Commentary
The shipbuilding and maritime industry can be roughly divided into shipbuilding, offshore plant construction, operation of maritime vessels and offshore plants, and ship financing. All segments should thrive together because an imbalance in the industry leads to a collapse of the entire sector. Fortunately for Korea, the maritime and shipbuilding industry has continued solid growth for decades, with current conditions being favorable. Specifically, its shipbuilding segment is second-to-none worldwide, with the shipping segment ranked fifth in the world. The country is also distinguishing itself these days in terms of maritime infrastructure.
Even in the late 1980s, when I was a college student majoring in marine engineering, people said that the shipbuilding industry was facing a crisis, with industrial and academic figures gathering together at my alma mater to collect their thoughts regarding how to tide it over. My seniors succeeded in getting over the crisis, allowing the industry to grow into what it is today, and overtaking Japan, whose industry focused only on industrial efficiency and standardization on the assumption that the sector had already reached its maturity. In retrospect, the approach began to act as an obstacle to Japan’s shipbuilding industry in the 1990s and 2000s, hampering the island nation from meeting new demands and paradigms in the sector.
In the early 2000s, I worked for a software company in the United States and visited Korea, Japan and China twice to present its products. I remember I felt a lack of enthusiasm hanging heavy on workers in Japan’s shipyards at that time. Most employees I met there were in their 50s and looked nervous regarding the possibility that new software could replace them. They were afraid of new technologies and unwilling to create something new. Meanwhile, in shipyards in Korea, I met a lot of young and passionate engineers in their 30s and 40s, who were eager to solve problems by means of innovate technologies and software. Some were even complaining that their companies were not purchasing enough software licenses. In China, in the meantime, I also met many young, skillful engineers, yet it appeared as if they did not know how and where to employ their software tools.
I am convinced that such an atmosphere reflects the present and the future of the shipbuilding industries of these three nations. In Japan, experienced engineers have already retired and the shipbuilding and marine engineering departments of colleges have been consolidated, thus hindering the supply of personnel.Under such circumstances,Japan appears unlikely to regain the global number one spot. Meanwhile, those Korean workers who were young engineers full of get-up-and-go are now playing a pivotal role in the country’s shipbuilding sector, while their juniors are currently refining their knowledge at 40 or so colleges around the country. When it comes to China, it seems that the government-led growth of the sector is rather slowing down its future growth, and that much more time is needed before the country’s shipbuilding industry, in which ship design and construction are separated, is in sync with the current trends for eco-friendliness and high efficiency. In short, Korea’s shipbuilding industry is expected to remain number one for the time being.
However, as I stated above, the prosperity of the shipbuilding segment alone does not suffice. Major shipbuilders have to cooperate more closely with the government and their smaller partners in order to accelerate the growth of the equipment industry. Long-term and autonomous technological development will be the most important factors during this time. At present, the technological independence ratio of Korea’s shipbuilding equipment industry stands at just 60%, with the figure falling to below 30% when equipment for offshore plants is taken into consideration. Industry participants need to decrease their reliance on imported technologies and equipment rather than blindly following shippers’ demands. Leading shipbuilders should also set out to persuade international shippers and support Korean entities’ activities in international organizations in this context. At the same time, they should provide technical support to small and mid-size shipbuilders, not limiting their assistance to short-term financial gains. Smaller enterprises have their own merits and strong points in certain vessel types. As a result, large shipbuilders must help them maximize their comparative advantage and encourage them to work on new and innovative technologies.
The shipping industry must also seek new growth opportunities. In order for Korea to take a bigger portion of maritime transportation profits, which totaled US$38.5 billion as of the end of 2012, there have to be a larger number of local shippers. Approximately 20% to 30% of this total is currently paid to foreign shippers as charter fees, meaning that Korean companies are not being compensated that much for labor.
Another critical factor for the development and advancement of Korea’s shipbuilding and marine industry is ship financing. It appears that Korean banks are concentrating on growing nowadays, yet I believe portfolio expansion is more important. Their European counterparts, which account for 70% of the global ship financing sector, are earning massive profits from direct and indirect investment, and insurance sales, etc. Asian banks, including those from Japan, are also focusing on the sector’s huge potential.
The marine and shipbuilding sector has fulfilled its role as a backbone industry of Korea. However, for it to further prosper in the future, the government, industry and academia must make dedicated and coordinated efforts. Let’s say there is a restaurant that is famous for its cold noodles. What if it changes its main dish to pasta, saying that cold noodles are old-fashioned? The answer is obvious. It could catch neither. I hope that Korea’s marine and shipbuilding industry does not make a similar foolish mistake.