Subtle Differences
Deputy Prime Minister Yoo Il-ho and Lee Ju-yeol, governor of the Bank of Korea (BOK), are waging a war of nerves over a restructuring of the shipbuilding industry.
According to the government and relevant industries on Oct. 27, “Shipbuilders should restructure their business, such as in the adjustment of business portfolios, which includes concentrating core capabilities on their competitive sectors, the privatization of Daewoo Shipbuilding and Marine Engineering (DSME) and M&As,” Deputy Prime Minister Yoo has repeatedly stressed.
With reference to the remark by the deputy prime minister, BOK governor Lee raised a different voice that the government should make a restructuring plan after listening to more opinions from those in the field, saying, “The government has not come up with the right plan to restructure the shipbuilding industry.”
The BOK governor directly listened to the voices of workers in the field by paying a surprise visit to industrial sites in Ulsan and Pohang from Oct. 24 to 25. “The companies I visited were strongly carrying forward management rationalization not to lose their competitiveness in the global market even though they were suffering from a drop in demand and a glut. “Times like this make it more important for the government to consistently push ahead with restructuring according to economic logic by closely deliberating with companies in accordance with the basic plans by industries,” Governor Lee added.
But Deputy Prime Minister Yoo has stated that he will refer to the results of consulting by foreign consulting firms such as McKinsey for restructuring. McKinsey already released a report saying that the Korean government should change the shipbuilding industry into a two frontrunner race of Hyundai Heavy Industries and Samsung Heavy Industries, as the DSME was bereft of competitiveness.
On the other hand, on Oct. 23 the IMF sent a warning that it will require around 31 trillion won to restructure the Korean shipbuilding and shipping industries, and it will take ten years to recoup the money, further pressuring the deputy prime minister and the BOK governor.
The IMF came up with a negative outlook that supposing that these companies’ income drop 10 percent from that of 2014, corporate debts that will be put at risk in the shipbuilding, manufacturing, shipping and construction industries will account for 12 to 14 percent and make 1.9 to 2.1 percent of the nation’s jobs vanish.
In the event that the global economic slowdown deteriorates, it will deal a big blow not only to the shipbuilding and shipping industries but to other major industries of corporate Korea, the IMF added. “Intensified global competition is facing technology-intensive industries such as the automobile and electronics industries,” the IMF said. “Korean industries in these industrial sectors are susceptible to debt risk.”