"Consolidating ailing firms in a sector that suffers from excess capacity globally is not going to fix the issue that of low demand...Ultimately, the cutting of excess fat is needed, such as the case of Korea where there will be a reduction of employment," Nguyen said.
News emerged this week that the nation's top three shippers—Hyundai Heavy, Daewoo Shipbuilding, and Samsung Heavy—will lay off 32 percent of their combined workforce by 2018 as part of the sector's restructuring.
On Monday, President Park Gyuen-Hae's administration announced its intention to form a government-backed ship financing company to help domestic shippers following the industry's biggest-ever bankruptcy filing. Hanjin Shipping, the world's seventh biggest container line, filed for court receivership in August, and its Asia-U.S. operations are now on sale as part of insolvency proceedings.
"Ship building and marine shipping are generally sectors strategic to national development so it makes sense for government support. Obviously, the government is adding a caveat that they restructure and cut excess fat as well as support this through non-core asset selling. This is to prevent the moral hazard that comes with state support," Nguyen noted.
But while government funds will serve as a temporary cushion for shipyards facing collapse, that is no long-term solution either.
"What yards really need are new global orders and at the moment, very few ship-owners are ordering ships because the second-hand market is filled with quality vessels at fire sale prices," explained Knowler.
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