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(EDITORIAL from The Korea Times on Sept. 6)

All Headlines 07:18 September 06, 2016

Hanjin turmoil
Government's poor response leaves public speechless

Hanjin Shipping's filing for court receivership last week is causing bigger-than-expected turmoil in global sea freight.

As of Sunday, nearly half of the shipping line's 141 vessels were reportedly stranded in 23 countries. Since Hanjin filed for court receivership on Aug. 31 after failing to receive further financial help from its creditors, 61 container ships and seven bulk carriers have been seized, denied entry to ports or left unable to dock around the world.

With sea freight disrupted, Korean companies have trouble carrying goods to North America. As Hanjin's collapse comes at a time of high seasonal demand for shipping ahead of the year-end holidays, American retailers have urged the U.S. administration to intervene to resolve the gridlock.

Not surprisingly, the latest mess was caused by creditors and the Korean government downplaying the fallout even though Hanjin's collapse was drawing nearer. They misjudged its economic repercussions in their belief that Hanjin accounts for only 2 percent of the domestic traffic and that sales in Korea make up only 20 percent of the company's total sales.

But once the bankruptcy proceeding began, the fallout has turned out to be far greater than expected. Large companies are desperately looking for vessels, while smaller firms are on high alert to meet delivery.

Hanjin, the world's seventh-largest shipping company, made a blunder of rejecting creditors' requests to discuss contingency plans in the run-up to the court receivership. Instead, the cash-strapped shipper only appealed to the public, insisting that bankruptcy should not be an option. Hanjin deserves the blame for making the fallout bigger by operating its vessels normally right before filing for receivership.

The government's poor response to Hanjin's collapse leaves the public speechless. Restructuring the ailing shipping industry has been in review over the last 10 months, with putting Hanjin into court receivership undeniably an option. But our policymakers appear to be in deep confusion, even failing to accurately assess what's going on.

Minister of Oceans and Fisheries Kim Young-suk chaired a meeting of relevant ministries Sunday and belatedly decided to upgrade the ministry's emergency response team to a task force attended by other agencies. Still, however, there was no tense atmosphere.

In fact, it's hard to deny the inevitability of placing Hanjin Shipping into court receivership, given the much-needed principle that helping poorly managed companies is no longer tenable. But this is not to say that the government may sit on its hands, doing nothing to prepare for contingencies.

As the confusion drags on, there has been talk about offering fresh loans to Hanjin so that contracted companies can load or unload the vessels. However, the government needs to be prudent, considering that it would result in the financial regulator breaking its own principle: no more financial aid without outlays from major shareholders.

What is needed urgently is for Hanjin vessels to escape being stranded through consultations with foreign countries. Strategy and Finance Minister Yoo Il-ho, who doubles as the top economic policymaker, should come forward to minimize the impact of the Hanjin turmoil on the economy.
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