The move is part of South Korea's efforts to strengthen maritime safety and boost the economy. It is said that the package in particular is meant to help smaller shipping companies build 59 new ships; of them 21 will be passenger boats and the other 38 will be cargo vessels.
Namely, a shipping company will be able to receive financial help of up to 60% of costs needed for building a ship from banks; whereas, South Korea's state-run Korea Ocean Business Corp. guarantees more than 95% of the loans.
In addition, the Korea Development Bank, a policy lender, also funds 20% of costs needed for building a ship.
Yonhap reports that currently, 58 smaller shipping companies operate 166 passenger vessels, including ferries, in order to transport about 15 million people between the South Korean mainland and its islands annually. 780 other shipping companies run 2,013 cargo ships on domestic routes.
Remarkably, South Korea lowered the maximum life of vehicle ferries from 30 to 25 years, thus creating demand for new ships. At the end of 2018, 22% of passenger vessels and 68% of cargo ships are more than 20 years old.
It is said that the average lifespan of a ship is 25-30 years. After this span, the ship may become too expensive to operate, but most importantly, to become unseaworthy putting human safety at risk.
A great deal of discussions surrounds the adverse consequences of shipbreaking in Southeast Asian yards, that has been strongly criticized by global NGOs and environmental organizations for many years, with marine pollution, hazardous waste dumping and unsafe working conditions, as well as the illegal exploitation of child workers, being among the key areas of concern.
However, we are sure you understand that this is not how things are supposed to be for old ships, but it constitutes a common industry malpractice for financial gains; we have previously explored all the possible scenarios for the fate of an old ship!
Although it is usually common to compare vessels as per their vessel type, when considering ship performance other parameters, such as age, may result to interesting findings as well.
Bulk carries aged <10 years old have better performance than Tankers aged >15 years old. This could be attributed to the fact that PSCOs mainly focus on safety items/ conditions while new built vessels do not show excessive maintenance problems. Although tanker operators may have better performance than bulk carrier operators, the additional rules and requirements (TMSA, Vetting etc) do not ensure adequate high maintenance status of a tanker throughout the years.