May 25, 2014 7:00 am JST

After ferry disaster, companies in anguished South Korea rethink safety

KOICHI KATO, Nikkei staff writer

Yellow ribbons, symbolizing hope that more ferry survivors will be found, hang in Seoul. © Reuters

SEOUL -- South Korean society continues to reel from last month's ferry disaster. Companies in a range of fields are scurrying to ease widespread anxiety about safety. Consumers are in no mood to spend, raising concerns about the nation's economy. 

     Lee Jai-seong, chairman of leading shipbuilder Hyundai Heavy Industries, on May 13 ordered presidents of group companies to review safety management procedures to ensure accident-free working environments. Lee gave the order after a fire at one of Hyundai Heavy's docks in the city of Ulsan, where a liquefied natural gas carrier was being built. The blaze on April 21, just days after the sinking of the Sewol ferry on April 16, killed two and injured two, according to local media reports. 

     At the meeting of presidents, the Hyundai Heavy group decided on emergency investments totaling 300 billion won ($296 million) to enhance safety. As a first step, the group's safety management organs have been unified and placed under the direct supervision of a president. In addition, the number of safety workers at contractors will be doubled, and related training will be upgraded.

     Other South Korean companies are taking action, too. Leading steelmaker Posco decided this month to provide more than two hours of monthly safety education for all employees. It also resolved to work out new measures by establishing a global safety center at its headquarters in the city of Pohang. The Samsung group, which has embarked on a two-year safety investment plan worth 3 trillion won, conducted a disaster drill in Seoul on May 14.

Spending slump

Meanwhile, the South Korean government is assuring the public there will be justice in the Sewol case.

     In a statement issued last Monday, President Park Geun-hye said the government will pursue the ferry operator to hold the company responsible. She also said legal action would be taken to tap the assets of the family that effectively owns the operator. The money would go toward compensating victims.

     So far, such promises have not lifted the gloom over consumers. Spending did pick up in early May when there were four consecutive holidays, but it slowed again in the middle of the month. Major department store operator Lotte's same-store sales decreased 3.8% on the year during the May 7-13 period; rival Shinsegae's fell 2.6%. The mood on the streets is somber. Yellow ribbons are everywhere -- an expression of hope that, perhaps, some ferry survivors have yet to be found. 

Months of dread

Earlier this month, the Korea Institute of Finance forecast that the South Korean economy will grow 4.1% in 2014. This was a 0.1-percentage-point cut to the institute's original projection, taking into account factors including the Sewol tragedy. In a three-year economic reform plan, the government has proposed deregulation and other measures, but some analysts expect progress to be slow.

     It is likely to take a few more months to confirm the fate of all the missing ferry passengers, as the sunken ship needs to be salvaged. The shock of the disaster is unlikely to dissipate anytime soon.