Seoul: South Korea plans to launch a fund worth up to $3bn to buy vessels from cash-strapped shipping companies, and will loosen rules on ship purchases and investment in shippers, Reuters writes, quoting a financial watchdog.
The public sector will ante up about 1 trillion won ($742m) for the upcoming fund, the Financial Services Commission said in a joint statement released with the finance ministry and transportation ministry.
"We are trying to form the ship fund, with us taking up 30%, financial institutions taking another 60% and private investors 10%," Vice Transportation Minister Choi Jang-hyun told a briefing. "The size would be about 3-4 trillion won ($2-$3bn)," he said, adding that the fund would buy vessels at market prices.
The domestic shipping industry, led by Hyundai Merchant Marine and Hanjin Shipping, has been struggling with rapid drops in shipment volume and freight rates due to the global economic downturn, with global container volumes declining around 20 percent in February from a year earlier. South Korea is the world's sixth-biggest country in terms of vessel holdings, with 819 ships.
The government is also trying to remove an investment ceiling on shippers temporarily until 2015, so that conglomerates and financial institutions can freely invest in them, and will also apply tax breaks to the industry, the joint statement said. The revisions will be handled in a National Assembly session in April.
Creditor banks will complete their assessment of credit risks at 38 top shipping companies in South Korea by the end of this month, and draw up restructuring and aid plans for some of them.
They will also assess the books of 140 small shippers by the end of June.
Out of the 177 shipping companies in South Korea, 90% are small- and medium-sized. The top 30 players control 85% of total revenues. Financial institutions have lent 20.4 trillion won to the shipping industry, including 17 trillion won owed to banks. [23/04/09]
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