Industry Voices Complaints Over Desk-bound Administrative Measures for Shipbuilding Sector

30-Year Accumulated Issue of Primary and Subcontractor Dual Structure
Government Announces Measures... Three Months After President Yoon's Directive
Created After Industry Consultation but Lacks Incentives
Both Management and Workers Question Effectiveness

Employees are entering through the west gate of Daewoo Shipbuilding & Marine Engineering Okpo Shipyard in Aju-dong, Geoje-si, Gyeongnam.
[Image source=Yonhap News]

[Asia Economy Reporter Choi Seoyoon] There are complaints from the industry regarding the government's policy to resolve the 30-year-old dual structure of primary and subcontractors in the shipbuilding industry through autonomous win-win cooperation among industry stakeholders.

According to the industry on the 30th, the government announced the "Measures to Close the Gap and Improve the Structure of the Shipbuilding Industry" at the Emergency Economic Ministers' Meeting on the 19th. This came about three months after President Yoon Seok-yeol instructed to "prepare fundamental alternatives to solve the dual structure problem in the labor market," triggered by the strike of the subcontractor union at Daewoo Shipbuilding & Marine Engineering.

The shipbuilding industry views the government's move to finally prepare measures for the chronic problems of shipbuilding, a national key industry, as desirable. However, doubts remain about the effectiveness. This is because the issue of the dual structure between large shipbuilders as primary contractors and subcontractors, which has been stalled for over 30 years due to failure to find common ground, is left to the industry's 'autonomy.'

In response, during a Q&A session with reporters after announcing the measures, the government stated, "There are limits to solving a 30-year-old problem through laws or regulations," and added, "It is more important to create social interest and pressure so that it does not end as a one-time event, and the measures are part of that."

Looking at the government's measures in detail, the core points are ▲ proper payment of progress payments between primary and subcontractors ▲ profit sharing between workers of primary contractors and partner companies ▲ improvement of the multi-tier subcontracting structure, all aimed at win-win cooperation between primary and subcontractors. The industry consensus is that it is difficult to solve the problem solely through voluntary participation due to the complex intertwined interests of the parties involved.

Win-win cooperation between primary and subcontractors is a structure where the burden falls on the top-level primary contractors. The incentives announced by the government are limited to various subsidies and allowances. A representative from a major shipbuilder who provided opinions during the government's policy-making process said, "The government said it would support win-win cooperation, but no clear incentives were announced," adding, "From the primary contractor's perspective, if incentives are not certain, the motivation inevitably decreases."

Specific implementation plans have not been finalized either. The government explained that progress payments between primary and subcontractors will be formed based on profits or operating income, and profit-sharing plans between workers of primary and subcontractors will be discussed later. In response, voices from the field criticize this as desk-bound administration that misjudges reality. A union official from Hyundai Heavy Industries said, "The company controls and allocates resources used for on-site industrial safety facilities or welfare systems, and workers follow that structure," adding, "Voluntary participation cannot guarantee the company's execution power."

Lee Jeong-sik, Minister of Employment and Labor, is speaking at the "Joint Declaration for Win-Win Cooperation to Revitalize the Shipbuilding Industry" held on the afternoon of the 19th at LW Convention in Jung-gu, Seoul. On this day, the Ministry of Employment and Labor, the Ministry of Trade, Industry and Energy, and the Fair Trade Commission announced this joint declaration together with the five major shipbuilders?Hyundai Heavy Industries, Samsung Heavy Industries, Daewoo Shipbuilding & Marine Engineering, Hyundai Mipo Dockyard, Hyundai Samho Heavy Industries?and the Korea Offshore & Shipbuilding Association. [Image source=Yonhap News]