Finding Financial Solutions to Support Small and Medium Shipyards... KMI Hosts 'K-Marine Finance Innovation Forum'

Discussion on Improving Limitations in Refund Guarantee Issuance

Exploring Strategies for Revitalizing the Shipbuilding Industry Ecosystem

In Busan, financial and policy solutions were discussed to address the challenges faced by small- and medium-sized shipyards in securing refund guarantees (RG) for advances, a key obstacle to their competitiveness in vessel order bidding.

The Korea Maritime Institute (KMI), led by President Cho Jeong-hee, co-hosted the second 'K-Marine Finance Innovation Forum' with the Busan Finance Center (BFC), headed by President Lee Myungho, on July 21 at the Busan Finance Center's lecture hall.

This forum was established to address the challenges experienced by small and medium shipyards regarding RG issuance limits and refusals, with the goal of restoring competitiveness in the shipbuilding industry and exploring strategies for sustainable growth in both shipbuilding and shipping sectors.

The refund guarantee (RG) is a system in which financial institutions guarantee the advance payments shipowners make when ordering ships, serving as an essential financial instrument for new orders and the management stability of shipyards. However, in recent years, some small and medium-sized shipyards have faced difficulties expanding orders due to conservative screening and issuance constraints by financial institutions.

This discussion was a follow-up to the first K-Marine Finance Innovation Forum, where the issue of RG issuance for small and medium shipyards was identified as a top priority for revitalizing the shipbuilding industry ecosystem.

Over the past several months, KMI and BFC have visited small and medium-sized shipyards in person and gathered feedback from both shipbuilding industry representatives and financial experts. At the forum, policy and financial support measures to facilitate RG issuance were intensively discussed, drawing on field research and expert discussions.

The forum was attended by a total of 19 organizations related to maritime and finance, including existing forum participants and BNK Busan Bank. Notably, the Korea Small Shipbuilding Cooperative Association, the Busan Shipbuilding & Offshore Equipment Cooperative Association, and representatives from small and medium shipyards shared on-site challenges and ideas for improvement.

The event consisted of key topic presentations, a comprehensive panel discussion, and an open discussion among participants.

Ko Byungwook, Research Fellow at KMI and the first presenter, addressed “Solutions to the Refund Guarantee Issuance Problem,” outlining strategies to mitigate adverse selection and moral hazard in RG issuance and suggesting policy directions to expand guarantee issuance.

Next, Lee Donghae, Director at the Busan Finance Center, gave a presentation on “Expanding the Supply of Refund Guarantees and Alternative Measures for Restoring the Industrial Ecosystem,” introducing ways to supplement the existing financial system, such as establishing a Shipbuilding Mutual Aid Association and innovative ship financing structures linked to P-CBOs.

In the subsequent panel discussion, representatives from financial institutions, associations related to shipbuilding, shipping, and ship equipment, research institutes, and small and medium-sized shipyards discussed practical alternatives for expanding RG issuance.

There was a broad consensus among attendees on the need to expand the supply base of refund guarantees through the establishment of a Shipbuilding Mutual Aid Association and to secure the soundness of its operations by implementing business feasibility verification procedures.

Participants agreed that in order for small and medium shipyards to secure stable competitiveness in order bidding, it is necessary to go beyond simple financial support and devise a new guarantee system that reflects the unique characteristics of the industry.

Cho Jeong-hee, President of the Korea Maritime Institute, stated, "Resolving the issue of refund guarantee issuance for small and medium shipyards is a top-priority task to strengthen the competitiveness of Korea’s shipbuilding industry. Based on the discussions held at this forum, we will continue to work toward developing practical industry support policies."

KMI is holding the 'K-Maritime Finance Innovation Forum' and taking a commemorative photo.

This content was produced with the assistance of AI translation services.