"Government-Controlled Finance 'Hanjin Shipping Bankruptcy' Decision Brings Crisis to Domestic Shipping Industry"

Rep. Park Yong-jin: "South Korea's Shipping Industry Smaller Than 4 Years Ago... Support Abandoned Too Easily"
Chairman Lee Dong-geol: "Regret Hanjin Shipping Bankruptcy... Striving to Restore South Korea's Prestige"

[Asia Economy Reporter Kangwook Cho] Four years ago, the decision for government-controlled finance to let Hanjin Shipping go bankrupt has been criticized for bringing a crisis to South Korea's shipping industry. It has been pointed out that the Korea Development Bank (KDB) should take this as a lesson and adopt a long-term perspective.

According to the financial sector on the 17th, Park Yong-jin, a member of the National Assembly's Political Affairs Committee, asked Lee Dong-geol, chairman of KDB, about his thoughts on the ‘Hanjin Shipping bankruptcy’ that occurred when the creditors, including KDB, abandoned support for Hanjin Shipping in September 2016 during the recent National Assembly audit.

At that time, Hanjin Shipping was the number one domestic shipping company. After its bankruptcy, the company with the largest shipping capacity in South Korea is now HMM (formerly Hyundai Merchant Marine). KDB has supported HMM with a total of 2.0938 trillion won so far. Chairman Lee stated, “I understand that there is currently a plan to support up to 5 trillion won.”

Park said, “The global shipping market is booming these days,” and explained, “Not only container freight rates but also the global shipping market size has increased by 15.7% over the past four years.”

He added, “Before the bankruptcy in 2016, Hanjin Shipping was the domestic industry leader, accounting for 3% of the global market, but currently, HMM, the domestic leader, holds about 2.6% of the global market (as of September 2020),” pointing out that “its share in the world market is smaller than that of Hanjin Shipping before bankruptcy.”

The government announced a five-year plan for shipping industry reconstruction in 2018 after the Hanjin Shipping bankruptcy, striving to secure global competitiveness. However, the total shipping capacity of domestic shipping companies has decreased by about 280,000 TEU compared to 2016, reaching only about 78% of the capacity four years ago.

Park said, “The bankruptcy of Hanjin Shipping four years ago was because the creditors, including KDB, abandoned support,” adding, “KDB gave up supporting the shipping industry, which is a national key industry.” He also pointed out, “Currently, a 40 trillion won Industrial Infrastructure Fund is being operated to support key industries, but the performance is worse than in 2016.”

Park continued, “I think the reason our shipping industry is in crisis is that KDB made a short-sighted decision to restructure the shipping industry too easily,” and urged, “Please take this incident as a lesson and approach your duties with a more long-term perspective.”

Chairman Lee responded, “I feel regretful about the Hanjin Shipping bankruptcy,” and said, “Network industries become difficult once they collapse.” He added, “At that time, the bankruptcy decision had to be made,” and expressed regret, saying, “I think it was not so much a short-sighted decision by KDB but rather a decision made by the government.”

Lee also said, “After several years of difficulties, HMM has recently normalized its foundation with the introduction of large new vessels and the resolution of route shortages,” and stated, “We will strive to increase shipping capacity and sales in the future to restore South Korea’s former status.”

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