FMI: The restructuring of Korean Shipping could cost $27b
The total cost of bankruptcies and bailouts in the shipping and shipbuilding industry in South Korea could also translate into layoffs and layoffs for about 10,000 workers, according to a recent report by the International Monetary Fund.
The total cost of restructuring firms in difficulty in the South Korean shipbuilding sector could reach 31 billion Won ($27 billion), according to a report published this weekend by the International Monetary Fund (IMF). The Seoul government has allocated 12 trillion Won to the state owned Korea Development Bank (KDB) and Export-Import Bank of Korea (KEXIM), which together have 10 trillion Won available to absorb domestic losses.
In the report, “Benefits and costs of corporate debt restructuring: an estimate for Korea”, the IMF said that the employment impact of bankruptcies and bailouts in the shipping industry will affect about 10,000 workers. This basic estimate suggests a timeline for the recovery of what was lost by about 10 years, according to the IMF.
“The economic cost of debt restructuring is not directly a fiscal cost, but may imply the need for fiscal support to encourage corporate restructuring; to support individuals affected by the employment impact of corporate restructuring (e.g. by providing unemployment benefits and retraining); to maintain the solvency and profitability of banks; and to compensate for short-term cuts in production and lower consumption,” the IMF says.
The IMF argues that Korea should serve as a “school case” for examining the costs and benefits of corporate restructuring.
“After years of rapid growth, many of Korea’s export-oriented industries are facing headwinds due to a global economic slowdown. Shipments and shipbuilding are particularly affected. Steel and petrochemicals may face difficulties if the global slowdown deepens. Sectors such as automotive and electronics will be exposed to intensified international competition.
“The vulnerability of corporate debt is very high and the government seems to be taking steps to agree, and then rapidly implement, plans for the operational and financial restructuring of companies in difficulty, while ensuring an adequate social safety net for the workers affected.
According to an analysis by the Korea Times, on the financial data received from a member of the security service of the People’s Party in opposition, they suggest that the South Korean government has already paid 38,700 billion Won so far for the shipping and shipbuilding sector, of which 20,800 billion Won for 26 companies alone since 2008.
“Most of the financial support during the restructuring of shipbuilding and shipping companies comes from state-owned banks, and most of the errors of assessment by politicians have exacerbated the problem,” as the parliamentarian argued.
Source: American Shipper
