Maritime industries get gov’t aid
Deputy Finance minister Lee Chan-woo, third from left, and Yoo Jae-soo, head of the financial policy division at the Financial Services Commission, unveil a plan to provide refund guarantees for small and medium-sized shipbuilders on Thursday at the Central Government Complex in Seoul. [FINANCIAL SERVICES COMMISSION]
The public company, under the purview of the Ministry of Oceans and Fisheries, will also monitor turnarounds at struggling shipping and shipbuilding companies, and conduct regulatory oversight of the industries when it launches next year in June. It will keep tabs on freight prices, forecast market conditions and oversee the management and replacement of old vessels.
The measures are a response to the collapse of Hanjin Shipping, once the country’s top container carrier, in February. The bankruptcy created a ripple effect across the shipping industry and caused a global logistics jam, prompting the government to devise ways to avert another catastrophe.
The Ministry of Oceans and Fisheries has set aside 5 trillion won ($4.4 billion) to operate the company. The Financial Services Commission will take the role of ensuring its financial stability. The government also plans to establish a 100 billion won fund to provide small and medium-sized shipbuilders with refund guarantees for the next four years.
Refund guarantees are a type of security that shipbuilders give to buyers in case the vessel they order cannot be delivered for reasons like the shipbuilder going bankrupt. Refund guarantees are typically issued by financial institutions, and they provide the refund to buyers in cases of failed delivery. It is impossible for shipbuilders to land orders if they cannot provide a refund guarantee to buyers.
Big shipbuilders like Hyundai Heavy Industries and Daewoo Shipbuilding and Marine Engineering can go to state-owned banks like Korea Development Bank to get refund guarantees, while smaller builders have to rely on commercial banks, which are often reluctant to grant them.
But with signs that the industry is recovering, the government believes smaller builders will need more support in refund guarantees. Last year, large shipbuilders received 2.8 trillion won in refund guarantees for the whole year, but during this year’s first half, they received 2.1 trillion won, suggesting that orders are picking up again, according to a policy plan provided by the Ministry of Strategy and Finance and the Financial Services Commission.
About 30 small and medium-sized shipbuilders will benefit from the fund, according to the Financial Services Commission. Korea Development Bank, Industrial Bank of Korea, Suhyup Bank and Korea Credit Guarantee Fund will each contribute 25 billion won to the fund.
“The plan is to support small and medium-sized shipbuilders facing difficulties getting a refund guarantee despite landing orders,” Kim Dong-yeon, the finance minister, said.
During the first half of the year, small and medium-sized shipbuilders received 19.9 billion won in refund guarantees.
“Until the industry recovers, financial policy will work as a supplementary tool for the market,” Kim said.
BY PARK EUN-JEE, CHOI HYUNG-JO [park.eunjee@joongang.co.kr]
with the Korea JoongAng Daily
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