The South Korean government has announced that the state-run financial institutions will commence profitability checks on shipbuilding orders and large overseas construction projects to prevent local companies from winning contracts that will lead to losses.
According to Choi Kyung-hwan, South Korea’s finance minister, shipyards will not get support from local financial institutions if they accept zero profit orders.
Choi said state financial institutions need to take on more responsibility in preventing companies from signing contracts.
“Money losing projects can put pressure on financial institutions and if lenders are seriously hurt, this can be a burden for the economy as a whole. There is a need to fundamentally tackle this problem,” he stressed.
Following the announcement, the Export-Import Bank of Korea, Korea Development Bank and Korea Trade Insurance Corporation have all said they will mandatorily coordinate with the government’s decision.