The missing pointsI was bothered by the comments by President Park Geun-hye on the Hanjin Shipping crisis and maritime havoc during a cabinet meeting before the Chuseok holiday. She blamed the management and owner of the country’s largest shipper for causing the calamity. “The complacency believing the government would step in for rescue if the shipping industry is damaged has dealt a heavy blow to local exporters and importers.
Such corporate management practice should not be condoned,” she said.
Hanjin Group chairman Cho Yang-ho and the owner family members cannot avoid criticism for building up a mess in the shipping unit and deserting the company when it was beyond recovery. The downfall of the shipper began when the management was left in the hands of Choi Eun-young, the widow of the company chairman Cho Su-ho, after her husband passed away in 2006. Under her helm, Hanjin Shipping’s debt ratio skyrocketed to 1,445 percent from 155 percent. The case should be left in the record books as a lesson to other family-run businesses.
Still, we are disappointed by the president’s poor understanding of the crisis. The situation did not merely hurt local exporters and importers. She failed to point out the extreme impotence and irresponsibility of the government and creditors for taking a back seat and letting the country’s largest cargo carrier go under to the extent of causing unrest to national shipping.
Before the cargo crisis, authorities should have been alarmed by the sinking of Korea’s shipping industry. The country is on the verge of losing its reputation as the world’s fifth largest shipping nation and the Busan port as home to two global shippers. No other country since the global economy slipped into common slowdown after the 2008 financial crisis has been dealt the fate of a major shipper “according to market principles.”
When sea flag carrier CMA CGM ran into liquidity trouble, the French government stepped in to reschedule its debt and bonds on its behalf and gathered creditors around the world to offer payment guarantee to draw new capital.
The German government also provided a guarantee of $1.8 billion to rescue container carrier Hapag-Lloyd, and the City of Hamburg created a consortium to invest in cash and equity in the shipper to pull it out of liquidity woes. The world’s largest shipper Maersk also maintained its status with the help of the Danish government and financial institutions.
It is not just because the shipping industry affects both the manufacturing and financial sector. It has been and remains a strategically important industry for national security. In wartime, shippers act as the backup fleet to transport goods and necessary manpower for the troops at sea, air and land. The British forces were able to carry out military operations and win the Falklands War against the Argentine invasion in 1982 partly thanks to its fleet of merchant ships.
A shipping industry is sustained on a confidence-based network, and once confidence is lost, it cannot be easily won back. Governments got involved to defend the confidence and reputation of their shipping fleet and ports.
The Seoul government has been unbelievably clueless and neglectful about its shipping industry. The ship fund it created in 2009 to facilitate restructuring in the shipping sector bought ships from shippers at overly cheap price and worsened the competitiveness of local carriers. While agreeing to buy the bonds from shippers, it demanded a high interest rate of 12 percent and a penalty rate of up to 20 percent when rolling over the debt. Instead of restructuring to enhance the shipping industry’s competitiveness, the government worsened it through its predatory bond program. The local shipping industry became a basket case not just because of poor management from the company owners but also due to the ineptitude of the public sector.
We imagined the government had a contingency plan ready from the casual way it talked of sending Hanjin Shipping to court receivership. But it turns out it prepared nothing. It is how we have ended up in a logistics disaster.
The government has made the terrible mistake of ruining a key industry because it was not happy with its owner. The president talks of principles, but she should think about why other governments defied “principles” to save their shipping industry. The people want agile and reliable leadership from the government to protect national interests, not textbook-like adherence to principles. If there is a stake in national confidence, the government must do its part to defend it with all its might.
JoongAng Ilbo, Sept. 21, Page 30
*The author is an editorial writer of the JoongAng Ilbo.