A report by South Korea’s Yonhap News Agency said the fund will help shippers buy and sell vessels with less financial risk. The fund aims to “aid the shipping industry which has been struggling due to decreasing global trade”. The fund will “help shippers buy and sell vessels with less financial risk as the Korea Trade Insurance Corp. and Korea Maritime Guarantee Insurance Co. will offer insurance for the process.”
Commercial banks will provide 50 per cent of the necessary fund in the form of senior bonds while state-run financial institutions including the Korea Development Bank, Export-Import Bank of Korea and Korea Trade Insurance Corporation will contribute 40 per cent in the form of subordinated bonds. Shipping companies, meanwhile, will be responsible to cover the remaining 10 per cent of the fund.
A slump in global trade has weighed heavily on the shipping industry of South Korea, which depends highly on exports. Hyundai Merchant Marine Co. and Hanjin Shipping Co., along with others in the industry, have faced weak demand throughout 2015.
Meanwhile, Hyundai Heavy Industries Co., South Korea’s largest shipyard, and its rival Daewoo Shipbuilding & Marine Engineering Co. have reported massive losses due to a sharp fall in new orders and increased costs resulting from building offshore facilities, triggering a shockwave in the entire industry.
“The country’s leading shipping companies have taken various measures to restore their financial health, but industry conditions have deteriorated rapidly,” said Kim Yong-beom, secretary general at the Financial Services Commission. Kim added: “The government is providing policy support that is necessary to help shipping companies strengthen their competitiveness while they continue to make their own efforts to ease the crunch.”
The government of South Korea will require its shipbuilding industry to restructure and downsize to increase its global competitiveness. Shipbuilding has accounted for 6-7 per cent of South Korea’s exports.