Help to SME Shipyard Suppliers

Korea Eximbank sets aside 4 tln won to support SME suppliers to shipyards

The Export-Import Bank of Korea (Korea Eximbank) announced that it will be providing a total of 4 trillion won throughout this year above and beyond its target amount through a Network Loan to shipyards in order to improve the financial standings of about 5,000 small and medium-sized suppliers of materials and resources to major shipyards. The SMEs receive Network Loan funds once they supply materials to the shipyards, the borrowers of the Network Loan.
The Cooperation Agreement for the Network Loan was concluded between Korea Eximbank and the following 10 shipyards on March 16, 2009:

< Shipyards >

- Hyundai Heavy Industries Co., Ltd.

- Samsung Heavy Industries Co., Ltd.

- Daewoo Shipbuilding & Marine Engineering Co., Ltd.

- Hanjin Heavy Industries & Construction Co., Ltd.

- STX Shipbuilding Co., Ltd.

- Hyundai Samho Heavy Industries Co., Ltd.

- SPP Shipbuilding

- SPP Plant & Shipbuilding

- Sungdong Shipbuilding & Marine Engineering Co., Ltd.

- Dae Sun Shipbuilding & Engineering Co., Ltd.

The current global economic tsunami has caused shipyards to face liquidity hardships due to a severe drought in new orders and delays in advance payment receipts, thus affecting partner SMEs. The Network Loan system is expected to help shipyards secure outsourced materials and ensure that SMEs receive improved payment terms. This would ultimately strengthen mutual cooperation between major shipyards and their suppliers.
Moreover, it should be noted that the major shipyards were willing to take the role of borrowers in consideration of their partner SMEs' hardships. The conclusion of the cooperation agreement will serve as a model case exemplifying cooperative measures taken to overcome the current economic crisis.
Network Loans can be applied to industries such as shipbuilding and major plants, which are major foreign currency earners and job creators in terms of the number of partner SMEs involved.
In the meantime, Korea Eximbank said the nation's exports will not drop as much as initially expected in the second quarter. The bank said Q2 exports will show signs of stabilization, stopping the rapid fall that began in Q3 of 2008, down 23 percent YoY.
The bank said the leading export index showed that exports could be on the way to recovery sooner than expected as China's exports appear to have stopped their rapid slide and trade financing is back on track.
On January 13, Korea Eximbank issued $2 billion in global bonds, the first issuance from a financial institution of a developing country since the Lehman Brothers incident.
The issuance is the largest since the Korean government's $4 billion dollar foreign exchange stabilization bond in 1998. The bond in U.S. dollars has a fixed interest rate with a five year maturity at Libor + 625bp.
The successful issuance of a non-government assured public subscription bond during a time of great instability in the global financial markets is quite significant. After Lehman Brothers petitioned for bankruptcy in September 2008, the international financial markets experienced a serious credit crunch and large bonds were no longer issued with the exception of government bonds and government assured bonds
Korea Eximbank established inter-bank export credit lines totaling $50 million with Bancolombia, the largest commercial bank in Colombia, and $30 million with Banco de Reservas, the state-owned commercial bank in the Dominican Republic, on March 30, 2009. This will enable both Bancolombia and Banco de Reservas to provide financing of up to $50 million and $30 million respectively to domestic importers of Korean goods and services.
The recent credit line was established in order to assist Korean exporters to take advantage of economic growth and opportunities in Colombia and the Dominican Republic. Colombia has enjoyed an annual growth rate of 5.7 percent on average since 2004, thanks to increasing foreign investment and exports as well as substantial growth in the manufacturing sector. As such, demand for Korean automobiles and electronics in Columbia is expected to rise steadily. A record annual growth rate of 8.3 percent since 2005 in the Dominican Republic has also increased demand for Korean goods.
According to one Korea Eximbank official, "The newly established credit line will enhance the financing environment to promote the purchase of consumer durables. We anticipate increased demand for Korean exports as a result of the new credit line." nw

The head office building of the Korea Exim Bank in Seoul.