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Monday, 13 June 2016 00:00 - - {{hitsCtrl.values.hits}}
SEOUL (Reuters): South Korea said last week the government and the Bank of Korea will create a 11 trillion won ($ 9.50 billion) fund to support two state-run banks most exposed to shipping and shipbuilding firms currently being restructured.
“Our key industries like shipping and shipbuilding are being aggressively caught up by countries like China and management conditions have worsened due to weak global trade,” Finance Minister Yoo Il-ho said in a speech announcing the corporate restructuring plans.
South Korea expects a 20% drop in major shipbuilders’ capacity and 30% drop in their workforce by 2018 versus 2015 after the restructuring process.
The two state-run banks to be capitalised are Korea Development Bank (KDB) and the Export-Import Bank of Korea (KEXIM).
The fund will be in operation by end-2017, although this date may change during year-end reviews.
Separately, the government plans to transfer 1 trillion won worth of assets to the Export-Import Bank by September this year and this will be reflected in next year’s government budget.
The central bank will also consider direct capital injection into the Export-Import Bank in future if needed.
Yoo added that South Korea’s top three shipbuilders have also come up with a plan to weather the difficult market conditions, which they see lasting for two to three years ahead.
The world’s three largest shipbuilders, Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding and Marine Engineering, have submitted additional plans to sell up to 4.8 trillion won in combined assets and find 3.6 trillion won through cost cuts, the government said in a statement.
The government will also support South Korea’s second-largest shipper, Hyundai Merchant Marine, in its attempt to enter into a shipping alliance, while a creditor bank-led restructuring is ongoing at the country’s largest shipper Hanjin Shipping Co Ltd.
