South Korea Government Refuses to Save Hanjin Shipping
The South Korean government, in the past has always supported the country's big industrial conglomerates, but apparently that is no longer the case these days. The government will not give any financial help and will stick to its hard-line stance on Hanjin Shipping whose collapse is roiling global supply chains according to Reuters.
Hanjin Shipping is the world's seventh-largest container carrier and it filed for assets protection and court receivership in late August.
The South Korean government has sought to limit the impact of Hanjin's demise to country's export-dependent economy but has so far let Hanjin handle its trouble largely on its own.
"It now is entirely up to the court," an anonymous government official closely linked to the issue shared with Reuters.
South Korea has said no helicopter money either from the government or central bank will be directly injected into firms that is undergoing debt restructuring in the struggling shipping and shipbuilding industries of the country.
Instead, the government has opted to extend aid to small-to-medium sized businesses displaced by the debt restructuring process by providing business owners and suppliers with low interest loans to maintain jobs and retrain workers in hard-hit regions of the country.
According to Reuters, the government has also taken steps to arrange for rival shipper Hyundai Merchant Marine and smaller carriers to send ships to routes that were served by Hanjin to help the embattled company deliver its cargo on time.
Reuters quoted Hanjin Shipping executive Kim Hyun-seok said last week who said that "in recent months, Korea Development Bank discussed arranging a merger between Hyundai Merchant Marine but the effort ended when Hanjin sought court receivership after lead creditor Korea Development Bank halted support."
The tough and cold treatment of Hanjin's bankruptcy by the government is a break from a decades old tradition.
Reuters reported that last year, Korea Development Bank (KDB) and the Export-Import Bank of Korea (Kexim) pledged $3.8 billion in loans and equity to Daewoo Shipbuilding & Marine Engineering, the world's largest shipbuilder. However, the loan drew sharp criticism after Daewoo Shipbuilding, which received a bailout some 15 years ago, shocked investors with a first-half operating loss of about 3 trillion won.
"Lazy thinking that the government will have no choice but to help shippers if they run into problems has ended up hurting trading companies," President Park Geun-hye said at a cabinet meeting on Tuesday.
"We will not sit silently by as corporate managements who do not aggressively try to recover their businesses and wait for the government to solve everything," The South Korean President further said.