Government to Support 80% of New Construction Costs for Aged Coastal Passenger Ships and Domestic Cargo Ships

'Measures to Support the Modernization of Coastal Passenger and Cargo Ships' 마련

Structure of Support Measures for New Shipbuilding

[Asia Economy Reporter Joo Sang-don] The government has decided to support 80% of the new construction costs for coastal passenger and cargo ships through guarantees and loans from policy financial institutions such as the Korea Development Bank and the Korea Ocean Business Corporation.

The Ministry of Oceans and Fisheries announced on the 5th that the "Support Plan for Modernization of Coastal Passenger and Cargo Ships," which includes these measures, was approved at the 2nd Economic Vitality Measures Meeting.

Domestic coastal passenger ships are a major mode of transportation, carrying about 15 million passengers by ship in 2018 for inland travel and tourism within island regions. In the case of cargo ship transportation, they account for 82% (by weight) of the total domestic cargo transport volume.

However, despite the importance of these domestic vessels, coastal passenger and cargo shipping companies are facing difficulties in new ship construction to replace aging ships due to their fragile financial structures. The proportion of ships over 20 years old is 22% for coastal passenger ships and 68% for cargo ships.

Accordingly, the government plans to provide financial support to minimize the initial self-payment so that shipping companies with weak financial structures can also benefit. First, 60% of the new construction cost will be procured as senior debt, and the Korea Ocean Business Corporation will guarantee more than 95% of this amount. Twenty percent of the new construction cost will be procured through the Korea Development Bank, and the remaining 20% will be borne by the shipping companies themselves. For the senior debt, repayment will be made in equal installments of principal and interest over 15 years after a one-year grace period, while the subordinated debt will be repaid in a lump sum at maturity, considering the financial burden on the shipping companies.

Based on demand surveys, the government has prepared a support plan for 39 ships, including 21 coastal passenger ships and 38 domestic cargo ships, totaling 820 billion KRW.

The Korea Development Bank and the Korea Ocean Business Corporation plan to announce business plans twice a year (March and September) to select support targets and will form a "Support Target Review Committee" composed of external experts to select the recipients.

A Ministry of Oceans and Fisheries official said, "The replacement of aging ships with new ones is expected to enhance maritime passenger and cargo safety and improve the quality of navigation services," adding, "It will also contribute to job creation in related industries such as shipbuilding materials and shipping services, and to the revitalization of regional island tourism through the modernization of passenger ships."

This content was produced with the assistance of AI translation services.