Policy Finance Strengthened for Small Shipbuilders... Government Supports Export RG Issuance

External Agencies Verify Ordered Shipbuilding Capacity and Business Feasibility, System Improvements
RG Issuance for Large and Medium Companies Progressing Smoothly

The government will strengthen financial support for small shipbuilders to facilitate smooth order intake in the shipbuilding industry.

Yonhap News

On the 29th, the Financial Services Commission and the Ministry of Trade, Industry and Energy announced that policy financial institutions will support the issuance of export advance payment refund guarantees (RG) for small shipbuilders with shipbuilding capabilities. While domestic RGs for small shipbuilders are mainly issued by private financial institutions such as Seoul Guarantee Insurance, the issuance of export RGs has been limited due to a lack of experience in building export ships.

Accordingly, the government has revised the system to allow external institutions to verify the shipbuilding capabilities and business feasibility of ordered ships, considering that small shipbuilders have little experience in securing export ship orders. In addition, for orders from small shipbuilders whose business feasibility has been verified by the Korean Register and accounting firms, the Korea Development Bank and Industrial Bank of Korea will review and issue RGs, while the issued RGs will receive special guarantees from the Korea Credit Guarantee Fund or the Korea Trade Insurance Corporation.

The Korea Credit Guarantee Fund plans to expand the support target of its RG special guarantee product (with an 85% guarantee ratio), currently operated for domestic use, to include export purposes and increase the support limit. Meanwhile, the Korea Trade Insurance Corporation will provide a customized RG special guarantee product (with a 95% coverage ratio) considering the management environment of small shipbuilders.

Meanwhile, the Financial Services Commission reported that the issuance of RGs for large and medium-sized shipbuilders is proceeding smoothly. Large shipbuilders have been granted RG limits worth $10.1 billion by the Korea Development Bank, Export-Import Bank of Korea, Industrial Bank of Korea, and five major commercial banks to the three Hyundai Heavy Industries companies and Samsung Heavy Industries, with about 65% of the limit used as of the end of this year. For medium-sized shipbuilders, the Industrial Bank of Korea, five major commercial banks, and three regional banks have issued RGs worth $26 million to Daehan Shipbuilding and K Shipbuilding, and the Korea Development Bank has also issued RGs worth $53 million. Future RG needs will be supported through direct issuance by the Korea Development Bank and special guarantees from the Korea Trade Insurance Corporation.

A Financial Services Commission official explained, "If the limit is expected to be exhausted in the future, additional limits will be granted through consultations among banks."