Scandal Hits as South Korea Restructures Shipbuilding

Entrance to the Blue House complex, the seat of government in Seoul (file image)

By MarEx 2016-11-03 13:48:08

South Korean president Park Geun-Hye has recently suffered a bizarre and damaging scandal, and in response she has decided to shake up her cabinet leadership – just as her government was poised to begin a sweeping intervention in the nation's troubled shipbuilding sector. 

The scandal started last week, when news broke of the president’s alleged ties to a cult-like religous group, the “Eternal Life Church,” and of an insular, tight-knit circle of advisers with great sway over policy. Some of these advisers’ consultations with the president may have involved improper handling of classified material, and prosecutors have begun searching the presidential complex, confiscating aides' documents and computers. 

President Park denies that she has done anything improper.

The mysterious adviser at the center of the allegations, Park's longtime friend Choi Soon-sil, is accused of using her close relationship with the president for personal gain. She has agreed to cooperate with prosecutors and has apologized for her role in the scandal; Yonhap reports that Choi used a Korean expression of remorse which translates to “I committed a sin that deserves death.”

After the news broke, Park took the resignations of eight senior aides and asked for all members of her cabinet to step down. 

On Tuesday, in the immediate wake of the shakeup, Financial Services Commission chairman Yim Jong-yong – one of the leaders of the government response to the crisis in shipbuilding and shipping – was promoted into the dual position of Deputy Prime Minister and Finance Minister. 

"I feel heavy responsibility after having been named finance minister in serious economic times," Yim said. "This current economic situation cannot be dealt with by one person alone."

The Financial Service Commission's efforts to restructure the country's shipping and shipbuilding industries will continue, he said. 

If his appointment is confirmed by the opposition-controlled National Assembly – an uncertain prospect – Yim will replace incumbent minister Yoo Il-ho. 

On Monday, Yoo had announced the creation of a $5.7 billion state-backed financing company, which will help buyers fund new vessel orders. He said that the new financing vehicle would make the Korean shipbuilding industry a "more competitive and profitable one." 

The International Monetary Fund recently completed a study of the troubled South Korean shipbuilding industry, and estimated that the cost of restructuring the sector's massive debts will approach $30 billion. The study found that the employment impact would affect up to one percent of the overall workforce, including 10,000 positions in shipbuilding, and that creditor's losses would come to between 5.5 and 7.5 percent of GDP.