Saturday, June 6, 2020
Korea and Japan Fail to Iron Out Differences over Hyundai Heavy Industries-DSME Merger
No Progress in Talks over Removing Export Restrictions
Korea and Japan Fail to Iron Out Differences over Hyundai Heavy Industries-DSME Merger
  • By Jung Suk-yee
  • April 1, 2020, 14:54
Share articles

South Korea and Japan held talks on the merger between Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering (DSME) on March 30 but failed to iron out their differences, the Korean Ministry of Trade, Industry and Energy said on March 31.

The ministry said it had bilateral negotiations with officials from the Japanese Ministry of Land, Infrastructure and Transport and Tourism and the Japanese Ministry of Foreign Affairs of Japan on March 30. Considering the spread of the new coronavirus, the bilateral talks were held via a video conferencing system.

Earlier in 2018, Japan already filed a complaint with the WTO, claiming that the Korean government financially supported Korean shipbuilders in the process of restructuring the Korean shipbuilding industry.

In January, Japan added the merger between Hyundai Heavy Industries and DSME to its complaint. Japan took issue with Korea Development Bank’s receipt of 9.12 million convertible shares and 6.1 million common shares from Korea Shipbuilding & Marine Engineering, the shipbuilding holding company of Hyundai Heavy Industries Group, in exchange for investing approximately 59.7 million DSME shares in Hyundai Heavy Industries. It also claimed that the bank’s decision to provide 1 trillion won in additional aid to Korea Shipbuilding & Marine Engineering when it faces a shortage of funds is a kind of illegal government support.

However, the Korean government pointed out that Japan was making a false claim. “In this consultation, we pointed out that Japan’s claim was unfounded and emphasized that the Korean government's financial support for the Korean shipbuilding industry was carried out in a manner that matched WTO rules,” said an official of the Korean Ministry of Trade, Industry and Energy. The two countries were unable to find any breakthrough as there was a discrepancy in the two sides’ opinions.

At the moment, Korea and Japan, have yet to find points of contact in the dialogue related to Japanese export regulations against Korea that have continued since 2019 apart from the merger issue in the Korean shipbuilding industry. The two countries held the “Eighth Export Management Policy Dialogue” to discuss ways to resolve export restrictions in about 3 months on March 10, but left the meeting without reaching any agreement.