SOUTH KOREA plans to spend KRW11 trillion (US$9.6 billion) financing 250 vessels through 2020 to keep its shipyards afloat after new orders fell 87 per cent year on year in the first nine months of 2016, according to trade ministry figures.
The government will also offer a total of KRW6.5 trillion in financing for local shipping companies to acquire new vessels, South Korean Finance Minister Yoo Il-ho announced on Monday.
Hyundai Heavy Industries Co, the world's biggest shipbuilder, will spin off its non-shipbuilding businesses, while Daewoo Shipbuilding & Marine Engineering Co., the second biggest, plans to cut 5,500 jobs by 2018, according to the government, reported Bloomberg.
About half the ship order will be boats for small shipping companies and the fishing industry. The remainder will be for government use, such as coastguard vessels and warships, ferries and patrol boats.
Officials at some of the major shipbuilders said the plan fell short of expectations because orders were mainly targeted at smaller shipyards. "It doesn't address the trough in orders for large and profitable vessels such as container ships and tankers," an unnamed shipyard official told the Wall Street Journal.
The decision to pump billions of dollars of public money into shipbuilders reflects their significant role in South Korea's economy and as employers. The sector accounted for 7.1 per cent of the country's manufacturing jobs last year, the government said.
Vice Trade Minister Jeong Marn-ki on Monday said the government hoped to keep the "big three" shipbuilders for now, although it would ask them to take more stringent restructuring measures, including deep job cuts and further sales of non-core businesses.
The country's three biggest shipbuilders will have to cut 32 per cent of their workforce by 2018 and reduce their operations by 23 per cent, the government said.