The government is reviewing a plan to support the expense of installing domestically made eco-friendly and autonomous-navigation equipment by Korean shipbuilders, according to reports on the 24th. The aim is to support domestic equipment suppliers that are struggling to win orders due to low-price offensives from Chinese companies. This follows President Lee Jae-myung’s instruction at the “K-shipbuilding future vision meeting” in May to the Ministry of Trade, Industry and Resources to “take a good look at the issue of supporting the equipment industry.”

Based on ChosunBiz’s reporting the same day, the Ministry of Trade and Industry (MOTI) is reviewing a plan to partially support expense items such as installation expense or insurance premiums when a Korean shipbuilder first uses new-technology equipment—such as eco-friendly and autonomous navigation—developed by a company in Korea next year. It is said the likely approach will not target all corporations but will select eligible targets and corporations through a government call for applications.

At the “K-shipbuilding future vision meeting” in May, officials from domestic ship equipment corporations said, “Due to low-price offensives by Chinese companies, the domestic ship equipment ecosystem is nearly collapsing.” They added, “Please devise ways to provide incentives—such as financing or tax benefits—to shipyards that adopt domestic equipment.” In response, President Lee asked the Ministry of Trade and Industry (MOTI) to “look into it,” and the ministry is preparing support measures.

The government expects this policy support to lead to domestic market entry and expanded overseas exports for domestic equipment suppliers. For now, even if a domestic equipment supplier develops a new product, entering domestic and overseas markets is virtually impossible without a first application record (track record) on an actual vessel. If such records are built at Korean shipbuilders, it can lower the barrier to market entry. In that case, new-technology equipment, which had heavily depended on European products, could be replaced by domestic products, diversifying supply chains.

China, which competes fiercely with Korea in shipbuilding, supports insurance premiums and equipment repair and replacement expense for adopting its domestic equipment. Because direct subsidies could prompt a complaint at the World Trade Organization (WTO), it provides indirect support. However, the United States holds a negative view of this support model. The Office of the United States Trade Representative (USTR), in last year’s Section 301 investigation report on China’s shipbuilding, noted that “China introduced an insurance premium subsidy policy to provide high-level financial support for the marine equipment sector, particularly advanced ship equipment, beyond shipbuilding since 2015.”

Korea could also face criticism from the United States on the same grounds as China. Regarding this, an official at the Ministry of Trade and Industry (MOTI) said, “Some view only direct support as subsidies, while, as in the USTR report, one could interpret all factors that lower ship prices as subsidies, so the unfairness of subsidies can vary depending on the viewpoint,” adding, “We are reviewing ways to provide support while adhering to international rules.”

Source: ChosunBiz