80 Billion Won Released to Modernize Old Coastal Passenger and Cargo Ships

Korea Ocean Business Corporation and KDB Sign MOU

Guarantee and Loan Support for 80% of New Shipbuilding Costs

On the 5th, Hwang Hoseon, President of the Korea Ocean Business Corporation (right), and Lee Dong-geol, President of the Korea Development Bank, signed an MOU for the "Coastal Passenger and Cargo Ship Modernization Program" and took a commemorative photo.

[Sejong=Asia Economy Reporter Joo Sang-don] Korea Ocean Business Corporation has decided to support approximately 800 billion KRW for the construction of new coastal passenger and cargo vessels in collaboration with the Korea Development Bank (KDB).

On the 5th, Korea Ocean Business Corporation announced the "Coastal Passenger and Cargo Vessel Modernization Program" and signed a memorandum of understanding (MOU) with KDB at the Mokpo Coastal Passenger Terminal.

This decision follows the government’s plan to support 80% of the new shipbuilding costs for coastal passenger and cargo vessels through guarantees and loans provided by policy financial institutions such as Korea Ocean Business Corporation and KDB.

Domestic coastal passenger transport is a major mode of transportation, carrying about 15 million passengers by ship as of 2018. In the case of cargo shipping, it accounts for 82% (by weight) of the total domestic cargo transport volume. However, despite the importance of these domestic vessels, coastal passenger and cargo shipping companies face difficulties in replacing aging ships due to their fragile financial structures.

As of the end of 2018, among 166 coastal passenger vessels, 36 vessels (22%) were over 20 years old, and among 2,013 domestic cargo vessels, 1,589 vessels (79%) were over 15 years old.

Accordingly, the government is providing financial support through policy financial institutions such as Korea Ocean Business Corporation and KDB to ensure that even small shipping companies can benefit.

First, 60% of the shipbuilding cost will be raised as senior loans through private financial companies, with Korea Ocean Business Corporation providing guarantees covering more than 95% of the principal. KDB and others will support 20% of the cost through funds and loans, and the remaining 20% will be borne by the shipping companies themselves.

Priority support will be given to replacing vessels reaching age limits?20 years for coastal passenger ships and 15 years for domestic cargo ships?with new vessels. In urgent cases, the introduction of used ships will also be included in the support scope. Based on a demand survey conducted by the Korea Shipping Association last November, the support scale is expected to be around 800 billion KRW for 59 vessels, including 609 billion KRW for 21 coastal passenger vessels and 190 billion KRW for 38 domestic cargo vessels.

Korea Ocean Business Corporation plans to announce the business plan twice a year (March and September) and establish a "Support Target Review Committee" composed of external experts to select support recipients.

A representative from Korea Ocean Business Corporation stated, "With the signing of this MOU, we plan to launch this program in the first half of this year to expand the introduction of modernized passenger ships and high-efficiency, eco-friendly cargo ships, thereby providing safer seas and more competitive cargo transport services to our people."