President Lee Meets with Shipbuilding Industry: "Why Not Postpone Public Orders to Industry Downturns Given Large Market Fluctuations?"

Buffering Measures Proposed for Shipbuilding Cycles at K-Shipbuilding Roundtable
On RG Shortages: "Study Ways for Government to Shoulder Risk with Fiscal Support"
On AI Safety Management: "Labor and Management Should Seek Agreement on Banning Disciplinary Use and Deleting Video"
Employment Issues a Constant Concern: "Government's Role and Efforts Are Also Crucial"

On May 13, President Lee Jaemyung directed officials to consider adjusting the timing of public shipbuilding orders, including naval vessels, to coincide with industry downturns in order to mitigate the sharp cyclical fluctuations in the shipbuilding sector. Regarding the difficulties that small and midsize shipbuilders face due to shortages of refund guarantees (RG), he instructed the government to study ways to assume part of the risk through fiscal support. On the issue of labor-management conflict over the introduction of artificial intelligence (AI) video analysis at shipyards, President Lee proposed that labor and management reach an agreement that takes into account both the use of technology for safety management and concerns over worker surveillance.

That afternoon, President Lee visited HD Hyundai Heavy Industries in Ulsan to inspect the shipbuilding site and later presided over the "K-Shipbuilding Future Vision Roundtable" at Hotel Hyundai by Lahan Ulsan, where he made these remarks. The roundtable was organized to review both the opportunities, such as rising demand for high value-added eco-friendly vessels and expanding international cooperation in shipbuilding, and the risks, including the vulnerability of small shipbuilders and parts suppliers, as well as a shortage of skilled workers. The event was attended by representatives from large, medium, and small shipbuilders, in-house and external partners, parts manufacturers, financial institutions, and labor representatives, covering the entire shipbuilding industry ecosystem.

During the discussions, President Lee stated, "The wide swings in the business cycle are a major concern for shipbuilders. How about postponing regular public shipbuilding orders to coincide with downturns?" He explained that when the industry is booming, orders are concentrated and production capacity is stretched, while during downturns, there is a shortage of work and job insecurity, suggesting that government orders could function as a buffer. President Lee continued, "Currently, the government allocates regular orders for military vessels without considering industry fluctuations. Although we can't adjust everything, we could align some orders. The biggest impact would probably come from military vessels."

In response, Kim Heecheol, CEO of Hanwha Ocean, suggested that stable orders were needed to retain skilled workers for special ships such as submarines. President Lee replied, "There are conflicting opinions, so please consult with the Ministry of National Defense." When Minister of Trade, Industry and Energy Kim Jeonggwan said, "Frankly, the industry has not dared to discuss this with the Ministry of National Defense," President Lee joked, "Minister Ahn Kyubaek is a kind man. Don't be afraid," which drew laughter.

The introduction of AI video analysis at shipyards was also a major topic. Management sees AI as a way to reduce safety risks such as falls and entrapments, while labor representatives worry that constant monitoring of work behavior could be used as grounds for disciplinary action or suppression. President Lee said, "Management believes that introducing AI will significantly reduce the risk of safety accidents, but from the workers' perspective, it may feel like surveillance and a tool for company repression." He then proposed, "Labor and management should discuss compromise solutions, such as agreeing not to use collected video as grounds for disciplinary action or committing to immediate deletion."

President Lee attributed the difficulty in reaching such agreements to mutual distrust between labor and management, stating, "There needs to be a dialogue system involving workers, employers, and partner companies in all areas." In response, Minister of Employment and Labor Kim Younghoon pledged, "We will establish a social dialogue consultative body for shipbuilding labor as soon as possible."

The issue of RG shortages faced by small and midsize shipbuilders was also discussed in depth. RGs are essential for securing new shipbuilding contracts, as they guarantee that if a shipbuilder fails to deliver a ship on time or goes bankrupt, a financial institution will refund the advance payment to the shipowner. Recently, small shipbuilders have been struggling to secure RGs in a timely manner, despite an increase in order opportunities.

President Lee said, "Pressuring financial institutions does not seem to be a viable solution. There may be ways for the government to assume part of the risk through fiscal support." He added, "Please study various options, such as providing secondary guarantees or underwriting insurance." He continued, "Winning an order for just one ship can boost the local economy and increase work for parts suppliers, so the effect may be greater than that of direct fiscal support."

However, President Lee also asked, "In return, I hope the shipbuilding industry will cooperate, where possible, to help revitalize the local economy."

Financial and tax incentives to increase the adoption of domestically produced parts were also discussed. The parts industry requested that shipyards using domestic components receive tax or financial benefits. Deputy Prime Minister and Minister of Economy and Finance Koo Yooncheol stated that, regarding the domestic production promotion tax system, "For companies that are not profitable, tax cuts are not effective." He said that the Ministry of Economy and Finance is considering providing subsidies at the initial stage in cooperation with the Ministry of Planning and Budget. President Lee said, "That is a valid point," adding, "After other countries destroy our industrial base through dumping, we could find ourselves unable to respond, so we need a long-term solution."

Securing skilled labor was also a major request. Both management and labor called for improving local living conditions and utilizing alternative military service programs to secure skilled workers. On the suggestion to introduce alternative military service, President Lee responded cautiously, "It will be very difficult, as we are already considering replacing sentry soldiers with robots due to a shortage of military manpower." However, he added, "Our government's core task is to ease the concentration in the Seoul metropolitan area by making regional locations more attractive. We will do our best."

In his opening remarks, President Lee also characterized shipbuilding as "ecosystem competition." He stated, "Recently, as I have met administrative leaders and heads of state from other countries, I have found that almost all maritime nations are hoping for cooperation with the Republic of Korea in shipbuilding. Thanks to your efforts, the Korean shipbuilding industry has become a major industry representing Korea."

He emphasized, "Nowadays, international competition is not about a single product, but ultimately about ecosystem competition. How robust is your own ecosystem? If it is well-developed, it provides national and international competitiveness."

President Lee also pointed out, "The defining feature of the shipbuilding industry is its extreme exposure to business cycles. With booms and busts swinging like a giant graph, employment issues are always a concern." He continued, "This is not anyone's fault, but simply the nature of the industry. Although shipbuilding is a very important sector, it is exposed to such risks, so the government's role and efforts are crucial." He emphasized, "Leaving everything to the field for self-regulation will not solve these problems. The government must pay close attention to employment retention and the maintenance and development of the shipbuilding ecosystem."

President Lee also mentioned Korea-US shipbuilding cooperation. He said, "Recently, international interest in shipbuilding has increased, and the shipbuilding industry has been designated as a core item in the so-called MASGA, a massive US investment initiative. Shipbuilding has become the most important area of investment cooperation between Korea and the United States."

The Ministry of Trade, Industry and Energy announced the "K-Shipbuilding Future Vision" that day, outlining three main strategies: strengthening the main base, expanding the market, and creating a mutually beneficial ecosystem. The government plans to invest approximately 1 trillion won in a public-private partnership by 2030 to promote the world's first AI shipyard capable of fully autonomous 24-hour operation, and to invest up to 525 billion won over the next five years to secure technologies for seven key ship types, including LNG carriers, ammonia carriers, hydrogen carriers, and liquefied carbon dioxide carriers.

By 2030, the government also plans to train 15,000 shipbuilding professionals and skilled workers, support the issuance of RGs for small shipyards, and implement a preferential lending program called "K-Shipbuilding Win-Win Financing" through cooperation between the three major shipbuilders and commercial banks, totaling 1 trillion won. The government will provide a total of 16 trillion won in win-win trade financing, including 1 trillion won in supply chain guarantees, and pursue a plan for the three major shipbuilders to increase their direct workforce by 20 percent.

Before the roundtable, President Lee visited the HD Hyundai Heavy Industries yard to inspect the shipbuilding site. Founded in 1972, HD Hyundai Heavy Industries is Korea's first large-scale shipyard and the largest in the world, operating 14 docks and building ultra-large container ships, LNG carriers, LPG carriers, ammonia carriers, and more.

President Lee arrived at the site at around 3:10 p.m., shook hands with the officials, put on a safety helmet, and began the inspection. He then boarded a 174,000-cubic-meter LNG carrier ordered by Norway's Knutsen and was briefed on the status of the development of Korean LNG cargo containment technology. This vessel is the last in a series of 10 and will be deployed for LNG transport to Qatar after delivery.

At the site, Jo Yangsam, executive director of HD Hyundai Heavy Industries, explained that the key technology for LNG cargo containment is maintaining an ultra-low temperature of minus 163 degrees Celsius to prevent LNG vaporization. He also noted that applying foreign technology would incur about 10 million dollars in royalties per vessel. The Korea Economic Daily reported that the French engineering firm GTT holds the design technology for LNG carrier cargo holds, and that domestic development of LNG cargo containment systems has become a core task for enhancing the competitiveness of high value-added vessels.

At the site, the "Half-Ship Project," a collaboration between HD Hyundai and small shipyards, was also introduced. Chung Kisun, Chairman of HD Hyundai, explained that in half-ship construction, the bow and stern of a ship are built at different shipyards and then joined together, increasing construction flexibility and providing a mutually beneficial model for both large and small shipyards. President Lee asked questions about the time required to complete a vessel, recent order performance, and global market trends as he traveled around the docks.

After the inspection, President Lee posed for a commemorative photo with on-site workers, commending them by saying, "The world-class competitiveness of K-Shipbuilding is above all due to the skilled techniques and dedication of our on-site workers."