The South Korean Government has announced plans to set up a $1.2bn fund for the shipping industry which is reeling under the effect of dwindling global trade.
The fund, which will help the shippers to transact vessels with less financial risks, aims to encourage acquisition of new vessels, as well as subsequent development and modernisation efforts.
Different state-run financial enterprises as well as policy lenders such as Korea Development Bank, Export-Import Bank of Korea, and Korea Trade Insurance Corporation, are roped in to extend their support to the government.
Korea Trade Insurance Corporation and the Korea Maritime Guarantee Insurance Corporation will offer financial security to the shipping companies which plan to buy or sell ships.
The fund is expected to receive 50% of the required finances through senior bonds from commercial banks, 40% from state-run financial institutions’ subordinated bonds, and the remaining 10% will be covered by shipping companies.
Shipbuilding accounted for 6.9% of the country’s total exports last year, compared with 6.6% a year earlier.
Financial Services Commission secretary general Kim Yong-beom was quoted by MarineLink as saying: "The country’s leading shipping companies have taken various measures to restore their financial health, but the industry conditions have deteriorated more rapidly.
"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."