April 23, 2009
Korea unveils $6.4 billion plan to restructure shipping industry
The Korean government is to pump 8.7 trillion won (about $6.4 billion) into restructuring the struggling domestic shipping industry. It unveiled its plans today after after an emergency economic meeting presided over by President Lee Myung-bak.
The government is hoping avert a massive sell off of a large part of the national merchant fleet to Asian competitors at fire sale prices.
Private investors and financial institutions, including the Korea Asset Management Corp., will create a 4 trillion-won fund that will be used to purchase some 100 ships from firms undergoing restructuring. The government plans to inject 1 trillion won into the 4 trillion won fund.
The government will also provide 4.7 trillion won in loans through the Export-Import Bank of Korea to help build ships that are under construction and will lift an investment cap to encourage conglomerates and financial institutions to invest in shipping companies.
Tax breaks and other institutional support will be provided to prevent ships owned by domestic firms from being sold overseas at heavily discounted prices.
It will also lift or ease regulations to help cash-strapped shipyards or shipping companies promote the sale of new vessels, the Ministry of Land, Transport and Maritime Affairs said, reports the Korea Herald.
"Measures are aimed at supporting the nation's shipping industry to escape a slump in the real economy triggered by the global financial crisis last year and to help the industry make this an opportunity to enhance its international competitiveness," the Transport Ministry said in a statement.
The Korea Herald reports that the announcement comes as lenders plan to put 10 to 20 percent of the nation's 38 largest shipping companies under debt workout or liquidation procedures this month. Under a guideline set by the Korea Federation of Banks, the companies will be sorted into four groups -- A, B, C and D. Companies falling into the "C" group will face a debt workout while those in the "D" group will be categorized as "non-viable" businesses and will face liquidation procedures.