South Korea will create a fund worth some 4 trillion won ($3 billion) to purchase vessels from struggling shipping companies as part of efforts to help industries.
South Korea will create a fund worth some 4 trillion won ($3 billion) to purchase vessels from struggling shipping companies as part of efforts to help industries buffeted by the protracted global economic downturn. In a related move, the South Korean government will expand credit lines to boost sales of ships being constructed by cash-strapped shipyards or shippers, while easing overall regulations to stimulate such transactions.
The move is part of sweeping measures unveiled by the government to enhance the international competitiveness of local shipping companies. The decision was made at a meeting presided over by President Lee Myung-bak earlier in the day.
"We drew up those measures to help shipping lines struggling in the wake of global financial turbulence last year and the downturn in the real economy," the Ministry of Strategy and Finance said in a statement.
The 4-trillion won fund will be used mostly to purchase ships from struggling local shipping lines which have to sell their assets as part of restructuring efforts. The purchases will likely start as early as June with around 100 ships being bought at market prices, officials said.
The state-run debt clearer Korea Asset Management Corp., creditor banks and private investors will participate in the fund, the ministry explained. The government will inject 1 trillion won into the envisioned fund.
Through the Export-Import Bank of Korea, the government will also provide up to 4.7 trillion won in loans to be used for purchase of the ships being constructed by cash-strapped shipyards and shippers, the ministry said.
Those measures were announced as local shipping companies have been feeling the pinch of the global financial crisis and the slumping economy, with some facing a severe liquidity squeeze.
Experts have warned that a possible bankruptcy chain reaction will undermine the soundness of the shipbuilding and banking sectors, dealing a harsh blow to the whole economy.