The Korea Chamber of Commerce ＆Industry (KCCI) has submitted a ‘Recommendation of Policy Support for Shipbuilding Industry to Overcome Crisis’ which states such as revitalization of shipbuilding finance and ship guarantee fund, etc., to the Ministry of Strategy and Finance, the Ministry of Knowledge Economy and Financial Services Commission on February 27.
KCCI has pointed out that “Recently, as shipbuilding market is experiencing economic contraction, financial institutions’ support got weakened while China is rather reinforcing its policy support for the industry that we are losing ground to China in an export competition against China.”
Technically, Korea has long maintained the top spot for 11 years since 2001 when it outpaced Japan and ranked in the world’s largest ship exporter, however, when China reported a total of $39.2bn of exports last year, Korea exported $37.8bn worth of ships and finally yielded the first place to China.
The industry regarded government’s full supports as the background of rapid growth of China’s shipbuilding industry which has been far behind in terms of technology competitiveness.
The recommendation says, “Amid global economic recession, shipbuilders have struggled, thus China has provided various financial support policies such as supporting high value vessel, project on offshore structure export and exclusive ship fund project.” “However, Korean shipbuilders’ financial problems are getting worse because Korea financial institutions are passive about ship finance.”
Also, shipbuilding industry is in a difficult situation where it is almost impossible to construct vessels without financial support since most of deals are signed for ‘Heavy-Tail’ payment.
Accordingly, KCCI suggested that first of all, institutions which support shipbuilding funds need to be expanded substantially. Although shipbuilding funds have been available not only for the Export-Import Bank of Korea but also all the other commercial banks to execute since last September, there has been no bank which lent money to builders up to now.
Moreover, it requested for liquidity assistance for mid-sized builders and claimed for flexible financial support even to the builders which got a poor credit rating affected by the industry’s recession, considering their contract performance and customers’ credit.
It also suggested rushing through the establishment of ship guarantee fund as soon as possible saying, “The guarantee fund specialized in shipbuilding and shipping segments might be a good opportunity to raise international credit-worthiness of our shipbuilding industry.”
Park Jong-gap, executive director of KCCI said, “Our recent shipbuilding industry is facing situations of giving up orders won with difficulty due to the lack of financial support.” “Policy support is urgently needed for builders to overcome the crisis through financial support which is tantamount to China’s.”