Shedding new light on the Daewoo deal

PAUL GESSELL April 28 1986

Shedding new light on the Daewoo deal

PAUL GESSELL April 28 1986

Shedding new light on the Daewoo deal

When Industry Minister Sinclair Stevens stood in the House of Commons on Jan. 28 to answer a question, he appeared indignant. A controversial proposal from the South Korean multinational, Daewoo Corp., to bring hundreds of workers to Canada to operate a suit-making factory, he told New Democratic Party immigration critic Dan Heap that day, had been rejected “out of hand.”

But documents since obtained by Maclean’s through the Access to Information Act indicate that the proposal was, in fact, studied at various levels of government for at least five months. Consideration of the proposal appears to have ended only after a reporter obtained details (Maclean’s, Feb. 3), and Heap raised questions in the Commons.

Leafing through the heavily censored documents last week, Heap described Stevens’s January statement as “unacceptable” and his actions as “slippery.” Pointing to the stack of letters and government memos on the subject stretching from September, 1985, to January, 1986, Heap said, “That doesn’t sound like an out-ofhand rejection to me.” However, Stevens’s press secretary, Vera Holiad, said the minister had decided from the beginning that “the proposal wasn’t going to work.” She said he had only continued talking to Daewoo because he hoped the company would produce a new proposal that eliminated the imported workers and conformed to immigration rules. When no such proposal emerged, she said, the project died.

One point that the documents do not fully clarify is the role played by Employment and Immigration Minister Flora MacDonald in scuttling the proposal. Some government officials, who nicknamed the project “Sinclair Stevens’s baby,” claimed that MacDonald vehemently opposed it. They said her stand was symptomatic of several disagreements the two ministers have had over job creation strategy.

Stevens’s department of regional industrial expansion (DRÍE) asked MacDonald’s department last fall to study the Daewoo proposal because of possible immigration problems. Meanwhile,

Stevens appointed Terry Ford, a senior DRIE official, to head what was called the Canada-Korea Project and negotiate with Daewoo. In an interview last week Ford said, “The senior people of the company were told, ‘Look, we’ll try to get an agreement from MacDonald, but it probably won’t fly.’ ”

Although the documents show that DRÍE officials recommended Stevens and MacDonald meet to discuss the issue, Ford said he was not aware that any meeting ever took place.

“What happened with that proposal is it was

recognized it could not move forward until Stevens and MacDonald could agree,” said Ford. “And when ministers don’t meet on something, basically it’s because the time’s not right or the deal isn’t going to be made.”

Whatever MacDonald thought of the project, she appears to have been reluctant to make her views known publicly. In a brief interview with Maclean’s on Jan. 21, MacDonald was asked about her department’s role in the negotiations. At first she chuckled and then, breaking into a broad smile, replied: “No one’s talked to me [about it]. I’m sorry I can’t be of any help to you in that regard.” However, the documents obtained from her department and from DRIE indicate that MacDonald was briefed on the subject as early as Oct. 21 by her deputy minister, Gaétan Lussier, and was kept informed throughout the talks. MacDonald’s press secretary, Brian Grant, said last week that the project must have “slipped her mind” when she was asked about it in January.

Evidence of MacDonald’s involvement is disclosed by a Dec. 9 memo sent from one senior official of her department to

another. The memo said: “In view of the strong possibility that Mr. Stevens may approach our minister again shortly on the Daewoo proposal, we recently prepared a memorandum to her

highlighting the policy issue and outlining four options for dealing with it.” Those options, along with many other missing pieces to the puzzle, were censored by government officials before the two departments released the documents to Maclean ’s. The Access to Information Act allows the government to delete certain types of information relating to companies or to recommendations made to cabinet ministers.

The Daewoo affair began last Aug. 27 when Stevens met officials of the company in Seoul, South Korea. The offi-

cials expressed interest in investing in Canada. According to his correspondence to the company, Stevens was enthusiastic about securing investment dollars from South Korea’s fourthlargest conglomerate. With interests in everything from textiles to shipbuilding, Daewoo Corp. had sales of more than $5 billion in 1984 and accounted for 10 per cent of South Korea’s exports.

But a major problem arose once Daewoo outlined in detail that it wanted to build a men’s suit factory, to be located in Quebec, New Brunswick or Nova Scotia, and import the majority of an estimated 1,200 workers. Memos between various government officials repeatedly expressed concern that the scheme would present “immigration problems.” There appeared to be no way, under existing immigration rules, that Daewoo could bring hundreds of Korean workers into Canada at a time when at least 15,000 Canadian garment workers were unemployed. Stevens expressed some of those concerns in a letter last Nov. 20 to Woo Choong Kim, Daewoo chairman. But Stevens still encouraged the company to continue work on the project.

The documents obtained by Maclean’s indicate that discussions about the proposal continued as late as Jan. 22, only a week before Stevens told the Commons the project had been rejected out of hand. On that same date, John Edwards, MacDonald’s associate deputy minister, prepared a memorandum to the minister “intended to provide both you and Mr. Stevens with the information needed to discuss Daewoo’s immigration demands. Daewoo has indicated they will not pursue the proposal any further until they receive a response to these demands.”

Stevens’s Commons statement, said Ford, was “the nail in the coffin” of the project although the company, aware of the government’s concerns, had foreseen problems as early as November. The company realized the project was dead when Stevens made his statement in the House.

However, talks between Daewoo and Canada are continuing. Said Ford: “We are trying to encourage them to still look at projects, but fully consistent with immigration policy.” Prime Minister Brian Mulroney will visit South Korea next month and meet some of the country’s leading businessmen. Ford said he did not know whether Daewoo executives would be among them. For his part, Heap said he doubts that the government has abandoned the plan to “bring in people to work for low wages.” Said the NDP MP: “Even if the project is dead, the idea is not.”