The South Korean government will create a US$1.2 billion ship investment fund to aid the shipping industry which has been struggling due to decreasing global trade.
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".
Fund will "help shippers buy and sell vessels with less financial risk as the Korea Trade
Insurance Corp. and the Korea Maritime Guarantee Insurance Co. will offer insurance for the process."
Commercial banks will provide 50 percent 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 percent in the form of subordinated bonds. Shipping companies, meanwhile, will be responsible to cover the remaining 10 percent of the fund.
A contracted slump in global trade weighs heavily on the shipping industry of South Korea, which depends highly on exports. Two big leaders of Hyundai Merchant Marine Co.
and Hanjin Shipping Co.
have faced strong headwinds of weak demand throughout the year, while Asia
’s fourth largest economy suffered an 11-month drop in its outbound shipments.
Hyundai Heavy Industries Co., South Korea’s largest shipyard, and its rival Daewoo Shipbuilding & Marine Engineering Co. have reported massive losses so far due to a sharp fall in new orders and increased costs stemming from a protracted procedure in 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 the industry conditions have deteriorated more rapidly,” said Kim Yong-beom, secretary general at the Financial Services Commission.
Kim adde: “The government is providing policy support that is necessary to help shipping companies strengthen their competitiveness while they continue to put their own efforts into easing liquidity crunch.”
The government of South Korea also
plans to require downsizing and restructuring of its shipyard industry.