Kim Young-moo, vice chairman of the Korea Shipowners’ Association, said on April 23 that the disbandment of the Ministry of Oceans & Fisheries in the previous administration and its revival in the next, that is, the lack of policy consistency has led to the current crisis of the shipbuilding and shipping industries of South Korea.
“Between 2009 and recently, no less than US$10.8 billion South Korean financial institutions provided for new ship building by South Korean shipbuilders flowed to foreign shipping companies such as Maersk,” he continued to say, adding, “Meanwhile, South Korean national shipping companies received only US$1.9 billion in loans during the period, that is, South Korean shipping companies could take out a smaller amount of loans due to their credit ratings falling short of those of foreign shipping companies.”
The South Korean government had to face the liquidation of Hanjin Shipping in February this year. This month, it tried to help out Daewoo Shipbuilding & Marine Engineering. This has led to controversies with the government not planning to give a hand to smaller shipbuilders, which are in much more adverse situations.
For instance, Sungdong Shipbuilding & Marine Engineering received approximately three trillion won in 2010 in return for debt workout. However, the company has failed to sign any new shipbuilding contract since 2015. STX Offshore & Shipbuilding, which is in receivership, has failed to find an acquirer, too. SPP Shipbuilding has been closed since February this year due to the lack of work. Not a few people are criticizing the government as wasting tax in order to buttress the declining shipbuilding industry. Daewoo Shipbuilding & Marine Engineering has been given 2.9 trillion won along with a second chance this time. This can result in a series of lawsuits at home and abroad down the road. Financial institutions offering assistance for the shipbuilder are concerned over malpractice suits above anything else.
The global shipbuilding industry is being led by China as of now. South Korean shipbuilders cannot regain their past price competitiveness in this labor intensive industry. Besides, Chinese shipbuilders have already caught up with them in technology.
Between 1980 and 1990, the Swedish government invested approximately four trillion won in the shipbuilding industry of Sweden for its revival, which failed in the end. Then, the Swedish government veered towards new and renewable energy and increased its investment in future and green industries, creating 63,000 jobs. “The South Korean government needs to take a leaf from Sweden’s book and focus on future-oriented industries as alternatives to shipbuilding,” said Seoul National University professor Park Hee-jae.