South Korea's Ministry of Oceans and Fisheries (MOF) announced Aug. 6 the establishment of a shipping guarantee agency to assist shipping companies that have been struggling in the country.

Through a press statement, the MOF said, "Approximately 40 domestic shipping companies agreed on financing the shipping guarantee agency. A total of KRW15bn (US$12.8m) will be invested by the end of the month."

The MOF expects that the shipping guarantee agency will help Korean shipping companies secure 744 vessels of Korean nationality for the next 20 years if the agency raises a total of KRW550bn as planned.

The shipping guarantee agency would work as a collection guaranty when it comes to shipping investments, accounting for 20-30% of the total price of a new vessel or a secondhand ship. It also acts as a tonnage bank that purchases ships undergoing restructuring and operates them.

According to the MOF, shipping companies initially were opposed to the investment because of their financial difficulties. However, they changed their minds through consistent encouragement and persuasion by the Minister of Oceans and Fisheries Yoo Ki-Jun. Given this, the shipping companies will invest KRW15bn by the end of August, and another KRW10bn at the end of 2015.

As private investments have been confirmed, investments from public agencies are likely to be made in the second half, the MOF said.

The MOF said, "Korea Development Bank and Export-Import Bank of Korea have already invested KRW60bn and we are expecting more investments from the public agencies. If the amount is injected into the private investment, the shipping guarantee agency will have KRW120-130bn at the end of the year."