Identifying the culpritsIt is embarrassing to see the so-called restructuring of the Korean shipbuilding industry, which is in obviously need of major changes. The government and creditors contributed to the companies’ woes through their negligence and lack of expertise, and yet instead of joining forces to salvage what’s necessary, they are busy tossing hot potatoes around while the industry is sinking fast.
The state banks should have conducted much better oversight over how tax funds were spent in the bailed-out shipbuilders, even if nobody could have predicted the global slump in orders would be as prolonged as it has been. They allowed the world’s largest shipyards to run on deficits and debt to keep them open through an absolute dearth of new orders. State banks treated themselves with fat paychecks and perks for the role in which they performed so poorly.
STX Offshore & Shipbuilding used to be the world’s fourth-largest player in terms of number of orders. The shipbuilder began to tremble in 2013. Creditors should have seen the problems then and stopped extending new loans.
State banks did likewise. Korea Development Bank (KDB) and the Export-Import Bank of Korea (Korea Eximbank) lent out 4.5 trillion won ($3.8 billion) in fresh loans from August 2013. Even as other commercial banks pulled out of the bailout program, the two state banks kept up their patronage. They were pressured by politicians fearing massive layoffs and the effect on local economies should the shipyards and subcontractors go under. The government sided with politicians. As a result, KDB’s debt ratio overwhelms its capital by over 800 percent and Eximbank by 640 percent.
Yet KDB received the highest performance rating in 2013 and 2014 from the Financial Services Commission. Its chairman and employees congratulated themselves with bonuses amounting to 90 percent to 100 percent of their salaries. Korea Eximbank also got an A rating from the Ministry of Strategy and Finance in 2013. The following year, its rating was lowered to B because of its exposure to a number of major bankrupt companies. Still, it was enough to pay the bank employees 70 percent year-end bonus. The average salary at KDB is 94.5 million won, and at Korea Eximbank, it is 92.42 million won, the third and fourth highest-paying jobs among public institutions excluding think tanks.
The government must be held accountable for this negligence. Was it not presidential aides and ministers that approved the large-scale bailout funds to troubled shipbuilders in the first place?
JoongAng Ilbo, May 30, Page 30
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