Seoul under attack over shipyard aid

Date: 25/03/1999

By Renée Cordes

The European Commission is turning up the heat on South Korea to stop funnelling international financial assistance to shipbuilders in breach of the terms of loans it received to help the country's ailing economy.

Acting Industry Commiss- ioner Martin Bangemann is this week sending an official from the Directorate-General for Industry (DGIII) to try to settle the dispute.

The Commission alleges that Seoul has misused funds from the €51-billion bailout it received from the International Monetary Fund more than a year ago to help repair some of the damage caused by the financial turmoil which shook Asia. The won, Korea's currency, lost about half its value against the US dollar in the second half of 1997.

European shipbuilders claim Seoul illegally used the funds to expand capacity at yards, such as those at Halla Engineering and Heavy Industries. They also allege that Korean shipbuilders artificially lowered the price of their vessels, despite the fall of the currency, giving them an unfair competitive advantage.

” The unreasonable shipbuilding capacity increase in Korea endangers all the advances and efforts carried out by European shipbuilders over the years,” said José Perez of the European Union Shipbuilders' Association (CESA). “The present Korean offensive will have disastrous consequences for the entire European shipbuilding industry this year.”

Korean production in 1998 is expected to surpass that in the whole of Europe. But a trade war could prove highly embarrassing for Korea's shipbuilding industry, one of the country's main exporting sectors.

Seoul officials deny their government has done anything wrong, pointing out that international organisations such as the IMF and others closely monitor the use of funds they grant.