In a bid to strengthen the international competitiveness of Japan's shipbuilding industry, the government is planning to create a new framework for extending sizable financial support to the sector.
The government aims to provide the assistance from this year, at an expected level of tens of billions of yen per case. The aim is to maintain Japan's industrial base and secure its sea transport capacity in competition with the shipbuilding sectors of South Korea and China, both of which are expanding their share of the global market.
According to government sources, under the new framework, a marine transport company that operates container ships, tankers and the like would purchase a ship from a domestic shipbuilder through a special purpose company (SPC) established overseas to own ships each time a shipping company buys one.
The financial assistance would be given to the SPC, by utilizing governmental financial institutions. For instance, the governmental Development Bank of Japan would give its official guarantee to a private bank that finances the SPC; and the Japan Bank for International Cooperation would directly advance funds to the SPC.
If an SPC has ample funds, the charterage that a shipping company pays to the SPC will decline, which is likely to spur the procurement of ships.
Japan in 2018 filed a petition against South Korea with the World Trade Organization, on the grounds that the public assistance in excess of 1 trillion yen that the South Korean government had extended to major domestic shipbuilders undermined fair market competition.
In January this year, Japan made an additional request to South Korea to hold bilateral talks over sizable subsidy to major domestic shipbuilders, which is equivalent to a refiling of the suit. But the case has yet to be resolved.
In light of this situation, a senior Japanese government official said: "As things stand now, Japan's shipbuilding industry may cease to exist. There is no other way but for the government to extend a helping hand to the sector within the bounds that would not violate WTO rules."
Japan's market share, measured by the amount of shipbuilding orders, dropped to 16% in 2019 from 32% in 2015. Domestic shipbuilders have been forced to engage in a fierce battle with their counterparts in South Korea and China, both of which mounted a low-price offensive.
Due to the rise of foreign shipbuilders, the ratio of orders from Japan's shipping companies to domestic shipbuilders fell from 94% between 1996 and 2000, to 75% between 2014 and 2018. Through its financial assistance, the government intends to help domestic shipbuilders roll back this trend.
Read more from The Japan News at https://japannews.yomiuri.co.jp/
