South Korean Curbs On Shipbuilding To End Amid Controversy

South Korea's Ministry of Industry, Trade and Energy said that next year it will end its regulation of domestic shipbuilding, despite warnings from three major domestic shipbuilders of a market glut.

"The government has no intention of extending the current rationalization program — limiting new entrants and capacity expansion — which expires at the end of this year," a ministry official responsible for domestic shipbuilding affairs reportedly said, adding that the government will let shipbuilders expand capacity according to their own judgment. The rationalization program was imposed in 1989 by the government, which feared redundant investments. The government's decision allowing shipbuilders greater self-control followed a joint proposal to the ministry by three of the nation's largest shipbuilders, Hyundai Heavy Industries Co., Daewoo Shipbuilding & Heavy Industries, and Hanjin Heavy Industries, urging that Samsung Heavy Industries' plan to expand its shipbuilding capacity by one million tons be abolished. The nation's combined shipbuilding capacity is currently estimated at 4.5 million tons a year. The three companies asse that increased capacity in curre: market conditions will cause a gli and excessive competition amor domestic companies.

"An expansion of shipbuildir capacity at a time like this when virtual recovery in the order of shij building is yet in sight will exace bate demand-supply balance," the reportedly asserted in the joint pn posal. The companies fear the cu rent rush of orders to South Korea shipbuilders may prove short-live< brought about by external factoi such as the stiff appreciation of tb Japanese yen, making Korean ship much cheaper.