Mask Shortages in South Korea amidst the Wuhan Coronavirus Outbreak, China, Central Planning, and Corruption

2020-3-23, Tara O

South Korea is suffering from nation-wide mask shortages.  There are not enough masks and protective suits for the health care workers treating the Wuhan Virus-infected patients at hospitals in South Korea.  South Korean citizens searched around for masks for hours, only to go home empty handed. Now, a person can only purchase 2 masks a week with an identification card, if they can find masks to buy after standing in long lines.  Many in South Korea are blaming South Korea’s sending so many masks to China as a primary reason for mask shortages. Kim Sang-jo (김상조), Senior Secretary for Policy at the Blue House, labeled it as “fake news.”  Who is right? What really caused the mask shortages?

Early period:  Millions of masks sent to China

Shortly after the Wuhan Virus story broke in mid-January 2020, and after the Chinese government quarantined the entire city of Wuhan on January 23, 2020, South Korea quickly provided China over 6 million masks, in addition to at least 42,000 protective suits, other supplies, and millions of dollars in cash.  The South Korean government delivered 3 million masks, 10,000 protective suits, and medical supplies and cash worth $5 million to China on the same chartered aircraft that was contracted to bring back South Korean citizens from Wuhan. 

South Korean businesses also quickly donated at least 3.3 million masks and 32,000 protective suits. Additionally, Seoul Mayor Park Won-soon donated $500,000 worth of medical supplies, including protective suits, goggles, and face shields, to China on February 28, 2020, when South Korea was suffering from mask shortages while the Wuhan Virus spread exponentially in South Korea. 

As South Korea provided masks to China, National Assemblyman and the floor leader Lee In-yong (이인영), Deobureo Minjoo Party, said “a friend that helps in difficult times is a true friend,” defending the sending of masks, supplies, and money to China.  Lee also described China as a “precious friend that South Korea must live with and help, going forward.”

South Korean businesses donated masks, protective suits, money to China

Around the same time, over 20 South Korean businesses rapidly donated medical supplies and money to China.  For instance, Samsung posted on its website on January 31, 2020 that it is providing 1,000,000 masks and 10,000 protective suits and other supplies and money equal to 30,000,000 Yuan ($4.3 million).  LG donated 1.2 million masks, 10,000 protective suits, and cash, as well as enough floor covering to build a 6,000 square meter hospital in Wuhan, China.  In terms of mask donations, SK also gave China 600,000 masks, Atomy gave 140,000 masks, Celltrion gave 130,000 masks, SPC China gave 100,000 masks, Orion gave 80,000 masks, and Kukdo Chemical gave 40,000 masks.  Together, South Korean companies donated to China at least 3.3 million masks and at least 32,000 protective suits.  These donations by over 20 companies occurred almost simultaneously and in the early periods after the news broke, indicating a close coordination, potentially by the government.

Mask shortages in South Korea

While the South Korean government and large businesses sent millions of masks to China, the South Korean people have noticed that masks were difficult to find, especially N95 and  KF94 masks, but also other masks as well, and the issue became controversial. People have stood in line in the cold from dawn for hours to buy masks.  The prices have jumped, but people counted themselves as lucky for being able to buy masks, even at higher costs.  South Koreans are not used to this level of shortages, especially of masks, since its modernization. The yellow signs on a pharmacy are an example of how deeply frustrated South Koreans are.

A frustrated pharmacy owner placed bright yellow signs (above picture) with various explanations about why they have no masks.  The sign on the left:

• Pharmacies receive only 100 masks per day.  We must wait until there are enough masks stockpiled to be able to distribute 100 masks to all the pharmacies in the country.  So we don’t receive the masks everyday.
• Only 5 can be sold per person, so only 20 people a day can buy.
• It only takes 10-20 minutes for the masks to be sold out, so it’s hard to get masks.
• We don’t know when they will be delivered next, due to sudden increase in the demand for delivery service.
• We are also in a predicament and feel just as frustrated.

The sign on the right:

• We have no KF masks!!!
• Help! I say [no masks] 1000s of times a day. It’s driving me crazy.
• I don’t know when more masks will arrive.
• There is no [disinfecting] alcohol and no thermometer. None!
• We have no KF masks!!!
• No masks. None!
• Truly none.

Health care workers also face shortages of masks and protective suits.  Workers at a hospital wear open-back aprons.  The sign shows “Corona 19 [COVID-19] Key Regional Hospital.”

Massive Mask Movement to China

Already in late January, pharmacies and stores were running out of masks due to the increase in demand, including mass purchases of masks by Chinese.  While other countries instituted a travel ban on China, South Korea’s Moon administration resisted the public and the Korean Medical Association’s (KMA) calls to ban entry from China, where the coronavirus outbreak spread from Wuhan to other parts of the country as well as to other countries.  Thus, the Chinese traveled to South Korea. A portion of them could have been infected and likely have contributed to the spread of the coronavirus, which originated in Wuhan, to South Korea.  Some of the travelers bought masks in bulk.

In early February 2020, there were 123 mask manufacturers in South Korea, together producing about 8 million masks per day.  A dealer told a journalist on February 5 that he sold 2 million masks to China.  A Joseonjok (ethinic Korean Chinese) dealer, who normally sells Korean cosmetics, tried to buy more masks, even going directly to the mask factories in South Korea several times, to fulfill orders from Beijing and Dalian, but the mask purchasers (from China) bought all the masks at the factory.  According to a researcher, there is nothing the customs official can do as they watch millions of masks leave the airport for China, because there are no measures against it.  The masks not only leave for China via individual suitcases, but also by the boxes as large purchases.

National Assemblyman Ji Sang-wuk (지상욱), Unified Future Party, said at the National Assembly’s Political Committee Meeting on March 5, 2020, “Over 1 million (masks) are handed over everyday to Xiaomi [Chinese electronics company based in Beijing], disguised as Red Cross relief products, even after the government’s export restrictions.”

While South Korea donated millions of masks to China and the government allowed the export of millions more masks, South Koreans face mask shortages.  This contrasts with the action of the government of Taiwan. Taiwan banned mask exports early on January 24, 2020, stating it needs to look out for its own people first.  It also started to restrict passengers from Wuhan on December 31, a month before the South Korean government did so, which was after the Chinese government already quarantined Wuhan.  Taiwan suspended all tours to China on January 25, and banned all visitors from China on February 6.  The South Korean government never banned entry from China (other than Wuhan), despite numerous calls for it from Korean Medical Association and its citizens.

On average, 10,000 to 30,000 Chinese tourists visit South Korea daily.  On January 31, 2020, while the Wuhan Virus was rapidly spreading across China, 11,345 visitors from China entered South Korea. Using that as an average, 340,350 visitors would enter South Korea in a 30-day month.  If 1% of the visitors from China were infected with the coronavirus, that would be 3,403 people, at 5%, it would be 17,018 and at 10%, it would be 34,035 in one month.

The Moon administration’s refusal to ban entry from China led to rapid spread of the coronavirus in South Korea, leading to 157 countries restricting or banning travelers from South Korea, as of March 18, 2020.  Ironically, China also restricted travel from South Korea.

Masks from China

To add to the irony, the South Korean Foreign Ministry announced on March 9, 2020 that the Chinese government will send 1.1 million masks to South Korea. The Chinese government sent 80,000 masks to South Korea on March 11, 2020.  It is unclear if the Chinese government sent the rest (1.02 million) of the masks to South Korea.

Prior to the Chinese government’s sending of masks, Jack Ma of Alibaba in China sent 1 million masks to South Korea on March 8, 2020.  They were American brands, including Honeywell and Gerson. 

Jack Ma also announced that he will send 1 million masks to Japan, and sent 10,000 masks to Hokkaido.  It turned out they were South Korean-made KF94 masks, which ran out of stock in early February in South Korea.  Ma did not explain how he obtained the KF94 masks.  KF94 masks are also on sale in the U.S. online, such as on eBay, but the majority of the sellers are Chinese (registered from China) and the prices have risen dramatically, raising the question of hoarding.

Taking masks away from kids

President Moon Jae-in has been telling the public that the mask supply will not be a problem until early March.  However, long lines for purchasing masks has become the new norm, if people are lucky enough to get them.  The public discovered on February 29 that the Ministry of Education requested  that the Offices of Education at the Seoul Metropolitan City Government, Gyeonggi Province, and Incheon City collect the masks secured in each elementary, middle and high school in their jurisdictions.  According to the Seoul Metropolitan Office of Education, schools with 500 or more masks must send the entire inventory to the Office of Education by March 1, except for the amount needed to operate day care classes for 10 days.

An elementary school vice president was angry, stating, “I called dozens of suppliers and tried hard as if I were in a combat situation to acquire masks, thermometers, and other articles for epidemic prevention, but now they want me to turn them over.”  A high school principal was also upset, saying, “The education authorities did not provide [the masks].  We were on our own, and it was difficult for us to obtain the materials…must the schools accept harm to help, when it was the government’s policy failure?  It is pathetic that they have to use kids’ masks to spin this.”

A parent also was upset, saying, “The government has received the wrath of the public because of the mask [shortages], but they still haven’t resolved the problem. So now they want to take [masks] from schools.  What has the government been doing?”

According to the education authorities on March 2, the government collected 5,800,000 masks from elementary, middle, and high schools all over the country, except the schools in Daegu and North Gyeongsang Province and small schools.  The government plans to distribute the collected masks to the Farmers’ Cooperatives and post offices.

Central Planning of Masks

In addition to confiscating masks from schools, the Moon administration decided to centrally plan and distribute the masks, but it is creating long lines and rationing. The public and the health care providers found out through the mask suppliers that such government action took place.

The Korean Medical Association (KMA) operates a Doctor’s Marketplace, a specialized online store that provides medical supplies to medical staff.  On March 3, 2020, Doctors’ Marketplace issued an urgent notice, because the masks that it was supposed to receive from the manufacturers that day completely stopped.  The masks received by the Doctors’ Marketplace were to be supplied to the health care providers. It stated, “We received notices from the mask manufacturers that it is impossible for them to supply the masks that we were supposed to receive today at 11:30 a.m., because the government’s [new] policy that the manufacturers must supply100% of the masks designated for public sale to the Public Procurement Office.”

As the news spread through the online community, various comments ensued:

• “Is the state robbing even the doctors’ masks?”
• “If these online sites can’t supply anymore, then are the doctors expected to leave in the middle of treating patients and stand in line outside the farmers’ cooperative or the post office [to buy masks]?
• “I’m closing [my clinic]”

The KMA stated, “When medical staff is exposed to COVID-19, it is not possible to protect a large number of patients with depressed immune systems, who are visiting the hospital/doctor’s office.”

A mask manufacturing company that supplies masks to dentists, eDent (이덴트), stated on its website on March 5, 2020, “The Public Procurement Office (조달청) is demanding an increase of 10 times the daily production and that it will recognize only 50% of the production cost.”  The Moon administration also required the supplier to provide 80% of its production to the government.  Essentially, the government is telling the manufacturers to increase production by 10 fold, sell the majority (80%) to the government, and sell them at a significant loss to the producer.  This defies the market economy logic. Indeed, eDent further stated, “We are announcing that production of eDent masks will be discontinued.” The Public Procurement office stated it made an error in the quantity; instead of 896,000 masks, they wrote 8,960,000 masks, but the rest of the requirements remain.  The government’s action removed at least one mask manufacturer, reducing the supply even more.

Another mask manufacturer complained that his employees are working long hours, now from 9 a.m. to 3 a.m. the next day. [The government also instituted a 52-hour work week, so they had to get an approval for an exception.]  He wants to give his employees time off, but the government tells them not to, so they have been working everyday.

The government also cut the price paid to the manufacturers from ₩1,000 ($0.84) to ₩900 ($0.76) on March 6, 2020.  The price sold to pharmacies is ₩1,100 ($0.93) and the pharmacies, in turn, sell the mask for the government set price of ₩1,500 ($1.26).  The government contractor (the middleman) makes ₩200 ($0.17) profit for each mask. (Using $1:₩1,188 rate on March 6, 2020).

The Moon administration also announced that it will use soldiers to repackage masks.  Since the number of the masks an individual can buy has been changed to two, and many of the manufacturers package them in bulk (although they can package different numbers, if requested, but probably at a greater cost), the Moon administration plans to use the military to repackage the masks during the dawn, so the masks can be delivered to the pharmacies in the morning.  Outraged netizens stated “Where did all that huge budget and donations go? And deploy the military during the dawn (to repackage masks)?”  Ministry of Defense spokesman Choi Hyun-soo (최현수) denied that the soldiers will be sent to work during the dawn, stating the soldiers will work from 4 p.m. to 10 p.m.  The government, therefore, did not deny it was using the soldiers to repackage masks, just that their work hours were different . It appears that the soldiers were already sent to mask factories to repackage masks as early as March 1, 2020 in the photo below.

The Citizens are upset that the soldiers are used as free labor for the government contractor, Geo-Young, which is benefiting from the new arrangement, while mask shortages, long lines, and restrictions continue. 

Requiring people to routinely stand in long lines also is counter to the concept of social distancing, which is important in reducing the coronavirus infection spread.  A 17-year old high school senior died rather suddenly on March 20, 2020 in Daegu, and his death certificate showed “Coronavirus” Pneumonia induced Acute Respiratory failure.  The teen had been indoors the majority of the time for about three weeks, because he did not want to risk infecting his father, who has third stage cancer.  On March 10, the day the teen could purchase masks based on the government’s mask distribution plan, he stood in line for over an hour in the rain.  He developed typical symptoms of the coronavirus–headache, cough, vomiting, difficulty breathing, and fever that reached 41.5 °C (106.7 °F).  The government is disputing the cause of death and claiming it was something other than coronavirus.

Centrally planning the distribution

On the demand side, the Moon administration instituted more central planning.  Starting February 27, 2020, it began distributing masks to pharmacies, post offices, and Farmers’ Cooperative Hanaro.  Beginning March 9, 2020, it placed further restrictions, changing the mask rationing from five to two per week per person, the purchasers must produce an identification card, and the person can only purchase on certain days of the week, based on the identification number. Providing an ID to purchase masks means that even the sick, the elderly, and toddlers also must stand in line to show their identification.  After a public uproar, the Moon administration then allowed a family member to purchase for some of the family members by bringing their identification cards.

Setting the day of the week when one can buy masks also raised the question about whether one can buy masks for a family member, whose designated day of purchase may differ from the person who is physically buying the masks.  A 73-year old grandmother went to a pharmacy on Tuesday and asked what number on her ID card she needs to see to determine which days she is allowed to purchase and whether she can buy masks for her grandson.  She was told that only the birth year ending in 2 and 7 can buy masks that day, so she was allowed, but not her grandchild, who is not allowed to purchase masks until the weekend or the upcoming Monday.  After 20 minutes, the grandmother plunked down on the door sill, saying she has arthritis and cannot stand for too long.

The government’s actions of allowing sending masks to China and central planning are not helping to ameliorate the situation.  The mask shortages persist and the lines have not disappeared. Meanwhile, confusion and frustration are building up.

Health care workers face mask shortages

Doctors and nurses face mask shortages as well.  Although the government is supposed to distribute masks, many hospitals are running short of masks.  All five major hospitals in Seoul–Samsung Seoul Hospital, Seoul National University Hospital, Seoul St. Mary’s Hospital, Seoul Asan Hospital, and Severance Hospital–were suffering from mask shortages when a reporter checked with them on March 11, 2020.  At Samsung Hospital, the mask supply was down 70%, making it difficult for them to get through the weekend.

On March 12,  Park Neung-hoo (박능후), the Minister of Health and Welfare, asserted, “We have prioritized supplying (masks) to the medical industry, so they are not that short of masks. They just feel that they lack (masks), because they want to stockpile them.”  Park’s statement was in response to various doctors and nurses who are on the frontline fighting against the coronavirus, who expressed their concerns about mass infection of the medical staff due to shortages of masks and protective suits.  Lee Seong-gu (이성구) The head of Daegu Medical Association lamented, stating “[Lee’s] remarks [show he really] doesn’t understand the reality.”

A frustrated nurse stated online that the coronavirus outbreak in South Korea is at the state it is in [rather than at a much worse state] “due to the sacrifices of the healthcare providers” and asked “what has the government done?” The nurse further stated, they “endure with only one mask per day” due to lack of mask supply and expressed her shock and disappointment at the Health Minister’s statement that the healthcare workers are trying to hoard masks.

A doctor interning at a teaching hospital in Gyeonggi Province said, “We wear the same mask for three days, and due to so many protective gear being defective, the chance of the healthcare workers getting infected with COVID-19 is much greater.”

Graft and corruption of government contractors of mask distribution?

Prior to this new central planning decree by the government, the manufacturers could send the masks designated for public sale directly to the vendors serving the consumers of the masks.  With the new policy, 100% of such masks must go to a contractor designated by the government first. In effect, the government became a middleman in the process, which did not exist before.

Geo-Young (지오영), based in Incheon, initially was the only contractor conducting mask distribution for the government, and after being criticized for creating  a monopoly, Baekje Pharmaceuticals was added, with about a 75.5%/24.5% split.  The Ministry of Strategy and Finance (기획재정부) announced that it designated the masks will be sold through pharmacies, and in remote locations with no pharmacies, through post offices and farmers’ cooperatives.  The ministry stated that selecting Geo-Young and Baekje Pharmaceuticals was inevitable, since they had a nationwide pharmacy distribution network.  The government stated that 10,400 of 22,818 pharmacies in South Korea are in the Geo-Young network, which expanded the number to 17,000 to distribute the masks.  The government also stated it brought in Bakje to add an additional 5,000 pharmacies that are not part of the Geo-Young network.  Not all pharmacies are part of their network, thus the masks are not distributed to all pharmacies in the country.  The public asks why are the masks not distributed to local neighborhood government offices, community centers, police stations, post offices, and ubiquitous convenient stores, but only to pharmacies (in most regions) and only certain pharmacies.

The public is criticizing the government for enriching Geo-Young and Baekje, while severe mask shortages and long lines continue.  National Assemblyman Kwak Sang-do (곽상도), Unified Future Party, requested information from the Ministry of Food and Drug Safety, in response to the public outcry.  Park estimated that the two contractors made a profit of ₩3,788,500,000 ($3.2 million) [if ₩100 ($0.084) margin per mask] to ₩7,477,000,000 ($6.3 million) [if ₩200 ($0.17) margin per mask] in 13 days.  As mentioned earlier, the mask producers get ₩900 and the consumers pay ₩1,500. The pharmacies get ₩400 ($0.34) of margin and Geo-Young and Baekje receive ₩200 ($0.17) won per mask. At ₩200 per mask, the profit margin is 22%.  Geo-Young distributes 4,220,000 masks a day, for a profit margin of ₩844,000,000 ($710,437) per day, which is ₩25,320,000,000 ($21.3 million) in a 30-day month. Additionally, the soldiers were deployed to repackage the masks for Geo-Young and Baekje, thus there was no additional repackaging labor cost to the contractors.

Political connection?

Further criticism arose from the personal connections of the contractors to the government.  Park Myeong-sook (박명숙) (60), a former adviser to Geo-Young, recently applied to the Democratic Party of Korea (Deobureo Minjoo Party) to be nominated as a proportional representative candidate for the April general election.  Indeed, on March 11, 2020, the Democratic Party of Korea announced that it selected her as a proportional representative candidate.

China connection

In May 2019, Blackstone Private Equity Fund acquired 46% of Geo-young shares held by Anchor Equity Partners for $945.2 million.  Geo-Young co-founders Cho Sun-hae (조선혜) and Lee Hee-gu (이해구) retained the rest of the shares.  It was reported in the media that Chairwoman Cho Sun-hae (조선혜) owns 23% of the shares in Geo-Young.  Additionally, the Blackstone Private Equity Fund bought the Geo-young shares as “Blackstone SPC,” created in Hong Kong.  It is known within the industry as primarily a place that manages investments in Chinese capital.  The connection raises suspicions of Chinese government meddling in the mask distribution scheme, and even potential fundraising for favored political candidates the South Korean elections in April.

Conclusion

As the coronavirus spread from Wuhan, China to South Korea, the demand for masks has increased.  Starting late January 2020, however, South Koreans quickly discovered that masks were difficult to find.  The South Korean national government, local governments, large companies, and Chinese sent millions of masks, perhaps 10s of millions of masks, to China, starting in late January.  As the transfer to China occurred, South Korean doctors, nurses, and the public faced nation-wide mask shortages, which put their lives at greater risk and created something South Koreans were not used to:  long lines. The government’s central planning as an answer did not eliminate lines. Rationing and lines have become the norm in South Korea for the past few months. South Koreans are certainly getting a taste of socialism/communism represented by the confiscation of private goods, central planning, shortages, and long lines.  They are also put at greater risk of contracting coronavirus by having to stand in crowded lines and often at that. Meanwhile, the Moon administration’s selection of two contractors raises various suspicions as they make millions of dollars in profit in a matter of days, while the health care providers and the public still face mask shortages.