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Blood Money: U.S. Bank Funds Korean Project That Will Destroy Native Community

Do the money managers not know that poor villagers are being detained, beaten and even killed to protect their investments? Or do they not care?
 
 
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"When you share love's warmth, it returns even warmer. Together we can move the world."

So says the website of the South Korean-based Pohang Iron and Steel Co., or POSCO, an image of two beaming children and a bucolic mountain backdrop framing the message. American investors are among those sharing in the "warmth" of POSCO's profits, up 44 percent in the first quarter.

POSCO, the world's fourth-largest steel company, has apparently fooled many U.S. investors into believing this saccharine façade: The Bank of New York, a U.S.-based investment firm, is POSCO's trustee and largest shareholder, holding 22 percent of its shares. Another U.S. investment firm, Capital Research & Management (Capital Group Companies), one of the world's largest and most publicity-shy investment management companies, is No. 2, with a 4.4 percent share in POSCO.

Yet POSCO has been accused of marshaling police who jailed and beat striking union members -- one to death -- in its home country of South Korea, and it now stands poised to engage in even more violent tactics in India's eastern state of Orissa.

There, in the coastal village of Jagatsinghpur, farmers have railed against eviction orders for the past 22 months. Today, over 1,000 Indian officers -- 20 platoons -- of state police have encircled the villages where the POSCO site is planned in an attempt to repress the growing resistance. Farmers have formed "self-sacrifice squads" -- 500 men and women are prepared to die rather than move. Today, the Jagatsinghpur villagers have barricaded themselves behind bamboo fences in a desperate bid to protect their land.

In recent months, over 15 people were killed after police fired on protestors refusing to move to make way for an Indonesian chemical plant in Nandigram, West Bengal. Like the proposed POSCO site, the Nandigram village was one of hundreds of Indian "special economic zones" -- or SEZs -- neoliberal dreamlands where land rights, environmental and labor protections, and other laws are all but eliminated to attract foreign investors.

Similar massacres have taken place in SEZs in Kalinganagar and Kashipur, also in Orissa, and elsewhere. It is for this reason that the Jagatsinghpur villagers are demanding the immediate removal of the paramilitary forces and police from the vicinity of the proposed POSCO site, says Debjeet Sarangi from Living Farms, an organization working with farmers on sustainable agriculture in Orissa. And, he adds, they are asking for solidarity in their call that no project should proceed against the wishes of the local people.

The $12 billion POSCO project in Orissa is the largest foreign investment project ever in India. POSCO plans to take over 8,000 acres of fertile farmland to build a massive steel, automobile and ship-building complex, complete with its own power plant and port, displacing over 30,000 people. The POSCO project is the largest in the history of South Korea's overseas investment.

POSCO is very likely viewing its new operations in Orissa as a way of escaping pressures from unions for higher wages and better working conditions in its home country. At a strike at a South Korean POSCO facility in July 2006, one union member, Ha Joong Keun, was beaten to death by riot police, another suffered a miscarriage and scores of others were injured as a result of police brutality. POSCO used its political and economic clout to shut down the Pohang Construction Local Union affiliated with the Korean Federation of Construction Industry Trade Unions (KFCITU) during the strike. Approximately 25 Korean union members still languish in jail: Their crime, demanding a livable wage and a 40-hour workweek from POSCO.

The Orissa state government claims that it has already acquired 1,100 acres from their owners. Their government's environmental impact assessment claims that "89 percent" of the land is government-owned and only 11 percent is occupied. But that claim is visibly and historically false. Decades ago, villagers purchased land ownership rights from their king. Today, their descendants, mostly tribal farmers, have made their homes and livelihoods in the rich soil near the coast, growing betel nut and cashew crops. A 1956 law strongly restricts the sale of tribal lands to nontribals. In a bid to open up Orissa's vast mineral wealth to foreign investors, the state government is trying both to undo that law and dispute the ownership rights that date back decades.

POSCO has already invested $6.2 billion in the Orissa project, roughly equivalent to its profits in 2005, one year before striking Korean workers unsuccessfully demanded higher wages. BHP Billiton Ltd. of Australia, the world's largest mining company, has invested another $2.4 billion.

These corporations and their investors have a larger stake in POSCO's profits than their Korean peers; for example, the Korean national pension fund owns 2.9 percent of POSCO shares, South Korean Telecom owns 2.8 percent shares and South Korea's Pohang University of Science & Technology owns 2.7 percent. The remainder of shareholders in POSCO are small mutual funds, primarily based in the United States and Luxembourg.

If the police move in to Jagatsinghpur, to lay the groundwork for POSCO's profit-making venture, American shareholders may feel that "warm" feeling of high returns on their investments. What they won't see -- but should -- is the lives destroyed and the blood shed for that growing profit margin.

Editor's note: a correction was made after this story was originally posted .

Daphne Wysham is a fellow at the Institute for Policy Studies in Washington, D.C., where she is the director of the Sustainable Energy & Economy Network .