Government pledges more aid for heavy industries

The government has pledged to expand financial aid for the country’s ailing shipping industry by more than 6.5 trillion won ($5.5 billion) by the end of this year, alongside other support to prop up Korea’s struggling heavy industries.

The financial package for shipping companies will include benefits such as tax cuts and will raise the number of financial institutions from which companies can receive insurance premiums.

The government also promised to strengthen the competitiveness of heavy industries that are currently undergoing restructuring, including steel, petrochemicals and shipbuilding. The plan includes completing the sell-off of two Daewoo Shipbuilding and Marine Engineering affiliates.

“Corporate restructuring is not something that can be done right away, but it is more like a marathon where one has to take actions for a long period of time with consistent principles,” Finance Minister Yoo Il-ho said Friday. “The government doesn’t plan to delay corporate restructuring that is needed right now and will focus on proceeding with turnaround plans to help companies become more competitive in the global market.”

The government itself will also order more ships using this year’s supplementary budget. The ministry said it had already placed orders for 58 ships out of 63 planned, as of Wednesday, and would order three more military vessels by the end of next month.

The country’s three major shipbuilders - Daewoo Shipbuilding and Marine Engineering, Hyundai Heavy Industries and Samsung Heavy Industries - have agreed to lower the number of full-time workers by 32 percent, from 62,000 in 2015 to 42,000 by 2018. They also agreed to lower the number of dockyards from 31 to 24.

The government and local shipbuilders will launch a task force next week to explore the creation of a company specializing in the design of large vessels. The company will support local shipping and shipbuilding companies by saving costs on design.

For steel and petrochemicals, the government said it would announce plans by the end of this year to help companies working on higher value-added products such as steel used for future cars, lightweight steel and related products such as titanium.

“More companies in such industries are becoming beneficiaries of the so-called One Shot Act [a new law designed to facilitate and speed up voluntary corporate restructuring], and we will continue to have more companies sign up for the program while finding ways to give more incentives and benefits,” Yoo said.

Earlier this week, the government approved restructuring plans from Hyundai Steel, Dongkuk Steel Group and Wooshin Apect, all of which will receive a range of state-sponsored support, including tax benefits and subsidies on top of fast-track procedures for mergers and acquisitions under the One Shot Act.

There are now 10 local companies benefitting from the law, and the Ministry of Trade, Industry and Energy said it expects four to five more will be approved by the end of this year.

“Uncertainties are growing in the financial market due to the possible interest hike in the United States,” Yoo said. “The government will review whether voluntary corporate restructuring and a pre-emptive management reshuffle are needed in other industries as well.”

BY KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]