Thursday, January 18, 2007

Korean Shipmaking Jobs to be Shipped Overseas

Korea's shipbuilding industry is still the envy of the world, outpacing its foreign rivals in technology, skill and orders. But now, in a quest for cheaper land and labor, some Korean shipbuilders are moving their operations overseas.

The shipbuilding industry is enormously important to the Korean economy, supplying hundreds of thousands of jobs. And with a single ship costing more than W200 billion(US$1=W937), the business generates tremendous foreign currency income. If Korean shipbuilders leave for foreign lands, then local workers will be out of jobs, affiliate companies will be badly impacted and the country will feel a hard economic blow.

STX Shipbuilding's construction zone on China's Changxing Island, Jan. 13. When it's fully operational, the 3.795 million sq. m shipyard will help bring an estimated 100,000 jobs to the area.

Yet that process is already underway. Korean shipmakers have built or are currently building ship block assembly plants overseas, and even constructing entire shipyards in the Philippines and China. Hanjin Heavy Industries & Construction, the world's seventh largest shipbuilder, has invested US$721 million in a new shipyard at Subic Bay, the Philippines. When Hanjin was unable to expand its shipyard in Busan, Korea, it looked elsewhere for a new building site. With the Philippines offering low land prices and cheap manpower, a 50-year lease was signed. The construction site is working overtime to finish by March.

Korea's STX Shipbuilding, the sixth largest ship maker in the world, plans to build a 1.518 million sq. m ship block assembly plant in China by the end of next year. The company wants to increase its annual production capacity from 250,000 tons to 500,000 tons. And despite denials from STX, news reports in China say that STX will build a full shipyard there.

To learn the truth, this reporter last week visited Changxing, an island off the western coast of Dalian, Liaoning Province, China. Measuring one-seventh the size of Jeju Island, the whole of Changxing appears to be turning into an enormous construction zone. Earth-moving equipment and building vehicles line the roads. It is common knowledge among the islanders that STX Shipbuilding will start construction on the southern coast of Changxing in April. Local workers and merchants are all smiles at news reports that the Korean company will create thousands of jobs. When asked if she knew of the STX plan for a shipyard, Wen, 42, the owner of a supermarket, said, "We hear the news every day. People now call this place STX Island, instead of Changxing Island."

Four years ago, STX began looking for a site for its new shipyard. After encountering all kinds of grievances and regulations at home, the company gave up on building the facility in Korea. It found a more attractive industrial environment in China, where workers are forbidden from striking. Once STX decided on Changxing for the shipyard, all preparations to get the facility went speedily and without hitch. Early last year, STX and the city of Dalian held their first meeting, and a local corporate entity was established soon after.

The building site covers 3.795 million sq. m, four times the size of STX's Jinhae Shipyard. Although the price for the building site has not been officially disclosed, a Changxing official said, "Cost for a 1.98 million sq. m site in the first-stage contract is almost negligible." Total investment is said to be around US$920 million. In addition, the city of Dalian is providing the infrastructure for the shipyard for free, and a new highway is being built that will link Dalian with Changxing.

According to the Special Development Zone of Changxing, about 100,000 jobs will be created including 14,000 STX executives and staff and those in various affiliate companies. It's a huge figure, especially when one considers that only 300,000 new jobs were created in the whole of South Korea last year.

At least the Chinese are happy. "Oriental Precision & Engineering, another Korean company, has a plant in Dalian, twice the size of its plant in Korea,'' said Xing Liangzhong, the vice mayor of Dalian. ''I'm sincerely thankful to Korean enterprises for contributing so much to our economic development here."

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