Hanjin fallout casts cloud over southern coast economy

[THE INVESTOR] The fallout of Hanjin Shipping, the world’s 7th largest shipping line, is dealing a severe blow to the economy of Korea’s southern coast area where regional sustainability depends mostly on maritime transportation.

With more than 60 Hanjin cargos denied or blocked at 44 ports in 23 countries and the government belatedly drawing up contingency plans, industry observers say this latest fiasco following the shipper’s court protection filing would undermine the overall confidence in the Korean economy.

“The bankruptcy protection filing of the country‘s No.1 shipper will undermine confidence, given that Korea’s economy (driven by exports) relies on the shipping industry for growth,” said Suh Yong-gu, a professor at Sookmyung Women’s University’s School of Business.

“The seizure of Hanjin cargos, which are holding back deliveries, will affect Korean exports,” he further explained.

Among the hardest hit was Busan, Korea’s largest port, which handles more than two-thirds of the country’s inbound and outbound shipments. Some 45,000 Busan residents, including those working for contractors of Hanjin rely on Busan Port for their livelihoods, according to the Oceans and Fisheries Ministry.

The port is expected to lose more than 110 billion won ($98 million) in value, while at least 3,000 laborers will be let go as some 1.6 million containers and cargos will not be regularly processed on Hanjin woes, according to the Korea Maritime Institute.

Foreign companies partnered with Hanjin are readjusting their routes from Busan to Japan or China. Hanjin’s partner companies are also looking for other shipping companies to transport their goods.

A number of civic groups in Busan have submitted a joint statement urging the government to stop the court receivership and support Hanjin.

To make matters worse, Geoje, South Gyeongsang Province, located southwest of Busan, is suffering economic losses followed by reports of cholera patients in the region. Geoje is home to the country’s largest shipyards of Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering, which are currently going through restructuring, cutting down on manpower and selling off assets.

A number of restaurants in Geoje are losing customers due to the spread of cholera following reports of patients infected with the disease after eating raw fish in a Geoje restaurant late last month.

The Ministry of Health and Welfare confirmed last week a third cholera patient in his 60s residing in Geoje.

Industry experts say that the news of a third cholera patient will further exacerbate the regional economy as tourists are reluctant to visit the area.

By Kim Bo-gyung / The Korea Herald (lisakim425@heraldcorp.com)