South Korea Creates $3 Billion Fund for Shipping Lines

South Korea will create a fund worth 4 trillion won ($3 billion) to purchase vessels from struggling shipping companies to assist them due the global economic downturn.

The South Korean government will also expand credit lines to boost sales of ships being constructed by shipyards and shippers, while easing regulations to stimulate any of these type transactions.

The decision by President Lee Myung-bak and his government is meant to help shipping companies to remain internationally competitive. In a statement issued by the government it said the moves were necessary because global shipping is a key factor in the country’s overall economic wellbeing.

The 4-trillion won fund will be used mostly to purchase ships from struggling local shipping lines which have to sell their assets as part of restructuring efforts. The purchases will likely start as early as June with around 100 ships being bought at market prices.

The state-run debt clearer Korea Asset Management Corp., creditor banks and private investors will also participate in the fund as the government will inject 1 trillion won into the fund.

Through the Export-Import Bank of Korea, the government will also provide up to 4.7 trillion won in loans for the purchase of ships being constructed by cash-strapped shipyards and shipping companies..

Those measures were announced as local shipping companies are facing a severe liquidity squeeze. Experts have warned that a bankruptcy chain reaction would undermine shipbuilding and the banking sectors.