters in 1998. Tables 2.3 and 2.4 thought to be insensitive to eco- nomic factors. Furthermore, water quality is considered particularly 8 Ministry of the Environment. 10 Korea. The Environmental Dimension of the Economic Crisis compare wastewater discharges by during the April through July peri- watershed and by industrial estate ods. See also Figures 3 and 4. inl997 and 1998. In southeastern Seoul, around Agriculture runoff is the pri- Tanchon Creek monitoring site No. mary source of water contaminants 5, households and some industries in the Paldang Dam Reservoir (on are the primary source of water con- the Han River). Between 1997 and taminants. Observations at this site 1998, water quality at the Dam indicate that water quality indices Table 2.4: Wastewater by Industrial Estates, 1997 and 1998 (Unit: cubic meters per day) 1997 1998 Generated Discharged Generated Discharged Untreated Untreated Total 1,756,061 1,293,324 1,768,645 1,418,699 Sinpyung-Sangrim In- 42,541 37,279 34,820 38,195 dustrial Estate Taegu Dyeing Industrial 87,814 86,525 86,918 78,611 Estate Seongseo Industrial 34,673 32,634 35,541 33,513 Complex Taegu 3 Industrial Es 23,372 19,638 22,060 18,498 Taejon Industrial Estate 35,089 23,136 63,359 33,193 Banwol Industrial Estate 132,492 120,506 135,909 122,884 Sheewha Industrial Es- 49,418 42,726 54,816 37,867 tate Source: Ministry of Environment Table 2.5: Water Quality at Paldang Dam, 1996-1998 Dissolved Oxy- BOD (mg/l) COD (mg/l) SS (mg/l) gen (mgl) Standard* Over 7.5 Below 1 n.a. Below 25 1996 average 10.4 1.4 2.7 3.3 Average April-July 9.15 1.775 3.475 5.425 1997 Average April-July 11.275 1.725 3.275 5.225 1998 Average August- 9.9 1.32 2.86 5.26 December 1997 Average August- 9.94 1.28 2.76 9.24 December 1998 Note: First Class Water Quality Standard is applied. Source: Ministry of Environment monitoring site (on South Han were variable between 1996 and River) improved slightly. Table 2.5 1998. As shown in Table 2.6, there summarizes the improvements in were slight improvements in DO, dissolved oxygen (DO), biological and COD, but deterioration in BOD and chemical oxygen demand (BOD and SS. Despite improvements, wa- and COD), and suspended sedi- ter quality remained poor. ments (SS) between 1997 and 1998 Environmental Qualitv Indices 11 1 80 - 160 _______. 140 . ___ . o 1 20 .__ _-: o2 . , 100 S 80 60 40 20 0 D o BO D C o D s s 4g>*Dee~ 199 |3u.De Figure 3: Change in Water Quality at Paldang Dam January-July 1997/January-July 1998 (1997=100) Source: Ministry of Environment 01 40 - 120 - -_---__ 100 80 x t 60=; I < 40 -] 20- 0 DO BOD COD SS Pollutant AS.M i997 BArn Ju 19i8 Figure 4: Change in Water Quality at Paldang Dam August-December 1997/August-December 1998 Source: Ministry of Environment Table 2.6: Water Quality in Tanchon Creek #5 Station, 1996-1997 DWssoied BOD(mgJ COD(mglI SS(mg/I) Standard* Over 2 Below 8 n.a. Below 100 1996 average 5.5 11.1 13.9 23.3 Avg. Jan.-July 1997 7.66 14.114 13.8 24.757 Avg. Jan.-Jul 1998 8.142 12.56 10.38 18.46 Avg. Aug.-Dec. 1997 8.142 12.56 10.38 18.46 Avg. Aug.-Dec. 1998 7.16 12.88 8.3 16.92 Note: *Fourth Class Water Quality Standard is applied. - Source: Ministry of Environment 12 Korea: The Environmental Dimension of the Economic Crisis SOLID WASTES 1990s, almost half of all the speci- fied waste was being recycled, an Disposing of municipal and indus- additional 16 percent was inciner- trial wastes is generally a source of ated, and 5 percent went to landfills great concern in Korea. In particu- after undergoing some form of pre- lar, the increased generation of con- treatment. The fate of the remaining struction/demolition waste and slag 30 percent is unknown, but pre- following Korea's rapid industriali- sumably it was being stored by the zation is a growing public concern. enterprises on-site. The 1991 Waste Management Act Since the early 1990s, the vol- divided industrial wastes into two classifications: "general" or non- year solid duaste g incrased. hazardous and "specified" or haz- year has gradually increased. Household wastes have decreased, ardous. General wastes make up abdout. 97eeret wastre v- most likely because of the volume- about 97 percent of the waste vol- baecoltinfestmfrd- ume, of which about one third based collection fee system for do- comes from municipal, miscellane- mestic wastes instituted In January' ous commercial, and small business 1995. However, industrial wastes activities, and two thirds come from (general and specified) have grown factoties and commerdcia er- by more than 10 percent a year. prises. In1 3opercnt oftKre Data for 1998 is not yet available, prss In19,3preto oe' but inferring from the contraction of wastes were classified as specified wastes. Specified wastes include economic activities at the household caustic wastes, sludge, waste oil, and firm levels, together with the waste rubber material, waste syn- active recycling programs, solid waste~~~~ rubrmtra,wsesn w aste generation should have de- thetics, and other hazardous materi- waste gnet su h als. Specified wastes must be treated either by the generating in- Table 2.7 shows the rising share dustries themselves, by qualified of industrial wastes and shrinking hazardous waste disposal compa- share of domestic wastes. The solid nies, or by the state Environmental waste classification system has been Management Company. In the mid- adjusted twice-in 1991 and 1994. Table 2.7: Generation of Solid Wastes 1991-1998 (thousand tons per day) Total Industrial Wastes Domestic Subtotal General Specified Wastes 1991 158.6 66.1 47.4 18.7 92.2 1992 144.5 69.4 48 21.4 75.1 1993 141.4 78.5 56 23.4 62.9 1994 147.1 88.9 85.2 3.7 58.2 1995 148.1 100.3 95.8 4.5 47.8 1996 180.8 130.9 125.4 5.5 49.9 1997 194.7 146.8 141.3 5.5 47.9 1998 188.6 144.0 138.3 5.3 44.6 Source: Ministry of Environment, Environmental White Papers 1998, 1999. Environmental Quality Indices 13 The dramatic decrease in specified bution systems on the basis of life- wastes in 1994 was due to this clas- cycle analysis to incorporate waste sification change. The substantial reduction and recycling. increase in general industrial wastes Recycling efforts span a number in 1996 was the result of increased of sectors in Korea. Waste paper reporting due to stricter enforce- consistently accounts for the major- ment of construction waste regula- ity of recycled municipal wastes. tions. The rate of glass bottle recycling REcYCLING AND THE DEPOSIT fluctuates, but reached a 57 percent REFuND SCHEME retrieval rate in 1995. Improvements in steel manufacturing technologies The ambitious National Compre- now permit a large share of scrap hensive Waste Management Plan iron recycling. Since 1995, thanks was written in 1993 and revised in to these improvements, about 70 1996. Its goal is to fully implement percent of the domestic demand for the "polluter pays" principle by iron is supplied from within Korea. 2001. The Plan fosters recycling The recycling rate of plastic goods through tax incentives and Govern- was up to 13 percent in 1995, and ment procurement policies, and more than 90 percent of old tires are proposes an upgrading of the coun- recycled. Korean recycling regula- try's waste treatment facilities. By tions mandate that manufacturers of 2001, the Government wants to re- glass, paper products, plastic con- cycle 35 percent of municipal tainers and steel must use a set per- wastes and incinerate 20 percent, centage of recycled materials in with a reduction of landfill inputs their products, and Government or- overall by about 55 percent. The ganizations promote the purchase of 1994 Master Plan for Resource Re- goods with recycled content. Suc- cycling and Reutilization proposes cessful deposit-refund schemes are actions to make the collection and operating for batteries, tires, glass, transport of recyclable materials and electronic appliances. Refund more efficient; to restructure pro- schemes are not yet in place, how- duction and distribution systems to ever, for products that are more dif- facilitate recycling, and to ficult to handle such as chemical strengthen demand for recycled products. goods. In addition, the plan contains Since the onset of the crisis, re- targets for recycled paper, card- cycling rates have further increased. board, glass, steel, aluminum, plas- Higher foreign exchange rates and tics, and lubricants. Korea's 1995 lower domestic income levels cre- Green Vision 21, the country's ated a new economic environment blueprint for environmental priori- for the solid waste and recycling ties in the next century, also sup- sector. The collection rate of recy- ports establishing industry specific clables rose, induced by the higher waste reduction targets, composting, price of imported materials, but this and changing production and distri- occurred mainly in sectors where 14 Korea: The Environmental Dimension of the Economic Crisis recycled materials competed with imported materials. In sectors where recycled materials do not compete with imported materials or waste generation is not heavily related to consumption, waste reduction has not occurred. For example, manu- facturers' waste collection ratios for home electronics declined in the first half of 1998. The ratio of re- funding to deposits (the same as the waste products collection ratio) for products subject to the Deposit- Refund Scheme increased to 31.6 percent in 1997 from 29.3 percent in 1996. In the first half of 1998, how- ever, collection ratios dropped dras- tically-no waste recovery refunds were given to 200 out of 223 firms. Among twenty-two larger corpora- tions surveyed, half of them claimed no refunds in the first half of 1998. Among the items subject to the De- posit-Refund Scheme, collection of items with high recycling value and low recycling cost increased, while collection of items with low recy- cling value and high recycling cost decreased. Illegal dumping of wastes, such as defunct home elec- tronics, has reportedly increased. 3 The Environmental Impacts of the Crisis in Selected Sectors CHANGES IN THE COMPOSITION OF more pollution intensive in 1998.9 In INDUSTRIAL OUTPUTS AND IMPACTS summary, between 1997 and 1998, ON POLLUTION INTENSITY Korean industry shifted somewhat in the composition of outputs to- Between 1997 and 1998, indus- ward more environmentally un- trial production indices in the key friendly production, especially for industrial subcategories showed exports, as shown in Table 3.2. significant unevenness in their This environmentally undesir- growth rates. As shown in Table chis invindustal undesir- 3.1, production for domestic de- able change in industrial structure mand in 1998 was only 75.5 percent may have several causes. The price mandfin 1998 waskably 7.5 percent of inputs likely drove part of the of 1997-a remarkable 24.5 percent yhf.Scosweeakycmo reduction. Production for domestic shift. Sectors where a key compo- demand by pollution-intensive in- nent of costs iS domestic value- dustries dropped 21.6 percent, while added or relatively cheap imported production for domestic demand by inputs may have had a relative ad- non-pollution-intensive industries vantage. For example, considering non-pollution.intensivent Amond in- low international oil prices, energy- dropped 25.6 percent. Among inesvindsrenayhv-ee dustries producing for export, total intensive industries may have bene- production increased by 18 percent. fited (or been less penalized), rela- While export production in pollu- tive to other industries during the tion-intensive industries increased crisis. Significantly, although these 36 percent, production in non- pollution intensive-industries in- 9 Between 1997 and 1998, the percentage creased by only 12.8 percent. Thus, change in manufacturing production for exports compared to 1997, the export pro- and for domestic demand averaged i.18 and duction structure apparently became 0.75, respectively. A detailed description of the data describing these changes is available upon request. 15 16 Korea: The Envirounmntal Dimension flthe Economic Crisis changes in the pollution intensive- panies that had accepted industrial ness of industrial output may have wastes from other companies for increased pressures on the environ- treatment and proper disposal. After Table 3.1: Changes in Production for Domestic Demand and for Export Among Pollution-intensive and Non-intensive Industries (Ratio of yearly averages of monthly production indices for 1998/1 997) Pollution In- Non-Pollution Total tensive In- Intensive In- dustries dustries Production for Domestic 0.784237 0.744404 0.75473 Demand _9 (140) (189) Production for Export 1.36121 1.126893 1.179946 Productionfor Export(36) (123) (159) Source: Computed using National Statistical Office (ROK) Database Table 3.2:Change in Industrial Production for Domestic Demand and Exports in Pollution-intensive Industries (Unit: number of pollution intensive industries) Higher than median Lower than median Total Total 75-100% 50-75% 25-50% 0-25% Number of quartile quartile quartile quartile Items Production for 14 13 13 9 49 189 domestic demand 14 1 13 9 49 189 Production for ex- 12 12 6 6 36 159 ports ment, there is no evidence that the storing the wastes in their own environmental regulation of indus- yards, however, the owners disap- tries was relaxed or weakened. peared, leaving mountains of haz- ardous wastes that threaten both the Haazardous and Industrial Waste environment and public health. Management The situation became so serious One of the most visible environ- that MOE conducted a nationwide mental impacts of the crisis has investigation. MOE announced in been abandoned industrial waste on August 1998 that it had found the sites of closed, delinquent or 126,724 tons of wastes on the prem- bankrupt businesses. This is not a ises of 555 defunct businesses. new concern, but the sudden finan- Among them, 2,079 tons of wastes cial crisis intensified the problem. in 139 businesses were identified as Since early 1998, there have been a hazardous wastes requiring special number of complaints in the news treatment, while the remaining media by neighboring businesses 124,645 tons of wastes in 416 busi- and residents that defunct busi- nesses were general wastes that nesses were abandoning wastes. To were not toxic. More than 70 per- make matters worse, many of the cent of the hazardous wastes aban- closed businesses concemed were doned were waste oils and solvents. disreputable waste treatment com- and about half of the non-toxic Environtnental Impacts in Selectel Sectors 1 7 wastes were synthetic materials. only able to get 1.3 billion won al- Eighteen waste-treatment firms located in the 1999 budget for dis- were responsible for more than half posing of abandoned hazardous of the total wastes abandoned. The wastes-far below what is needed. responsibility for the remaining half Without clear liability laws, how- of the wastes was spread among 725 ever, the Government is concerned other firms. Furthermore, more than that if companies see wastes being half of the discarded hazardous cleaned up with taxpayers' money, wastes were left by just seven waste more will close and abandon sites treatment businesses. rather than treat their wastes with Although Korea has sophisti- their own money. cated environmental laws and As of December 1998, MOE's regulations, they are mainly policy on this issue was as follows: regulatory laws enforced by Sites with abandoned wastes should Government agencies, such as be monitored by the Government MOE. The Basic Environmental and steps taken to prevent off-site Policy Act adopted strict liability contamination."' MOE will assume rules in cases of environmental responsibility for cleaning up sites pollution damage, but institutions where serious public health and en- needed to implement an envi- vironmental hazards exist. Liquid ronmental liability regime are wastes such as waste oil, acids and underdeveloped in Korea. MOE has alkalis, and wastes discarded in the environmental dispute resolution upstream area of watersheds will be mechanisms, but there is not much cleaned first, and MOE will seek interest in using them to enforce an out the responsible persons and sue environmental liability regime. In for expenses. addition, there is no law similar to Although MOE has established the U.S. Superfund Act orAlhuhMEasetbhd CeRCA Ci .rehns Envi- a policy of cost-recovery from CERCLA (Comprehensive Envi- responsible parties, this is easier ronmental Response, Compensa- said than done. First, many of the tion, and Liability Act), which lev- firms and individuals are already ies joint liability among the waste bankrupt. Second, the liability of generators, transporters, and land- financial institutions (such as those owners. Businesses involved with holding mortgages on the con- hazardous materials have not been taminated sites) is an open question. required to carry any financial guar- On August 22, 1997, Korea's antee program or environmental li- Supreme Court ruled that banks ability insurance, either. In short, holding title to the land estate of there has been a serious loophole in closed businesses are responsible Korea's environmental regulation for treating wastes dumped on the regarding hazardous wastes. While p the economy was strong, the prob- premes ia orda with eme n . ~~requirements (Korea Supreme lem was not apparent; once busi- - nesses began closing, however, se- 10 MOE, "Memorandum on Orphan Wastes." rious problems became evident December 1998, unpublished. across the country. The MOE was 1S Korea: The Environmental Dimension of the Economiiic Crisis ments (Korea Supreme Court, Case law closes a major loophole, but it No. 95-Nu- 17724). As a result, does not provide any remedial banks are refusing to take title of the measures for the existing orphaned contaminated lands. because the wastes. Although the Supreme cost of cleaning up the sites is often Court ruled that banks are responsi- much higher than the value of the ble for residual wastes of bankrupt land itself. In the end, these orphan firms, the banks have avoided as- sites will only be cleaned up by the suming responsibility for the prob- Government. In December 1998, lem by refusing to accept ownership the National Assembly passed a bill of the land. The Supreme Court rul- revising the Waste Management ing applied to banks as owners of Act, which went into effect August the land, not as lenders. As yet, 8, 1999. According to the new law, lender liability does not exist in Ko- waste-treatment businesses are re- rea. Of the three options under the quired to carry one of three types of law, the mutual guarantee system financial guarantees. First, firms has emerged as the most viable. As may join together in a mutual guar- of November 1999, several mutual antee program. Second, they may guarantee associations of the waste carry clean-up liability insurance, management firms were expected to purchased from an insurance com- be licensed soon. MOE had hoped a pany. Third, they can deposit a bond single association comprised of all guarantee with the Government the waste management firms could (Art. 43-2). The Act also requires be established. In fact, many small general firms to keep stricter re- associations will be established as cords concerning the generation and there are many kinds of such firms. transport of specified toxic wastes MOE is therefore worried that such (Art. 25-2), and makes clear that associations' financial capacity may those who buy, inherit, or take over be very limited. firms are responsible for any wastes Since early 1999, MOE has left on the premises (Art. 24-5). been actively strUggling with the How the new law will work is discarded wastes issue. According not yet evident. Experts expect, to its own account, however, the however, that many of the existing worst problems may be over.11 As waste treatment businesses may the economy is recovering much shut down their operations rather faster than expected, many closed than carry the required financial businesses have been sold to new guarantees. In addition, it is doubt- owners, and many of the new man- ful that any insurance company will agers have begun to clean up. Ac- provide liability insurance for these cording to MOE, the following has firms, because the concept of envi- occurred: ronmental liability insurance is largely unknown in Korea, and many of the insurance firms them- selves are in deep trouble due to the 11 MOE, "'Memorandum on D)iscarded Waste economic crisis. Finally, the new Disposal," May 1999. Environmental Impacts in Selected Sectors 19 Table 3.3: Discarded Wastes (April, 30,1999) Discarded Wastes Cleaned Up Remaining Wastes Total 159,499 tons (718) 65,142 tons (420) 94,357 tons (298) Specified Waste 4,923 tons (172) 3,357 tons (124) 1,566 tons (48) General Wastes 154,576 tons (546) 61,785 tons (296) 92,791 tons (250) Note: 1) Numbers in parentheses are numbers of sites; 2) Volume of the discarded waste is the accumulated total since MOE first surveyed this problem. * In 1998, 1,094 tons of discarded 216 places were cleaned by the wastes were disposed of at Gov- successors. emnment expense (243 million Table 3.3 above summarizes the won). status of discarded wastes at defunct firms, as of April 1999. * In 1999, 600 million won were provided to regional offices of An Industrial Example: Textile the MOE to dispose of dumped Dyeing specified wastes. As of April 1999, almost 2000 tons of speci- In 1998, the domestic demand for fied wastes on the premises of clothing decreased by 21.1 percent seven treatment businesses have from 1997. Because of this plum- been properly disposed of. Five meting domestic demand, and in of the businesses were cleaned spite of some increases in exports, up by the new owners, and two operations in the textile industry by MOE. contracted. There is no evidence, * About 1,500 tons of specified however, that regulations affecting waste in 117 general businesses the industry have eased.'2 Based on (generators) were also disposed the data provided below on two of. Only one of these was dye-industry estates (Tables 3.4 and cleaned up by the local govern- 3.5), there has been no significant ment; all the rest were cleaned change in environmental loading up by new owners. due to dye industry processes over- all. * About 27,000 tons of general wastes on the premises of waste treatment businesses were dis- 12 Chosunllbo reported (April 21, 1998) that posed of. Three sites were there was a controversy about the quality of the cleaned by the successors of the water discharged from the wastewater treatment closed businesses. The local facility of the Tae-Gu Dyeing Industrial Estate. According to the Tae-Gu Environmental Move- governments cleaned the re- ment Union's report, the BOD and COD on maining three. 35,000 tons of April 10 were 880 ppm and 150 ppm, respec- general wastes on the premises tively, far exceeding the standard of 90 ppm for of general businesses were each. However, on April 21, the Administrative Of general businesses were Office of the Tae-Gu Dyeing Industrial Estate cleaned. The local governments announced that the Union's report distorted the cleaned twenty-nine places; and facts and was wrong. The Office announced that the pollution concentrations on April 10 were within the standard. 20 Korea: The Environmental Dimension of the Economic Crisis creased by 5.1 Table 3.4: Industrial Water Inflow/Wastewater Outflow in the percent. This Ban-Wol Dyeing-industry Estate, 1997-1998 d i f f e r e n c e (Unit: cubic meters/year) bet 1997 11998 Rate of Change(%) Wol and Tae- Industrial Water Inflow 1,730,366 1,649,671 -3.4 Gu may be Wastewater Emission 1,785,813 1,778,405 -0.4 attributed to Inflow/Outflow Ratio (%) 104.6 107.8 their different Source: Ban-Wol Dyeing-Industry Cooperative roles in the major markets. Table 3.5: Industrial Wastewater Treatment Record in the Tae-Gu Wastewater Treatment Facility, 1997-1998 (Unit: cubic meters/year) i i1:9977 D; 1998 Change Rate (%I Quantity of industrial 19,740,115 20,754,607 5.1 wastewater treated before/after before after before after before after treatment BOD(mg/1) 2,126 39 1,812 45 -14.8 15.4 Quality COD(mg/1) 800 75 758 72 -5.3 -4.0 SS(mg./l) 99 68 80 67 -19.2 -1.5 Source: Tae-Gu Dyeing Industry Estate At the Ban-Wol Dyeing Indus- The share of the export market in try Estate, both the quantity of in- total sales is larger for Tae-Gu than dustrial water inflow and the quan- for Ban-Wol. Since December tity of wastewater generated de- 1997, the domestic market has been creased in 1998 compared to 1997, in recession and exports have by 0.4 percent and 3.4 percent re- boomed (see Table 3.6 on changes spectively. On the other hand, at the in domestic demand for clothing). Table 3.6: Domestic Demand for Clothing, An Agricultural Example: 1990-1998 Livestock Farming X e VCakue (100 mi. Anniial Growth 1 Rawlion l) Rt The number of livestock in 1990 80,093 - Korea has changed dramati- 1992 1112,426 20.7 cally since the 1970s, as 1993 117,571 5.5 shown in Table 3.7. In 1970, 1994 135,777 15.5 the recorded number of na- 1995 157,892 16.3 tive beef cattle was 1996 174,421 10.5 1,102,286; in 1996 this had 1997 167,240 4.1 grown to 2,843,535-a 158.0 1998 131,878 -21.1 percent increase. Beef pro- Source: Korea Federation of Textile Industry duction was 236,527 metric Tae-Gu Dyeing Industry Estate tons in 1997, a 534.5 percent Wastewater Treatment Facility, the increase from 37,275 metric tons in quantity of wastewater treated in- 1970. In 1970, there were 1,126,130 Environmental Impacts in Selected Sectors 21 Table 3.7: Number of Livestock (Selected years 1970-1998) Nr-::. - - - Iativ. ; Dairy Catifo Pp .Chickens 1970 102,286 23,624 1,126,130 23,632,717 1980 1,427,200 206,851 783,536 40,129,924 1990 1,621,654 503,947 4,528,008 74,463,090 1995 2,594,027 553,467 6,461,179 85,799,729 1996 2,843,535 551,493 6,515,773 82,829,359 1997 2,735,000 544,000 7,096,000 88,251,000 1998 2,388,000 539,000 7,544,000 85,847,000 Source: Ministry of Agriculture and Forestry, National Livestock Cooperatives Federation (1997, 1998) pigs; in 1996, there were 6,515,773 very limited assimilative capacity of pigs-a 478.6 percent increase. Korea's environment. In fact, the Pork production was 698,279 metric increasing number of livestock tons in 1996. The production farms has resulted in a remarkable growth rate for pork is significantly rise of pressure on the environment, higher than that of beef, most likely as a whole, and on water quality, in because of the opening of the beef particular. As the consumption and market and the price competitive- production of meats in Korea stead- ness of imported beef. In 1995, im- ily increased, the discharge of live- ported beef accounted for about 50 stock wastewater also increased. percent of domestic consumption. Table 3.8 shows that livestock These livestock herd growth wastewater discharged in 1997 was rates may seem relatively low com- 206,386 cubic meters per day-a pared to Korea's high economic 47.5 percent increase from 139,958 growth rate, but they are actually cubic meters per day in 1991. This high, considering the shrinking ag- is an annual average growth rate of ricultural sector overall13 and the 7.9 percent. ______________==__________ Production of native beef cattle 13 In 1998, many urban workers throughout the decreased in 1997 and 1998. Do- country who had lost their jobs returned to their mestic beef had been in a decline rural hometowns. According to the Ministry of before the crisis mostly from the Agriculture, between January and August 1998, 4,914 families returned-40 percent of the 12,082 families that have left the cities for rural areas since 1990. Most returned to farmlands where they have relatives, to work on the farms (Chosun Ilbo, October 3, 1998). In response, re- swered question is whether this younger genera- ligious and civic groups have organized agricul- tion can succeed in agriculture, which is a diffi- tural training schools for the returnees. Accord- cult and very competitive economic sector. On ing to a recent poll, 86 percent of the migrants October 20, 1999, a newspaper article reported polled said they would not return to urban/ in- that the number of people migrating to the farm- dustrial areas. (Chosun Ilbo, March 30, 1999). lands is decreasing as the economy recovers. T'his phenomenon of urban ex-migration is re- Many migrants, having lost money on the farms, garded as a positive trend. The aging population are returing to urban areas in search of new in the agricultural areas is strengthened by a jobs. For many people, farming is such a mar- younger generation, and it is believed that re- ginal operation that any work in an urban area source-depleting farm traditions, such as fire could provide better compensation. (Dong-A farming, will be replaced with better practices Ilbo, October 20, 1999). and more environmental controls. The unan- 22 Korea: The Environmental Dimension of the Economic Crisis growing Table 3.8: Wastewater Generation from Livestock, 1991-1997 economic depression in Korea 1991 681 12,259 139,958 and the 1992 625 14,589 154,004 prospect of 1993 732 12,603 169,614 import lib- 1994 1,074 18,080 174530 eralization 1995 2,437 21,804 168,228 of the Ko- 1996 3,743 24,118 197,017 rean beef 1997 5,307 24,590 206,386 market. Source: Ministry of Environment Imported Taiwan, and the growth in domestic beef, which had remained at virtu- demand because of faltering in- ally the same level between 1995 comes, as shown in Table 3.9 and and 1997, decreased drastically in 3.10. Considering the severity of the 1998 with the advent of the crisis. economic crisis in Korea, however, the re- Table 3.9: Beef Supply and Demand in Korea in MT duction (Selected years 1970-1998) in the NW. f O number . . -- ~~~~of beef 1970 37,275 65 37,340 0 c 1975 70,292 0 70,292 0 cattle i 1980 93,250 0 93,250 0 smaller 1985 116,859 0 116,859 0 than ex- 1990 94,924 82,855 177,777 0 pected. 1995 154,772 148,395 303,169 0 The in- 1997 236,527 168,293 404,820 0 creased 1998 264,074 168,923 432,997 0 price of Source: Ministry of Agriculture and Forestry imported The number of pigs increased, how- beef may have offset a domestic ef- ever, between 1997 and 1998. This fect to some degree. increase is due to two causes: the increase in export demand, which Economic reports indicate that, was boosted by the pig epidemic in as of February 1999, beef cattle prices have regained Table 3.10: Pork Supply and Demand in Korea in MT tepriehae-regainedel (Selected years 1970-1998) the pre-crisis level; Year Ptthe actual number of Consumption . cattle is also ex- 1970 82,546 0 82,546 0 pected to recover to 1975 98,848 0 98,848 0 the pre-crisis level. 798. 235,181 2,776 237,957 0 Therefore, post- 1985 116,859 0 345,126 172 1990 506,507 2,583 503,288 5,802 crss, the number of 1995 639,336 34,407 659,407 14,346 lvestLock has re- 1997 698,729 64,803 711,908 51,624 mained roughly the 1998 732,698 55,722 700,114 88,306 same. It is likely Source: Ministry of Agriculture and Forestry that livestock Environmental Impacts in Selected Sectors 23 wastewater discharges have re- 80 percent of the air pollution emis- mained at the 1997 level. sions in the city, and in Kwangju, Taegu, and Taejon, motor vehicles THE URBAN TRANSPORT SECTOR are responsible for over 60 percent of the emissions. Korea's transport sector is responsi- The transport sector has been ble for more than 40 percent of Ko- The raport setoad beet rea's total air pollution emissions developing rapidly. The road fleet (2.1 million tons of pollutants in expanded from 528,000 vehicles in 1995). Vehicles are a major source 1980 to 10,456,599 in 1998, and it of nitrous oxides (NOJ), CO, and continued expanding during the crB- hydrocarbons. Korea has more than sis, although at a slower pace. Be- seven million private automobiles tween 1980 and 1997, about and taxis, which generally use 550,000 new vehicles were regis- unleaded gasoline or LPG, and are tered each year, while in 1998 only responsible for about 30 percent of about 43,000 were registered. Since Sep- Table 3.11: Number of Automobiles Registered 1993-1998 tember YearQr -of'1 . n*0 e-f Vwor:- t :;Numberof 1998, -utomobt~.s Automoblie. ------- ---auto- 1993 6,274,008 April 1998 10,390,436 mobile 1994 7,404,347 May 1998 10,388,298 1995 8,468,182 June 1998 10,394,230 regis- 1996 9,553,092 July 1998 10,405,033 trations 1997 10,413,427 August 1998 10,403,690 have 1998 10,456,599 September 1998 10,421,922 begun January 1998 10,410,890 October 1998 10,436,998 to in- February 1998 10,384,124 November 1998 10,456,294 crease March 1998 10,378,838 December 1998 10,469,599 again, Source: Korea Automobile Manufacturers' Association slightly the emissions. Approximately two (Tables 3.11 and 3.12). At the same million trucks and buses-most of time, new car sales have plum- which are diesel-are responsible meted. Only sales of mini-cars (with engines Table 3.12: Registered Vehicles by Type 1997 and 1998 less than Xbcmt~b.t -~B7 ember 1998 1.0 liter) Passenger Cars 7,586,474 7,580,926 Buses and Vans 719,127 749,320 Trucks 2,072,256 2,104,683 increase Special Vehicle 35,570 34,670 (Table Total 10,413,427 10,469,599 3.13). This Note: "Special Vehicles" refer to special purpose commercial vehicles means that such as concrete mixers, tanker trucks, etc. Buses, vans, trucks, and man Ko special vehicles use diesel. Passenger cars are powered by gasoline, y diesel or LPG. reans are Source: Korea Automobile Manufacturers' Association holding on for about 70 percent of the vehicle to their old cars rather than buying emissions. In Seoul alone, vehicle new ones at this time. If this phe- exhausts are responsible for almost nomenon continues for any length 24 Korea: The Environmental Dimension of the Economic Crisis Table 3.13: New Passenger Car Sales (Excluding Imported Cars ) 1997-1999 ::t~~~99 1i9 Jan;i r .-S.p. JanmS.pt Mini car 86,509 156,521 115,794 100,163 Compact 490,577 139,685 100,964 178,849 Mid-size 388,908 160,650 120,062 143,958 Full-size 64,388 24,476 12,276 42,495 SUVs 120,955 86,731 62,367 160,946 Total 1,151,287 568,063 411,463 626,411 Note: SUVs are mini-vans and four-wheel drive Jeep-style vehicles. Most SUVs are diesel or LPG-powered. Because of the cheap price of diesel and LPG, SUVs are increasingly popular. Passenger cars used as taxis and for the handicapped also may use LPG. Source: Korea Automobile Manufacturers'Association of time, Korea could develop "old has been instituted in some metro- car problems," as older cars tend to politan areas, as well as an express be less efficient and have higher line between Seoul and Pusan, emission rates. Yet it should be which is expected to improve traffic noted that Korea's vehicle fleet is flow between the cities. In addition, relatively young and most cars are a new subway line, currently under equipped with catalytic converters construction, will connect Seoul to and use unleaded gasoline. There- its satellite cities. fore, any "old car" contribution to Despite these and other air pol- air-pollution would be small com- lution abatement measures (such as pared to countries like Mexico, or three-way catalytic converters), traf- even other OECD countries. fic-related air pollution has been Since the beginning of the steadily increasing. During the fi- 1990s, the Government has engaged nancial crisis, air pollution de- in a campaign to encourage carmak- creased slightly, but once the econ- ers to build smaller, more efficient omy resumes and the demand for cars and to improve public transpor- private vehicles increases, chances tation. The goal is to convince con- are that air quality will deteriorate sumers to drive smaller cars (which again. are considerably less popular in Ko- rea than in other OECD countries LAND USE CONTROL such as Japan and France), use them less often, and progressively switch Since 1997, land use control has to public transport. Public agencies been a politically sensitive issue in and private industries have sup- Korea. In President Park's years, the ported switches to smaller vehicles Government instituted a strong land with public information campaigns use control policy. In the late 1 980s, and incentives, such as discounts on however, Government control over toll charges, reductions in automo- land use began to weaken, and local bile-related taxes, and lower insur- dissatisfaction grew rapidly. After ance premiums. To facilitate public local autonomy was established in transport, a bus-only lane system 1995, many local governments re- Environmental Impacts in Selected Sectors 25 quested that the central Government issue in 1997 when Kim Dae Jung, loosen land use controls, and prop- the Opposition Party's presidential erty owners organized lobbying candidate, declared that the Green groups for lifting restrictions. Envi- Belt is superfluous in a country like ronmental advocates and some Korea, where about 70 percent of members of the news media criti- the land is mountainous. He claimed cized efforts to loosen controls, that the system is undemocratic, and however. he supported abolishing most of the The following are land use con- Belt. Kim Dae Jung also pledged trol issues currently beingdisputed: that the Government would com- pensate landowners for their lost * Safeguarding land use controls rights in areas that will remain part in the Green Belt (the green of the Green Belt. zone surrounding metropolitan In its December 24, 1998 deci- areas). sion on the Green Belt issue, the * Protecting the catchment areas Constitutional Court held that the of major watersheds, particu- Green Belt system is not unconstitu- larly that of the Han River. tional itself, but that land owners in � Continuing the Seoul.Kyon Green Belt areas should be provided Coint e n 'just compensation" when they are Metropolitan Regional Planning prevented from using their proper- Policy, ties due to being part of the Green The Green Belt System Belt area.14 Many believe the Con- stitutional Court was influenced by The Green Belt system, which ap- President Kim's campaign stance plies to Korea's seven major metro- and subsequent win. politan areas, as well as small and After the Court's decision, the medium-sized cities, was initiated in Government decided to conduct the early 1970s. Much of the Green more research before it announced a Belt falls within privately owned new policy. The Ministry of Con- residential areas. Once a piece of struction and Transportation con- land is designated part of the Green tracted with the United Kingdom's Belt, further development is strictly Town and Country Planning Asso- prohibited, and no compensation is ciation to review the Korean Green provided to landowners for the loss Belt issues. On May 16, 1999, the of their development rights within Ministry of Construction and the zone. Landowners claimed this Transportation announced a new was a violation of their constitu- Green Belt policy. Landowners and tional property rights, and brought local governments were unenthusi- suit before the Constitutional Court astic-preferring total deregulation in 1989, but the court did not render to compensation or financial assis- its decision until 1998. The controversy surrounding the 14 The Constitutional Court Decision, 89 Hunma 214, 90 Hunma 16, 97 Hunra 78, De- Green Belt became a major political cember 24, 1998. 26 Korea: The Environmental Dimension of the Economic Crisis tance.15 Major aspects of the new On July 22, 1999, the Ministry policy are as follows: of Construction and Transportation * Property taxes on land in the announced its final policy regarding Green Belt area will be reduced, the derefulation of the Green Belt system.' The most critical points * Landowners may request the follow: Government to purchase their lands.ent topurchasetheir * Green Belts in small and me- lands. dium-sized cities, such as * Land use regulations in residen- Choonchon, Chonju, and Cheju, tial areas of the Green Belt will will be deregulated. In return, be lifted. these cities should prepare mas- * Development profits, derived ter plans in consultation with the from land price hikes after de- Ministry of Construction and regulation, should be taxed by Transportation. the Government through a de- * Green Belts in the seven major velopment charge system. metropolitan areas-Seoul- * The Government will establish a Inchon-Kyonggido, Pusan, Tae- account for landowner jon, Kwangju, Taegu, Ulsan and sompeial ion and management Changwon-Masan-will be re- ofothe areas adjusted. These cities and prov- inces should prepare city master In early June 1999, the U.K. plans in consultation with the Town and Country Planning Asso- Ministry of Construction and ciation (TCPA) released its final re- Transportation before they alter port on Korea's Green Belt Sys- the Green Belts. Several Green tem.16 It recommended that: Belt areas where more than 3 Green Belts in major cities like 1,000 people live will be Seoul and Pusan should be ad- scrapped immediately, however. justed only after performance of The Green Belts were not com- environmental impact assess- pletely deregulated, and many land- ments and metropolitan-wide owners in the seven major metro- planning. The Green Belts of politan areas are not satisfied- small and medium cities could because it is in these areas that the be deregulated. Green Belts have enormous poten- * Land use restrictions in small tial for development. People in and medium-sized residential these areas are pressuring the Gov- areas within the Belt should be emient to keep President Kim Dae rationalized or adjusted, rather Jung's campaign promise. At the than totally lifted. same time, environmental nongov- ernmental organizations (NGOs) are strongly opposing any wholesale 15 Chosun Ilbo, May 17, 1999. 16 Joong-Angllbo, June 4, 1999; Chosun 17 Chosun llbo, July 23, 1999; Dong-A Ilbo, Ilbo, June 3, 1999. July 23, 1999. Environmental Impacts in Selected Sectors 27 dismantling of the Green Belt sys- cause of the successful efforts to tem. The controversy is far from re- erode the Green Belt system.18 solved. These changes could have major Although the Green Belt con- impacts on other land use regulation Athvis not directly related to the issues such as watershed protection troversy si it directly lated and metropolitan regional planning. economic crisis, it is directly linkedgg to the debate over the economic re- Protection of Major Watershed covery. Promises to abolish the Belt Catchments have been part of the Government's overall efforts to deregulate land use In 1993, the Land Use Management controls in order to spur a construc- Act was revised, and permitting au- tion boom and stimulate the econ- thority for land management was omy. On December 12, 1998, the turned over to local government. As Government announced a much- a result, the upstream area of the awaited package of policies to boost Paldang Dam Reservoir, the source the economy by stimulating con- of drinking water for 20 million struction. First, the Government people in the Seoul-Kyonggi metro- lifted various price controls on politan region, opened up to an in- apartment sales and exempted hous- tense development boom. Existing ing sales from capital gains tax. The environmental laws could not com- Government also lifted many non- pensate for the loss of land use con- financial controls on construction. trols, and by 1997, it was evident For example, height restrictions on that water quality in the reservoir the buildings near military airports had deteriorated. were lifted. Procedures for inner city redevelopment were simplified, In response, the MOE proposed and semi-agricultural land was per- a special law to preserve the mitted to be rezoned for develop- Paldang watershed. The National ment without going through a for- Assembly failed to pass the law in mal rezoning process. These poli- 1997. By spring 1998, water quality cies could trigger a construction in the Paldang was once again a ma- boom in the short term. They could jor concern. Under criticism that the also result in another real estate in- new Government was neglecting the flation "bubble" in the longer environment, the Kim Dae Jung term-weakening the nation's Government pledged to prepare a economy once again. This phe- comprehensive protection plan for nomenon has already occurred in the Paldang Dam Reservoir. In Au- Japan. Furthermore, although such a gust 1998, the MOE announced a deregulation policy regarding land new policy of strict land use con- use may have short-term economic trols for the upstream area in benefits, it can result in environ- Kyonggido, Kangwondo, and mentally undesirable effects by Choongchungbookdo. People in the compromising long-standing Gov- ernment policies on land use con- 18 See Editorials, Chosun Ilbo, December 14, trol. This is especially a concern be- 1998. 28 Korea: The Environmental Dimension of the Economic Crisis upstream area objected that they bookdo, and Kangwondo Prov- were being forced to sacrifice for inces, and the Presidents of Ko- the benefit of the Seoul metropoli- rea Water Resources Authority tan area. They also claimed that the and Korea Electric Power Cor- new regulations were unconstitu- poration (KEPCO). tional. A seriously weakened bill, * The Council has the authority to which was a compromise between . . the MOE and local governments in purcael tin the cac- the watershed, eventually passed the ment otetio n aeces- Natinal ssemly ad tok efectsary. Landowners can request National Assembly and took effect that the Council purchase their on August 8, 1999. The following land if it is within the catchment are key elements of the Law to Im- prove Water Quality in the Han area. River Catchment Area and to Pro- * Local governments must pro- vide Assistance to its Residents:'9 vide benefits or assistance for * Areas up to 1 kilometer in people whose activities are cur- length along the Han River, its tailed within the catchment pro- tributaries, and Paldang Dam tection area. Reservoir can be designated . A Special Fund for Han River "waterfront areas." Areas which Water Quality Improvement will are already subject to special be established, funded by a wa- land use regulations such as the ter user charge levied on con- Green Belt, national parks, or sumers in the Han River region, catchment protection areas, can- and used for community assis- not be included in this designa- tance and water quality im- tion. provement programs. * Waterfront areas are designated The willingness of the National by the Minister of Environment, Assembly and the Ministry to ad- in consultation with the con- dress watershed preservation during cemed local governments. the economic crisis is remarkable. Yet the contradictory pledge to de- * In the waterfront areas, any new rglt h re etsse n facilities that discharge indus- spur new development could senl- trial or livestock wastewater, or ously com pme the erto new restaurants, hotels and bath- tigte catchmentae reu to ing fciliies,are orbiden.tighten catchment area regulations. ing fclisaeFurthermore, how effectively the * The Han River Management new law will be enforced has yet to Council (The Council) is estab- be seen. lished, comprised of the Minis- ter of Environment, Mayors of Seoul-Kyonggi Metropolitan Re- Seoul and Inchon, Governors of gional Planning Policy Kyonggido, Choongchung- One of Korea's most intractable problems is the tremendous concen- 19 LawNo.5932. Environmental Impacts in Selected Sectors 29 tration of people and activities in yang, Shihung, and Buchon, are Seoul and its immediate vicinity within the Growth Control Zone. (see Map "Land Use Zones Under The Managed Growth Zone lies just Seoul-Kyonggi Metropolitan Re- north and south of this region, and gional Planning Act, Amended the eastern part of Kyonggido has 1997," and Box 2). In 1984, the been designated a Nature Preserva- Seoul-Kyonggi Metropolitan Re- tion Zone. New facilities that might gional Planning Act, prepared by induce population in-migration are the Ministry of Construction and prohibited in the Growth Control Transportation and its think tank, Zone. For example, chaebols are not the Korea Research Institute for allowed to build new industrial fa- Human Settlements (KRIHS), was cilities or expand existing facilities enacted to balance development in in the Growth Control Zone. Relo- Korea by restricting growth in the cation of existing facilities out of Seoul metropolitan area and facili- the Growth Control Zone to the tating industrial decentralization. In Managed Growth Zone is strongly 1997, this Act was revised to incor- encouraged. Residential areas in the porate the Government's Second Managed Growth Zone are sup- Seoul-Kyonggi Metropolitan Re- posed to be developed in an envi- gional Planning Policy. Under the ronmentally friendly way. In the amended Act, the metropolitan zone Nature Preservation Zone, major was divided into three categories: a housing projects and new, polluting Growth Control Zone, a Managed industrial facilities are prohibited. Growth Zone and a Nature Preser- vation Zone. A~~~~~<fter local autonomy was estab- vation Zone. lished in 1995, Kyonggido authori- Seoul, Inchon, and the immedi- ties began to oppose the centrally ate vicinity, including Suwon, An- imposed Seoul-Kyonggi Metropoli- Box 2 Environmental Concerns in the Seoul Metropolitan Region Seoul, the capital city of Korea, is the political and economic center of Korea. The Seoul Metropolitan Region includes the City of Inchon and Province of Kyonggido. Kyonggido's small cities, such as Suwon, Kwachon, Songnam, Anyang, and Buchon are "bedroom towns" for Seoul. Seoul proper contains 22 percent of the nation's population. The Seoul Metropolitan Re- gion has a staggering 45.6 percent of Korea's total population and 56 percent of all manufactur- ing enterprises, but has only 11.8 percent of the land area of South Korea. Similarly, automobile registration is concentrated in the Seoul Metropolitan Region-of 10,456,599 automobiles registered in Korea in 1998, 4,817,875, or 46 percent of Korea's fleet, were registered in the Metropolitan Region. Seoul's environmental issues are, therefore, typical of major cities like Tokyo or New York, and environmental conditions in the metropolitan area are top priority for the MOE. Concerns include water quality in the Han River, which supplies tap water to the area's twenty million people through Paldang Reservoir; vehicular air pollution in Seoul, which is particularly tough to control; industrial air pollution in Inchon and Kyonggido; and mountains of municipal wastes. Solid wastes have been dumped in the Kimpo Landfill Area in the western coast near Inchon, but waste incinerators are now under construction in the municipalities. Several incinerators al- ready in operation have been the sites of serious clashes between municipal authorities and adjacent residents who are concerned about possible dioxin emissions. 30 Korea: The Environmental Dimension of the Economic Crisis tan Regional Plan. In late 1996, the catchment area of the Paldang Kyonggi Development Institute Dam Reservoir-which is al- (KYDI), established after local ready regulated as a Special autonomy went into effect, pub- Zone under the Basic Environ- lished its own study on the Metro- mental Policy Act-KYDI has politan Regional Plan. The study argued that the Nature Preserva- argued that the Ministry of Con- tion designation should be re- struction and Transportation's basic pealed. approach was misconceived. Most Some have questioned whether importantly, KYDI disputed the cur- the Seoul-Kyonggi Metropolitan rent designation of the Seoul Met- Regional Plan played a role in caus- ropolitan Region as bounded by a . . radius of 50 to 60 kilometers from ing tr enthenic chosis and Seoul Station. KYDI believed that inaddon wether t shouldte re this. ancrnstcdfntinsol pealed or revised to stimulate the this anachronistic definition sheconomy. Governor Lim of Kyong- be replaced by an integrated plan- gido, who arranged the International ning unit that includes everything Monetary Fund (IMF) financial as- within a radius of 200 kilometers from Seoul Station.20 sistance package in November 1997 as Minister of Finance and Econ- Kyonggido's dissatisfaction with omy under President Kim Young the plan can be summarized as fol- Sam, has pledged to repeal the Re- lows: gional Planning Act. In September 1998, at a seminar organized by * The most dynamic area of'gy Kyonggido, including Suwon KYDI, Gov. Lim claimed that the and Buchon, is classified within Plan is a failed policy that severely and BucwthCon,ris classiied winy restricts industrial activities in the Growth Control Zone. Manyvyngd-hc stemi chaebols, suh as Samsun Kyonggido-which is the main Echaebois such Daswo aMoosu power-horse of Korea's economy. have their main industrial facili- In addition, he added, the policy is a ties in the zone, and although major barrier to foreign investment they have land available they that Korea badly needs. The Center theyot hvexand aveifacilale, . t for Free Enterprise of the Federation cannot expand their facilities. New facilities must be built of Korean Industries (FKI), which elsewhere, where the infrastruc- represents the chaebols, supports ture is still poor and skilled this view. Because the Seoul- workers are scarce. Kyonggi Metropolitan Region is the area in which many foreign inves- * According to Kyonggido au- tors are interested, the FKI believes thorities, the Nature Preserva- that any siting restrictions there dis- tion Zone is a redundant land courage further investments. On use regulation. As the major part September 28, 1998, an editorial in of the Zone is composed of the the Maeil Economic News said that the Metropolitan Regional Planning 20 A Study of Seoul-Kyonggi Metropolitan Policy not only deters foreign capi- Regional Planning, KYDI, December 1996. tal coming into Korea, but also Environmental Impacts in Selected Sectors 31 pushes major Korean businesses to permit the chaebols to expand their move offshore. Notable examples industrial facilities in the metropoli- include the semiconductor manufac- tan region after restructuring: turing branches of Samsung Elec- tronics and Hyundai Electronics, * Permts to build new tourst and which shifted investments to Aus- resort facilities slarger than and Egene,Orego, re-500,000 square meters in the tin, Texas, and be,ause re- Nature Conservation Zone will spectively, reportedly because they be allowed for the next three could not expand their existing fa- . cilities in the Nature Conservation Zone ofKyongido* 21 by more than 51 percent foreign capital. Although there is strong opposi- To facilitate the restructuring of tion to the Metropolitan Regional major businesses, enterprises Plan, the Ministry of Construction will be allowed to aggregate and Transportation announced on wir betallowedlty areate October 15, 1998, that the existing their industrial facility area ceil- controls would remain in place. The ings-rather than be confined only exceptions are joint-venture by the area ceilings of each fa- projects or foreign direct invest- cility. Thus, if a company closes ments where the share of foreign an outlying factory during re- investment is 80 percent or more. structuring, it may expand its Chollabukdo and Chollanamdo, facilities in the metropolitan re- President Kim Dae Jung's political gion up to the square footage of base, and Chongchungnamdo, theclosedfacility. Prime Minister Kim Jong Pil's The proposed changes have power base, support strong growth been strongly opposed by the May- controls in the Seoul-Kyonggi Re- ors of Taegu and Taej on, and the gion, in hopes that controls there Governors of Kangwondo, Chong- will redirect development to their chungbookdo, Chongchungnamdo, own regions. Kyonggido and FKI Chollabukdo, and Kyungangbukdo. continue to push for deregulation. They argue that massive deregula- In April 1999, proposed revi- tion in the Seoul-Kyonggi metro- sions to the Seoul-Kyonggi Metro- politan area would result in a seri- politan Regional Planning Act were ous development gap between released for public comment. After Seoul-Kyonggi and the rest of Ko- comments, the revisions still must rea. Implementation of the Legoland pass through the Cabinet and be ap- Project (see Box 3) depends on proved by the President. The two whether the revisions in the Plan are most important revisions, listed be- approved. low, are designed to attract resort facilities into Kyonggido and to 21 How to Improve the Metropolitan Regional Policy in the Age of Economic Adjustment? July 1998, FKI, p. 17. 32 Korea: The Environmental Dimension of the Economic Crisis Box 3 The Controversial Legoland Project in Inchon, Kyonggido Legoland of Denmark, a company of the Lego Group of Denmark, would like to open a theme park in Asia. Legoland already has theme parks in Denmark, the U.K., and Southern California, and a fourth Legoland theme park is planned in Germany. The Kyonggido government is deter- mined to attract the new facility to the province. In years past, Legoland had considered Inchon, Kyonggido as a possible site for a park, but the strict land use regulations in Kyonggido made de- velopment impossible. Lego Korea, a company wholly owned by Lego Group of Denmark, already has a toy factory in Inchon, and Inchon is a picturesque town, only one hour's drive from Seoul, with a tremendous potential for growth. Under the Seoul-Kyonggido Metropolitan Plan, Inchon falls within the Nature Preservation Zone, however, and much of it is designated as a special zone for catchment protection with strict land use regulations. Beginning in 1998, the central and provincial governments decided to attract more foreign in- vestment to Kyonggido. They also decided to relax various regulations in order to attract this in- vestment. Under proposed revisions to the Seoul-Kyonggi Metropolitan Regional Planning Act, projects like Legoland could go forward. According to Lego Korea, the planned theme park, Lego- land Korea, would occupy 600,000 m 2_smaller than an existing park, Everland, in nearby Yongin, run by the Samsung Group, which was built before the catchment and metropolitan regulations were adopted. Everland occupies about 1,000,000 m2. If approved, the project would likely be funded entirely by Legoland of Denmark-to the tune of at least 200 million dollars'-one of the largest single foreign direct investments since 1998.1 Thus far, Legoland has not gone forward as expected. The Ministry of Environment has op- posed large-scale projects in the up-stream areas of the Han River, although environmental NGOs have been silent on the issue. Kangwondo has also raised serious opposition to the project, not for environmental reasons, but because it regards the project as grave leisure-facility competition, located as it is between Seoul and Kangwondo. Finally, at the December 1, 1999, Vice-Ministerial Meeting, the revisions to the Seoul-Kyonggi Metropolitan Regional Planning Act were defeated (Munhwa Ilbo, December 4, 1999). Once again, the future of the controversial Legoland project is unclear, although hopes for the project have not died. THE ENERGY SECTOR economy. Improvements in Korea's fuel consumption patterns will not As Korea has developed, there has occur quickly. Overall, the economy been a fundamental change in its is highly unsustainable in terms of energy use. Over the last thirty energy use, particularly with regard years of development, the nation to growing concerns regarding has become deeply dependent on greenhouse gas generation. imported energy, with a high ratio During the economic crisis, the of energy consumption per unit consumption of energy in Korea de- GDP (Tables 3.14 and 3.15). The creased for the first time in decades, high dependency on imported en- although the reduction was less than ergy (oil) has been supported by might have been expected given the relatively low domestic oil prices seriousness of the crisis. As shown (see Table 3.16). Although the share in Table 3.15, energy consumption of transportation in fuel consump- in 1998 was estimated to be 143,394 tion has risen dramatically since the thousand TOEs-a 0.28 percent de- mid-1980s, Korea's high energy crease from 143,890 thousand TOEs consumption is primarily related to in 1997. Lower interational oil its production pattern, which in turn prices and the energy-intensive is related to its position in the global structure of the Korean economy Environmental Impacts in Selected Sectors 33 Table 3.14: Energy Consumption in Korea 1970-1997 ... ~ ~ ~ ~ ~ ~ ~ ~ 4om.i . P*P 1970 0.54 0.38 104.4 47.5 47.5 1975 0.51 0.36 98.6 58.6 58.6 1980 0.58 0.41 112.1 73.5 71.6 1985 0.51 0.36 97.4 76.2 68.8 1990 0.52 0.37 100 87.9 73.7 1991 0.53 0.37 101.9 91.3 77.7 1995 0.58 0.41 112.6 96.8 85.6 1996 0.6 0.42 115.4 97.3 86.1 1997 0.6 0.43 115.9 97.5 86.5 1998 n.a. n.a. n.a. n.a. n.a. Source: Energy Statistics Information System DB Table 3.15: Energy Consumption by Sector 1993-1998 (est.) (Thousand TOE) Industry 21,865 30,871 50,825 62,946 77,433 76,146 Transport 7,699 12,269 16,531 27,148 30,780 30,441 Commer- 18,605 20,080 23,006 29,451 32,930 34,034 cial/Household Public/other 2,355 2,055 2,259 2,416 2,747 2,773 Total 50,524 65,275 92,621 121,961 143,890 143,394 Source: Ministry of Commerce, Industry and Energy. Table 3.16: International Comparison of Consumer Oil Prices, 1997 (Unit: US dollar Per liter) Gasoline 0.882 (100) 0.863 (97.8) 1.1(124.7) 1.101 (124.8) Diesel fuel 0.396 (100) 0.521(131.6) 0.871(219.8) 0.629 (158.8) Note: Numbers in parentheses are price indices setting prices in Korea = 100. Source: Korea Energy Economic Institute worked against much contraction in for imported energy. According to fuel consumption, and together, the Ministry of Industry and En- these factors permitted the shift to a ergy, the price of oil and coal rose slight increase in pollution intensity by 34.3 percent between August in the economy as a whole. 1997 and August 1998, while the Between 1997 and 1998, pri- consumer price index rose by only consumption dropped 6.9 percent. During this period, mary energy ~~~~~electricity consumption declined 9.2 by 10 percent, resulting in an im- provement in air quality. This im- percent and oil consumption provement was ind d by te edropped 15.7 percent. The reduction provement was induced by the re- duction in purchasing power of in- m oil consumption occurred mainly dustry and consumers and by the in- in household and commercial use crease of won-denominated prices 34 Korea: The Environmental Dimension of the Economic Crisis and transportation, rather than in in- November 1998, the price of dustrial use. unleaded gasoline and diesel fuel If international oil prices had not rose 29.2 percent, and the price of dropped (and the price of domestic diesel fuel rose 29.4 percent be- energy sources remained stable), the tween November 1997 and July rise in domestic energy prices in 1998. The relative price of diesel to K a o d in con- gasoline rose until March 1998, Korea and associated drop whe itbgaoonrp-seal sumption would have been even when It began to drop (see Table higher. In 1997, the average price of 3.17). That spring, the Korean Gov- oil was $21 per barrel; the average ernment raised the tax on both gaso- price in 1998 was about $16 per line and diesel fuel about 20 per- barrel-a 23.5 percent drop. The cent. Despite tough opposition by value of oil imports in 1998 was consumers and industry, the tax has about $16.5 billion-a 25.5 percent been viewed as a "win-win" oppor- drop from 1997. The quantity of oil tunity. It was designed to raise imported in 1998, however, was fumds for financial/industrial re- about 1,036 million barrels-only structurmg and to enhance incen- 2.5 percent less than in 1997- tives for energy conservation and despite the sharp rise in the foreign efficiency improvements in trans- exchange rate (from about 800 portation. The tax was criticized on won/dollar to about 1400 environmental grounds, however, won/dollar) and the drop in domes- because it weighed prices in favor tic demand. of diesel, which is more polluting than unleaded gasoline (Table 3.18 Between November 1997 and and Figure 5). Table 3.17: Gasoline and Diesel Fuel Prices (won per liter) Jan.1996 624 255 0.408654 Jul.1997 802.8 342 0.426009 Feb. 1996 611 261 0.427169 Aug.1997 798.7 328.6 0.411419 Mar.1996 608 259 0.425987 Sep.1997 813.5 350.9 0.431346 Apr. 1996 627 267 0.425837 Oct. 1997 819.5 357.7 0.436486 Mav 1996 639 275 0.43036 Nov. 1997 837.6 373.9 0.446394 Jun.1996 641 273 0.425897 Dec.1997 983.9 521.3 0.52983 Jul.1996 707 297 0.420085 Jan.1998 1142.7 679.9 0.594994 Aug.1996 717 313 0.436541 Feb. 1998 1189.7 738.2 0.620493 Sep.1996 710 317 0.446479 Mar.1998 1042.2 586.9 0.563136 Oct. 1996 711 325 0.457103 Apr.1998 1040.7 586.5 0.563563 Nov.1996 730 345 0.472603 May 1998 1040.8 493.3 0.473962 Dec.1996 779.8 340 0.436009 Jun.1998 1087.6 484.8 0.445752 Jan.1997 828 380.8 0.459903 Ju1.1998 1082.5 483.7 0.446836 Feb.1997 847.9 383.2 0.45194 Aug.1998 1082.1 483.8 0.447001 Mar. 197 844.2 370.1 0.438403 Sep.1998 1149.1 515.9 0.44896 Apr.1997 835.7 368 0.440349 Oct.1998 1214.3 547.3 0.450712 May.1997 828.1 365.7 0.441613 Nov.1998 1207.2 546.1 0.452369 Jun.1997 824.1 371.5 0.450795 Dec.1998 1192.1 495.5 0.415653 Source: Korea Energy Economic Institute Database (http://her.keei.re.kr) Environmental Impacts in Selected Sectors 35 Table 3.18: Fuel Tax Rates, 1999 ,7' - -> "tsgorpOt l s - :.-- Note Leaded gasoline has been banned since January 1, 1993. Gasoline 691 won/liter The Education Tax is 15% of the Transportation and Special Consumption Tax on gaso- Special line, diesel, and kerosene. Consumption Taxes Diesel fuel 160 won/liter Kerosene 60 won/liter LPG 40 won/kg LNG 40 won/kg Value Added Tax 10% of (Producers price + Special Consumption Tax/Transportation Tax + Education Tax), Station Margin, and Sales Agent's Margin. 0.7 0.6 - 0.5- 0.4 - - _ 0.3 - 0.2 - 0.1 '~~~ ~~ D (D D qN C) ) C) ) r) C) C oc c oo ) m p az O aw O s) aw O 0) a0) a) 0 0) 0 0 0) 0 a) WZ--) 0) 0 c) 0) Z ax ) 0) ) 0a) a)0 . __________, ..C_ Figure 5: Relative Price of Diesel Fuel to Unleaded Gasoline Monthly Trend 1996-1999 Source: Korea Energy Economic Institute Database (http://her.keei.re.kr) SUMMARY OF EFFECTS AT THE good sign, this shift may not be SECTORAL LEVEL genuinely structural or persis- tent. The critical question is Although the total level of pollution whether the observed increase in emissions appears to have gone pollution intensity will persist as down over the last year and a half, the economy recovers. Persis- or at least remained about the same, tence of the new pattern could there are some undesirable signs at be guarded by vested interests in the sectoral level: the new structure. This possibil- * Industrial production has shifted ity needs to be closely watched. slightly in a more pollution- * The most visible environmental intensive direction. This shift impact of the crisis has probably was facilitated by low interna- been abandoned hazardous tional oil prices. Although not a wastes from defunct businesses. 36 Korea: The Environmental Dimension of the Economic Crisis Korea's environmental laws have made it less expensive for have had a serious loophole re- households to have more than garding hazardous wastes. one car, and changes in the fuel When businesses closed during tax structure continue to favor and after the crisis, many aban- diesel fuel over gasoline. These doned their toxic wastes on-site. trends could signal new prob- The Government was reluctant lems in the future, including in- to assume wholesale responsi- creased traffic congestion in ur- bility for these sites, although ban areas and serious transport the most serious were addressed, related air pollution. and fortunately, as the economy In densely urbanized regions, re- strengthened, some private laxation of land use planning remediation has taken place. and controls must be carefully . Observations of the livestock monitored. Since the onset of and textile/dyeing sectors do not the crisis, business associations indicate a strong negative envi- and local governments have ronmental impact due to the cri- fought for land deregulation in sis. Some unemployed urban the name of economic workers have returned to rural revitalization. This pressure has areas, but the additional pressure been most acute in Kyonggido, on the natural resource base is where various land use not believed to be significant. regulations have been lifted to Given the current budget con- encourage a construction boom. straints of many enterprises, The ensuing long-term however, there may be instances environmental and social costs of increased pollution intensity of open space losses and poorly at specific site or sub-sectoral planned development may offset levels. any short-term construction * There is potential for declining . fannaYy, it is important to note water quality at industrial and that despite these changes, there agro-industrial sites. Given the is no evidence that enforcement current budget constraints of of environmental regulations many enterprises, there may be and standards has become more a lack of attention to maintain- lax in industrial sectors, particu- ing environmental controls, and larly among export-oriented in- instances of increased pollution dustries, as had been postulated emissions at some facilities, par- by some experts (see Chapter 4). ticularly in livestock operations and SMEs, including textile and dyeing sectors. * The contribution of vehicle emissions to ambient pollution is high and seems to be growing. Changes in registration taxes 4 Environmental Policy - Changes and Setbacks DEREGULATION On September 25, 1998, the Regulatory Reform Committee pro- In general, the Korean Govern- posed repealing 309 environmental ment's environmental enforcement regulations in 1998-1999.23 Based performance has not changed sig- on this proposal, the Government nificantly as a result of the crisis. adopted a "target-based" deregula- The number of sites that officials tion approach. On October 12, inspected rose in 1998, compared 1998, the Cabinet decided that each with 1997 (see Table 4.1). Although Ministry should repeal at least 50 there has been a slight reduction in percent of their existing regulations violation rates, this is a continuation by the end of 1998. Unfortunately, of a long trend of improvements in this directive did not distinguish be- environmental compliance. There tween economic disincentives such are no data on what exactly is driv- as entry barriers or rate regulations ing this improvement. At the end of and needed social protection regula- 1998, deregulation began, however. tions, such as those in environ- It is unknown what effect the loos- mental protection and public health ening of regulations may have on and safety. As of October 1998, the air and water quality, although the MOE identified 643 regulations un- MOE does not anticipate it will der its authority. Initially, MOE de- have any impact.22 cided to repeal 52 regulations, which it regarded as "non- 22 Deregulation is a key facet of economic essential." After the Cabinet deci- policy in the Kim Dae Jung Government. The sion of October 12, MOE added 141 Kim Young Sam Government also pursued a regulations to the list of "non- deregulation policy, but Kim Dae Jung Gov- ernment's drive for deregulation has been much essential" regulations. That means more powerful and swift. The Government be- the Ministry has agreed to repeal lieves that over-regulation has been one of the major barriers to foreign capital investment in Korea. 23 Chosun lbo, September 26, 1998. 37 38 Korea: The Environmental Dimension of the Economic Crisis Table 4.1: Enforcement Record of Air and Water Quality Standards for Industrial Pollution Sources, 1997 and 1998 Year Sites In- Violations Number of Measures Used spected (Rate of Viola- Improve- Closurel Censure* Other tion, %) ment Order Suspension Measures Air Qual- 1997 46,201 2,600 (5.6) 545 441 56 (981) 1,558 ity 1998 48,149 2,286 (4.7) 346 386 45 (956) 1,509 Water 1997 73,998 5,053 (6.8) 3,088 958 80 (1,027) 927 Quality 1998 76,746 4,461 (5.8) 2,579 721 88 (1,017) 1,073 Total 1997 120,199 7,653 (6.4) 3,633 1,399 136 (2,008) 2,485 1998 124,895 6,747 (5.4) 2,925 1,107 133 (1,973) 2,582 Note: * = number of total sites subject to censure and administrative measures) Source: Ministry of Environment, R. O.K. 193 regulations, or 30 percent of the tion. For example, the gap between existing regulations. MOE claims cost-saving through deregulation that any more would severely com- and actual outcomes is illustrated in promise its duties (MOE Memoran- Box 4. It is certain, however, that dum, December, 1998). the economic crisis has had a major Examples of regulations that impact on MOE's administrative MOE decided to repeal follow: (i) practices. More than ever, MOE pollution prevention facilities must must now rely on voluntary compli- be supplied by registered manufac- ance by businesses. turers; (ii) businesses must self- AIR QUALITY CONTROLS monitor their pollution discharges; (iii) Government officials must Under the Air Quality Conservation oversee the change of on-site envi- Act, air emission standards should ronmental managers; (iv) automo- meet developed country standards bile fuel additives must be regis- by 1999. When the economic crisis tered; (v) automobile manufacturers began in late 1997, however, the in- must employ particular inspection dustry association requested that engineers and equipment; and (vi) plans for strengthening air emission businesses must follow particular standards be adjusted. They argued record-keeping requirements for several of the target standards are waste generation. Many of the dis- unnecessarily stringent and in some continued regulations may be only cases are stricter than standards in burdensome red tape. Some may other developed countries. After have had important roles, however. several months of consultation Many officials in MOE have per- among the concerned ministries, sonally expressed their concern with MOE promulgated a new Ministe- such rapid and massive deregula- rial Decree that revised several of tion, but they are not in a position to the existing emission standards. oppose the deregulation drive or- Most of the higher standards went dered by President Kim Dae Jung. It into effect as planned, however, on is still too early to evaluate the im- January 15, 1999. pacts of such extensive deregula- Environmental Policy: Changes and Setbacks 39 An interesting case study re- tion that KEPCO indeed close the garding the crisis and emission plants by December 2001. Two standard compromises has been other domestic coal-fired power Box 4 Requirement to Employ Environmental Engineers Scrapped On August 11, 1998, MOE announced its new Regulation on Environmental Manage- ment, designed to implement the Special Act to Deregulate Business Activities (passed April 10, 1997). With this regulation, businesses are no longer required to hire certified en- vironmental engineers as their environmental managers. Instead, businesses have a choice: they can hire certified environmental engineers just as they formerly did, or they can 'out-source' environmental management by contracting with designated environmental management firms. To guarantee quality, MOE has promulgated detailed criteria for the designation of environmental management agencies. The intent of the new regulation is to cut costs by scrapping the compulsory employment of certified environmental engineers by each firm. As of January 1999, 21 firms have been certified as environmental management ser- vice providers but no businesses have contracted with them. This is primarily due to the criminal liability provisions in the environmental laws. According to existing law, environ- mental managers are responsible for any violation of environmental laws. If a business "out-sources" environmental management, however, MOE holds the business itself-not the contracted agency--responsible. Therefore, no business dares to 'out-source" and the status quo remains in place. (Interview with Yong Woon Lee, President of Environment Management Institute, January 1999) KEPCO's effort to extend the grace plants have been or are being built period for meeting emission stan- in Donghae City, a harbor city of dards for their domestic coal- the East Sea. Although these two burning power plants. KEPCO has plants burn domestic coal, there are maintained two domestic coal burn- no special allowances for emis- ing power plants in order to keep sions-thus, they should meet the Korea's coal production viable. As same emission standards as plants Korea's domestic coal is more ex- burning imported coal. pensive, dirtier, and less efficient than imported coal from Australia, THE ENVIRONMENTAL BUDGET this program has been controversial. Originally, the grace period expired In response to the crisis, the Gov- on December 31, 1998, which ernment cut overall expenditures in means that on January 1, 1999, 1998. It agreed with the IIMF to KEPCO would have been required amend the original 1998 budget (the to close the plants or install expen- First Amended 1998 Budget) and sive pollution abatement equipment incorporate substantial cuts. In the to meet emission standards. KEPCO revised budget, Government expen- has agreed to close the plants by the ditures (74,080.4 billion won) were end of 2001, but asked MOE to ex- still 3.8 percent higher than the pre- tend the grace period until they vious year, but this was signifi- closed. The MOE has agreed to pro- cantly lower than the usual 10 per- long the grace period on the condi- cent annual increases. In May 1998, the Government and the IMF agreed 40 Korea: The Environmental Dimension of the Economic Crisis to relax monetary and fiscal policies (reallocated from the Forestry in light of improved foreign ex- Agency in 1998), MOE's share of change reserves, and the budget was the budget has in fact shrunk even amended once again (the Second further. In the 1999 budget, MOE's Amended 1998 Budget). The budget share of the total budget was 1.36 revision allowed some expansion in percent, which is slightly reduced Government expenditures and was from that of 1998, so it would seem designed to prevent a further eco- that the trend is to continue reduc- nomic downturn and social unrest. ing environmental expenditures. Total public expenditure was ex- Previously, this share had been panded to 80,762,900 million steadily increasing. See Table 4.2 won-a 13.2 percent increase over and Figures 6 and 7. the previous year. Because of the Considering the tremendous crisis, the Second Amended 1998 amount of capital needed to shore Budget, prepared in June 1998, set up the banking sector and finance MOE's budget at 1,113,097 million industrial restructuring, the envi- won. This was only a 20 billion won ronmental budget has not been cut increase from the First Amended any more severely than other sec- 1998 Budget, and the same as the tors. Usually capital expenditures, original 1998 budget. Thus, the rather than operating expenditures, share of MOE's budget in the total are more vulnerable to cuts. Thus it Government budget went down could be expected that capital in- from 1.51 percent in 1997 to 1.38 vestments such as sewage or waste percent in 1998. Taking into ac- treatment facilities would be seri- count the fact that MOE gained the ously affected. Improving water national park administration budget Table 4.2: Changes in the Environmental Budget, 1997-1999 (million won) Tap Water/ Sewage 568,406 569,077 598,052 671 0.1 29,646 5.2 Treatment Waste Treatment 271,734 266,636 270,155 -5,098 -1.9 3,519 1.3 Poaicy Development 133,463 118,383 113,516 -15,080 -11.3 -5,467 -4.6 Nature Conserva- 6,281 48,303 59,195 42,022 569.0 10,392 21.5 tion Air Quality 8,945 7,375 8,489 -1,570 -17.6 1,114 15.1 Environmental Management & Mis- 1,080,203 1,113,097 1,153,606 32,894 3.0 40,509 3.6 cellaneous Total Public Expen- 71,368,400 80,762,900 84,937,600 9,394,500 13.2 4,174,700 5.2 diture MOE Budget/Total Public Expenditure 1.51 1.38 1.36 - - - (%) Source: Ministfy of Environment Note: The budget comprises capital expenditures and operating expenses including personnel ex- penses. Environmental Policy: Changes and Setbacks 41 3 - 2.5 - 2- 1.5- 1 0.5- 1991 1992 1993 1994 1995 1996 1997 1998 Year Figure 6: Share of MOE Budget in Total Public Expenditure 3 - 2.5 2- is 1.5- 0.5- v 0 / 0 -I I I I I 1991 1992 1993 1994 1995 1996 1997 1998 Year Figure 7: Share of Environment-Related Expenditures in the Government Budget Source: Ministry of Environment supply infrastructure, wastewater the Government, however, and capi- treatment, and waste disposal and tal investments have not been seri- treatment are very high priorities of ously affected. The deepest cuts 42 Korea: The Environmental Dimension of the Economic Crisis have occurred in the area of envi- 280 million won.21 The Sae- ronmental research and develop- maeul Movement Association, a ment. quasi-governmental organiza- tion with nationwide branches, THE ECONOMIC CRISIS AND THE also staged a massive recyclable ENVIRONMENTAL MOVEMENT collection campaign.27 The MOE announced that nearly one The economic crisis brought new million tons of recyclable challenges and opportunities to the wastes, valued at 17 million environmental movement. Many of won, were collected in February Korea's opinion leaders blamed the 1998 alone.28 The zeal for recy- financial crisis on over- cling cooled, however, when the consumption, and saw it as an op- currency rate stabilized in late portunity to correct negative pat- 1998. terns that have plagued Korean so- ciety in the 1990s.4 Environmental * Several NGOs also embarked on activists argued that the crisis was a campaign to "Renourish the an opportunity to improve the envi- Forest" in February 1998. The ronment by consuming less and re- purpose was to provide better cycling more. They also argued that forest management to rejuvenate it was a good time for the Govern- growth. Although Korea has ment to halt major infrastructure successfully implemented a projects, such as large dams, and massive tree planting campaign major landfill and reclamation ef- since the 1960s, there has never forts in coastal areas.25 been much after-care of the planted trees and forest growth During the early stages of the has been uneven. The Forestry crisis, there were several notewor- Administration and NGOs pro- thy environmental advancements: posed a nationwide plan for for- * A nationwide reusable or recy- est management that would gen- clable garbage collection drive erate about 100,000 jobs.29 The was staged by NGOs and Gov- Kim Dae Jung Government ac- emnment agencies. In February cepted the proposal and the 1998, an environmental NGO Ministry of Agriculture and named "The Citizens' Associa- Forestry officially announced tion to Solve the Rubbish Prob- the tree-care program.30 The lem" staged a recyclable solid- plan was dubbed a Korean ver- waste collection campaign. sion of the New Deal. Unfortu- Journalists claimed that if Korea nately, however, the tree-caring recycled 10 percent of its scrap metal and paper, it could save 26 Chosun Ilbo, Feb. 3, 1998. 27 Chosun Ilbo, Feb. 17, 1998. 24 Hyuk-Joo Lee, "We Should Be Blamed," 28 Chosun I1bo, March, 1, 1998. Chosun Ilbo, February 5, 1998. 25 Won Chang, "Opportunity to Improve the 29 Chosun Ilbo, February 25, 1998. Environment," Chosun Ilbo, February 16, 1998. 30 Chosun Ilbo, March 29, 1998. Environmental Policy: Changes and Setbacks 43 program ended up as massive a Prefectural Office of Seoul tree-cutting works in many areas free of charge. The Office did under the guise of forest man- not know that such feed can be agement, mostly due to the lack supplied to hog farms only, and of enough forestry management compensated the farmers for experts in the field.31 dead animals.33 Farmers turned More than fortycivicgrouback to grain when the currency * More than forty civic groups or-.. ganized a national campaign to stabilized. make feed for pigs from food wastes. Korea has been strug- gling with its food waste dis- posal problem for sometime. If properly collected and proc- essed, food wastes can be recy- cled as feed for pigs or as fertil- izer. The cost of collection and processing is quite high, how- ever, and farmers and hog growers have usually preferred chemical fertilizers and feed grains. Nearly all the feed grains sold in Korea are imported, and after the financial crisis, im- ported feed grain became very expensive. Many hog farmers switched to processed food wastes, and the NGO cam- paign's goal was to facilitate the collection of food wastes from urban areas.32 Interest waned by late 1998, however, because pigs raised on processed food wastes weighed less than those raised on feed grains. In addi- tion, there was an unfortunate incident that tainted the image of feed made from food waste. In June 1999, almost a hundred cattle in Kyunggido died after consuming the feed made from food waste that was supplied by 31 Chosun Ilbo, September 8, 1998. . 32 Chosun lbo, March 20,1998. 33 Chosun Ilbo, June 24, 1999. 5 Conclusions and Recommendations ln summary, environmental quality sector. In other words, Korean in- indices improved somewhat imme- dustry has become more pollution diately following the onset of the intensive for a given level of total crisis, but have tended to revert to output, even though individual in- pre-crisis levels as time has passed dustries' pollution intensity may and the economy has improved. Air have remained unchanged. These quality has been generally more shifts do not necessarily indicate sensitive to the economic changes that environmental regulations have than water quality, which has been weakened or environmental en- relatively constant regardless of forcement has become less strin- changes in economic variables. gent. Rather, other economic fac- 'l'he financial crisis and subse- tors, such as the relative cost of fuel, quent adjustment resulted in some have probably stirred the changes. changes in the composition of in- Nevertheless, if these shifts persist, dustrial outputs, both for domestic environmental policy and regula- demand and for exports. The main tions would need to be revisited to driving force of this change was ap- protect environmental quality. parently declining incomes, high in- In general, the crisis has had lit- terest rates, rising foreign exchange tle impact on agriculture, with the rates, and low international oil exception of livestock farming. Hog prices. Output composition has farming increased during the crisis. shifted in ways that may appear to A number of people who left urban be small, but which could have sig- areas after losing their jobs probably nificant implications.34 The shifts ended up hog fanning, and there is a have favored pollution intensive in- new demand for Korean pork from dustries, in particular in the export Japan. Japan previously imported beef from Taiwan, but when fatal diseases plagued Taiwan's hog 34 See Footnote 9 above. 44 Conclusions and Recommendations 45 farms, Japan turned to Korea for its sale of new cars radically increased pork supply as well. The increase in in 1999, including an increase in hog farming has had a significant diesel-powered cars. The potential impact on water quality in the af- increase of cars per household, in- fected regions due to the quantity of cluding diesel cars, could raise new wastes generated. challenges in the future, including increasing traffic congestion in ur- In the energy, industrial, and bnaes adcniudpolm transport sectors, imported fuel ban areas and continued problems prices increased significantly, due to with urban air pollution. the falling value of the won, but The major environmental issues were balanced by lower world oil in Korea today are directly and indi- prices. Some changes in industrial rectly related to land use controls- output were no doubt related to this for example, poor water quality and changing balance of input costs, re- watershed protection, loss of open sulting in a small but potentially space and urban/industrial density. important shift to more energy- The Green Belt system controversy intensive production. The price of was the most hotly debated envi- gasoline increased dramatically, ronmental issue in 1997-1998, and however, compounded by a Gov- played an important role in electoral emnment-mandated increase in politics. Although land use man- transportation taxes, which made agement may not appear to be di- gasoline 60 percent more expensive rectly related to the economic crisis, than before the crisis. Therefore, the business associations and local gov- difference between the price of ernments have fought for land de- gasoline and the price of diesel fuel regulation in the name of economic has become wider. This, in turn, revitalization. This pressure has pushed people to buy fuel price ef- been most acute in the Kyonggido ficient diesel-powered automobiles, region. Various land use regulations potentially increasing urban air pol- have already been lifted in order to lution problems. encourage construction, and though During the first six months of a new construction boom may boost 1998, automobile registrations de- the economy, there are pitfalls. creased modestly. Considering that First, a construction boom could re- auto registrations had increased sult in another economic bubble ef- more than 10 percent annually in fect, and second, if uncontrolled it recent years, this was significant may compound the environmental change. New car sales plummeted problems already inherent in Ko- in 1998, pushing the Korean auto- rea's development patterns. makers' balance sheet into deep red. The economic crisis did not Only sales of mini-cars and diesel- cause any apparent retreat in Ko- powered sports utility vehicles rose. rea's environmental policies. No The Government repealed the dou- standards were loosened, and there ble-registration tax for households' is no evidence that the implementa- second car as of January 1999. The tion of environmental regulations 46 Korea: The Environmental Dimension of the Economic Crisis has been eased-with one excep- nologies. The plan also calls for tion. The domestic coal-burning greater attention to the evolving power plants of KEPCO have had trends in industrial production and their operating permits extended, consumption and their effect on the but on the condition that they close environment, including a likely in- permanently by the end of 2001. dustrial shift to lighter industries The MOE was obliged to take "de- and smaller enterprises. This inte- regulation measures," however, and gration of environmental goals with eliminate unnecessary constraints. economic policies should be pur- Though a deregulation policy has sued and expanded. been pursued since the years of the Kim Young Sam Government, the tn' hscnet h otipr Ki ongSmGoh tant challenges currently confront- current Government's position is ing the MOE are the lack of tools much stronger than before. Some and institutional capacity for: (i) as- regulations have been removed, but suring comprehensive monitoring of the general assessment has been that and compliance with environmental those selected were either unneces- standards while relying increasingly sary or ineffective, on industry self-reporting; (ii) estab- Probably the most visible envi- lishing a framework for efficient ronmental impact of the economic management of environmental li- crisis has been the leftover wastes abilities; (iii) encouraging the vital from defunct businesses. Although SME sector to improve environ- problems with abandoned wastes mental compliance and reduce pol- are not new, the crisis intensified lution intensity; and (iv) ensuring the situation dramatically. The that new investments in the indus- MOE took rapid action to prevent trial sector and their financing are major disasters, such as toxic slides guided by environmental due dili- from waste mountains in factory gence processes. Thus, the MOE yards, and the Waste Management needs to strengthen and upgrade its Act was amended in December existing tools for resource alloca- 1998 in order to address the prob- tion, monitoring and enforcement, lem. Whether the law will be effec- planning, pollution prevention, and tive and how liability issues will be investment appraisal. resolved are still open questions. Strengthening the following ar- The integration of environ- eas of environmental management mental concerns into economic and would improve the foundations for sectoral policies is still in its early integrating environmental consid- stages in Korea. The current five- erations into economic decisions as year economic development plan the economy returns to growth: contains some energy conservation A and efficiency measures and advo- metodol suld envre- cates more public and private fi -venope fortmeasurongenvrn nancing to stimulate the use of menta alityeronmental accounts and performance indi- cleaner, more energy-effiJcient tech- ctr-anya h imlvl Conclusions and Recommendations 47 This information should be gathered to provide firms with accurate assessment of the envi- ronmental costs associated with their product and processes. In particular, a better understand- ing of behavior by SMEs would facilitate more effective envi- ronmental regulation of this sec- tor and provide needed informa- tion to SMEs on environmental management and best practices. Finally, the ability of the MOE and selected financial institu- tions to assess and minimize en- vironmental risks and liabilities when appraising investment or corporate restructuring propos- als should be enhanced. Infor- mation and training materials are needed on the legal basis for environmental risk assessments and environmental due diligence in credit assessment. With better analytical controls in place, many of the dangers of deregu- lation, industrial shifts, and re- laxation of land use controls may be mitigated or avoided. IBRD 30537 REPUBLIC OF KOREA SEOUL-KYONGGIDO METROPOLITAN REGION LAND USE ZONES UNDER SEOUL-KYONGGIDO Map METROPOLITAN REGIONAL PLANNING ACT, AMENDED 1997 -38� ' CHUNCHON ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- G- t ihe I.o .toA, 127 o,# =grnly, or ony asea MARCH m IBRD 30538 125' 126� 127 128 -29; Is~~~~~~~~~~~~a 6::) DEMOCRATIC PE PIE'S East REPUBLIC OF KREA - MAO RIVER BASINS, tgANOGAI g>lm*@g San ko S ~ ~ ~ ~~~ASN AND CMES so RNER N 80UND flkC*-,IVERE A Y^I -D MWB1O~A~ *~~~~~~~~~~~~~~~ A 5MAGEW4 T�ATMEW LAS Scpkyo R. ~ AH*4OICARM - .UVN~O % ... .. 0ARS ........-. - SeOVa ON Crf - B-''-D--- AS~~~~ ~ ~~ OF 'M :' ... .. AWWa 9= "N tCHEJU 90V., -..R Xtt \ .... - AM . '. ''': CA---W U 125 P 1915 127N T28� * S2 NiNI 2t - 'M t . __1''T' ,' ,1E , lo0-200 KY2 20- 60 *~ CA' ENI hij 3v %I~~~~~~~~I C~~~~~~~~~~~~~C Ye4llow 24 Sea 0 20~~~~~~~~~~~~ARH20 THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433 U.S.A. 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