Seoul waded in to save its beleaguered shipbuilding and shipping sectors in a dramatic and controversial move that could spark retributions at the World Trade Organization down the line.
The Bank of Korea will create a KRW11trn ($9.50 bn) fund to support Korea Development Bank (KDB) and the Export-Import Bank of Korea (KEXIM), the two state-run banks most exposed to the lines and yards under restructuring.
“Our key industries like shipping and shipbuilding are being aggressively caught up by countries like China and management conditions have worsened due to weak global trade,” finance minister Yoo Il-ho said.
All of South Korea’s major yards plus its top two shipping lines are now going through massive restructuring with huge layoffs being pushed through.
Seoul’s determination to intervene has already received criticism from the IMF and also from Japanese shipbuilders who question whether the move amounts to state subsidies.