DSME in Check

 

It was confirmed that the EU and Japan officially complained about a plan of Korean government-run bank, the Korean Development Bank to give financial support to Daewoo Shipbuilding and Marine Engineering (DSME).

The Korean government and supporting banks will deal with their complaint by drawing up a report that will explain that the financial support is not a subsidiary of the Korean government.

According to the shipbuilding industry and Korean financial authorities on Nov. 19, the EU led by Germany and Japan, made a big thing out of the Korea Development Bank’s support for DSME, in a meeting of the Council Working Party on Shipbuilding (WP6) of the Organization for Economic Cooperation and Development (OECD) held in Paris earlier this month. The WTO’s regulations limit nations’ subsidies for companies to promote fair competition among companies around the world.

But Korea refuted that the support was not a subsidy of the Korean government now that it was led by government-run banks including the Korea Development Bank which is a major creditor of DSME. The OECD WP6 decided to further deal with the agenda in the next meeting that will be held in June of next year. The Korea Development Bank and the Korea EXIM Bank will make a report to clarify Korea’s position.

The Korean shipbuilding industry and the Korean government among others expect that even if the EU and Japan take action, it is highly unlikely that Korea will lose the case since Korea did not violate any WTO regulations. Analysts say that the EU and Japan aim to keep Korea, the world’s shipbuilding leader, and China, a rising star in the world shipbuilding industry in check via this move.  

In the early 2000s, a similar shipbuilding dispute pit Korea against other nations but Korea finally won it. But if the EU and Japan really bring the case before the court, it will cost Korea billions of won in legal battles against the EU and Japan and a large amount of human resources from various organizations, putting Korea in a war of attrition. It is feared that the legal action will have a negative impact on the Korean shipbuilding industry. In particular, when Hynix received some support from outside, the US government made a strong protest against it, weakening the support. In the event that such a protest continues, it may become difficult for the troubled shipbuilder to receive additional support from outside.

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