Gov’t pledges trillions in aid to shipbuilders

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Gov’t pledges trillions in aid to shipbuilders

The government announced Thursday trillions of won in aid to Korea’s shipbuilding industry to help it build hundreds of vessels and hire thousands of new workers, but the measures are already facing questions about their effectiveness.

“Shipbuilding and shipping are our economy’s key industries,” said Finance Minister Kim Dong-yeon in a meeting of economic and industry ministers in Seoul on Thursday. “These industries, however, have been in a difficult restructuring process due to a global slump.”

Kim added that the government measures announced on Thursday would give local shipbuilders and shippers a chance for a comeback.

The industry has been under restructuring since 2016.

For starters, the government will spend 3 trillion won ($3.66 billion) to help shipping companies buy as many as 200 ships to make up for their lost vessels after the fall of Hanjin Shipping, once the largest shipping company in Korea and seventh-largest in the world. The orders will be placed with Korean shipbuilders.

The government said it will also help three major shipbuilders hire as many new recruits as they did before the stagnation began, aiming for 3,000 new hires on average for the next four years.

The target number of new hires suggested by the government for 2018 is 900 individuals.

This number will gradually increase to 1,700 next year and 3,400 in 2020 until it reaches 4,500 in 2021 and 2022.

Skeptics argue that this figure may be both unrealistic and not the right solution to local shipbuilders’ current crisis.

Back in the late 2000s, when the global shipbuilding industry was at its peak, local shipbuilders combined hired a little over 1,000 new recruits per year.

Even if the government provides financial support through its supplementary budget announced on Thursday, it’s questionable whether the shipbuilders will be able to hire such a large number of new workers.

“Just throwing money at it and forcing companies to hire more won’t make Korean shipbuilders more competitive in the global market,” said a former executive of a large shipbuilder in Korea who retired during the recent crisis. “The government touts Korean shipbuilders as very competitive, but they neglect the fact that the parts of some projects that require the highest levels of expertise and technology are often outsourced to Europe.”

But business finally seems to be turning around for Korean shipbuilders, at least for now.

According to Clarkson Research, a shipbuilding industry research firm, on Friday, Korean shipbuilders landed the most orders of any country in the first quarter of this year.

Their 63 million compensated gross tons (CGTs) worth of orders were about 70 CGTs ahead of second-place China.

The deals clinched by Korean companies accounted for 42.2 percent of global orders, according to Clarkson’s data.

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