Bureaucrats seeking to inject extra funds into Daewoo Shipbuilding

The government is mulling injecting some 3 trillion won (2.68 billion U.S. dollars) in extra fund into Daewoo Shipbuilding & Marine Engineering less than a year and a half after providing 4.2 trillion won (3.76 billion dollars) in taxpayers’ money to the troubled shipbuilder. The Financial Supervisory Service sought to drum up support of the plan on Thursday last week by calling a meeting of executives in charge of lending at commercial banks by explaining about national losses expected in the event of the company’s bankruptcy and the need to provide an extra fund. The government has changed its own promise as the maturity date of corporate bonds worth 440 billion won (393 million dollars) is just one month away, after consistently vowing not to offer an additional fund since deciding to give financial aid to the shipbuilder at a meeting at the presidential office’s West Wing in October 2015.

There is concern that if Daewoo Shipbuilding goes bankrupt, it could result in more than 40,000 people losing jobs and overall economic losses hitting 60 trillion won (53.6 billion dollars), causing the Korean economy to tumble instantly. The rumor of an "April crisis" is lingering in the Korea economy due to the maturity of the company’s corporate debts heavily concentrated in April, coupled with the hike of the U.S benchmark interest rate, and Washington’s possible designation of Korea as a currency manipulator.

However, Daewoo Shipbuilding, which has received an astronomical amount of taxpayers’ money, only implemented 29 percent of the self-rescue package it promised to the public. The company promised to sell off 14 of its subsidiaries, but has sold just two thus far. Korea Development Bank Chairman Lee Dong-geol has claimed that if Daewoo Shipbuilding goes bankrupt, it will cause 57 trillion won (51 billion dollars) in economic and social costs, but if the company survives just one year Korea can recover 23 trillion won (20.56 billion dollars), but it is questionable whether the state-run bank has thoroughly supervised the shipbuilder’s implementation of the self-rescue package as its majority stakeholder. Daewoo Shipbuilding & Marine Engineering CEO Chung Sung-lip, who is suspected of window dressing, has been handed an administrative fine of merely 12 million won (10,730 dollars). Former CEOs Goh Jae-ho and Nam Sang-tae, who allowed window dressing of its finances worth more than 2 trillion won (1.78 billion dollars) to happen, pocketed nearly 2 billion won (1.78 million dollars) in severance pay. A parliamentary hearing on the meeting at the presidential office’s West Wing in September last year, which was aimed at investigating the problem with the government’s financial aid to Daewoo Shipbuilding, ended without probing the case due to opposition by then ruling Saenuri Party (currently the Free Korea Party). We can hardly understand why and until when the public should extend taxpayers’ money in Daewoo Shipbuilding, which nobody wants to take responsibility, and help it stay afloat.

Deputy Prime Minister for Economy Yoo Il-ho, and Financial Supervisory Service Chairman Lim Jong-ryong also do not seem to be concentrating their efforts on restructuring of the shipbuilding industry by drawing a big picture on the nation’s industrial structure given the era of the 4th Industrial Revolution. They only make an argument that if the government gives up Daewoo Shipbuilding, only private chaebol companies can monopolize the resulting benefits, and that Korea for now needs to wait until the global economic recession ends. After all, the government is seeking to hand over the burden of a looming crisis to the next administration amid the ongoing presidential election when such an issue can be considered particularly sensitive, and as such they deserve the criticism that they are just mindless bureaucrats.