According to the article, a Korean company was bailed out in 2014 and 2015 due to financial difficulties necessitated by failing projects and ventures (Soo npg.). Specifically, this particular company was affected by massive losses that originated from its offshore projects prompting the state to come in to prevent it from collapsing. This is not an isolated case because financial analysts have confirmed that shipbuilding companies across the world often experience financial difficulties (Soo npg.). Such difficulties are because of the glut of vessels and low freight rates experienced in the industry. Moreover, the article supports the position by opining that slow economic growth in China and Korea may also be a reason why companies are experiencing financial difficulties (Soo npg.).
Government involvement in business activities through offering subsidies and bailout packages is critical in ensuring that major companies do not collapse in the economy. Many problems may arise if major companies are allowed to collapse, for example, loss of employment that may ultimately hurt the economy in the end. This is the reason why the state through the Korea Development Bank and Export-Import Bank of Korea is set to improve the cash flows of the company and convert its financial liabilities into equity. Besides, bailout packages also entail restricting the company, scaling down on employment, and selling non-performing businesses so that the company can operate along the profitability line. However, my opinion is that failing companies should be allowed to fail and that government or the state should not come in to bail them out. According to my assertions, this would be a case of rewarding failure because it is entirely their fault since they are supposed to put in structures and mechanisms to ensure they prosper.
Work Cited
Soo Nam. South Korean Shipbuilder Offered $2.6 Billion Bailout Package. Business: Logistics
Report. The Wall street Journal. March 23, 2017. Web. Retrieved from: https://www.wsj.com/articles/south-korean-shipbuilder-offered-2-6-billion-bailout-package-1490237193