Calling Korea's Shipbuilding Industry Support Policy into Question
The Ministry of Land, Infrastructure, Transport and Tourism of Japan has urged the Japanese government to call the South Korean government’s shipbuilding industry support policy into question in the framework of the WTO and the OECD.
The demand is to object to the merger between Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering. The Korea Development Bank is supposed to make an in-kind investment of about 59.7 million Daewoo shares, 100 percent of its shareholding in the company, in Hyundai Heavy Industries in return for 1.25 trillion won of redeemable convertible preferred shares and 6,009,570 common shares from Korea Shipbuilding & Offshore Engineering, which is the marine and shipbuilding holding company of Hyundai Heavy Industries Group. Japan called this into question in its consultation request the WTO made public in February last year, claiming that it is an expedient to reduce the burden of cash preparation. In addition, Japan made an issue of KDB’s 1.5 trillion won capital increase through third-party allocation in the interest of Daewoo’s liquidity and conditional support of an additional one trillion won.
Also, the Japanese ministry called for the Japanese government to deal with the matter in more various ways. The examples include industrial supply and demand and ship price analysis in cooperation with the OECD Council Working Party on Shipbuilding (WP6). The main members of WP6 include Japan and the European Union, which are yet to approve the merger.
Some in the industry point out that Japan will approve the merger in the end. This is because the two largest Japanese shipbuilders established a joint company early this year and China already approved the merger.