South Korea’s shipbuilding industry, which used to be its main pillar, is on the edge of a precipice now. What is worrisome under the circumstances is the blueprint and orientation of the interested parties in the industry.
South Korean banks’ exposure to the sector is more than whopping 70 trillion won. Although no less than 4.5 trillion won has recently been poured into STX Offshore & Shipbuilding, which went into court receivership as of late, in accordance with a voluntary agreement between the company and its creditors, the decision is being criticized as one lacking the logic of the market and yielding to the voice of the political community and the government and arbitrary determination of the creditors. The top management of the company focused on lobbying, not innovation from within, to get the fund in order to win new contracts at dumping prices and expand its shipbuilding facilities. In the early stage of its crisis three years ago, seven ruling party lawmakers in the region where the company is located called for the then head of the Financial Services Commission (FSC) to provide financing in a prompt and bold way.
The most pathetic ones are state-run banks. The former heads of the Korea Development Bank (KDB), which is currently the largest shareholder and main creditor bank of ownerless shipbuilders such as STX Offshore and Shipbuilding and Daewoo Shipbuilding and Marine Engineering, were appointed based on how close they were to those in power and were unable to be free from political logic and the influence of the government. As a result, they were unwilling to move ahead with restructuring and abandoned their responsibilities with a not-in-my-term attitude. Former FSC chairs were reluctant to take the responsibility, too. In other words, the cancer of the South Korean shipbuilders continued to grow with the political community, the South Korean government and the state-run banks contributing to their living from hand to mouth.
The restructuring issue rose to the surface early this year in earnest, and then both ruling and opposition party lawmakers began to flock to their shipyards, making hollow promise such as the minimization of the impacts of restructuring and permission of labor unions’ monitoring of the top management. Under the circumstances, bureaucrats in the financial sector have been wasting their time, failing to reach an agreement on how to prepare financial resources and come up with a broad picture regarding the specific procedure of the restructuring.
Undoubtedly, however, the primary responsibility for the insolvency of the restructuring targets consists in their executives and largest shareholders. Unfortunately, though, they have yet to be responsible for the current situation, sticking to their wrong perception that they are too big to fail. What is required now is to hold the largest shareholders accountable for the redundancy of multiple workers and the creditors’ assistance and to file criminal and civil suits with regard to their legal violations during the course of their management failure.
In addition, the Board of Audit & Inspection and the National Assembly have to step in to clarify who is responsible in the authorities. Only then, those politicians, bureaucrats and state-run bank executives who have been negligent and interrupted the restructuring can be held accountable before the restructuring processes get back on the right track.