[Editorial] Regulatory capture

By Korea Herald

Cozy regulator-industry ties breed disasters

  • Published : Apr 24, 2014 - 20:40
  • Updated : Apr 24, 2014 - 20:40
The primary responsibility for the sinking of the ill-fated Sewol ferry undoubtedly lies with its irresponsible captain and crew members. They abandoned the ship without attempting to rescue the passengers trapped in the cabins.

Equally irresponsible was Chonghaejin Marine Co., which operated the old vessel without bothering to follow safety rules. For instance, the company is alleged to have loaded cargo onto the vessel in excess of its limits.

Due to the overloaded cargo, the ferry probably had to carry much less ballast water than was required to maintain stability. Its rapid capsizing after losing balance supports this allegation.

The company is also suspected of not conducting safety drills to train its employees in case of an emergency. Public disclosures posted on the Financial Supervisory Service’s electronic disclosure system show that it spent a mere 540,000 won last year on safety training for its employees.

What enabled the company to get away with cutting corners on safety were the collusive ties among shipping companies, industry organizations in charge of safety inspections on vessels, and retired government officials.

Currently, the Korea Shipping Association is in charge of conducting safety checks on ferries before their departure. KSA officials inspect vessels’ compliance with their navigation manuals, test their rescue and fire-fighting equipment, and check whether their cargo is tightly fastened.

The KSA carries out this duty on behalf of the Coast Guard. But the problem is that it is an organization established to represent the interests of some 2,100 domestic shipping companies. As KSA officials are paid by shippers, the thoroughness of their vessel safety checks has its limits.

And the organization has been run by retired officials of the Ministry of Oceans and Fisheries. Shippers invite these former officials as they can exercise influence on the ministry.

Shipping companies also work around regular inspections on their vessels. In Korea, vessels older than 20 years are subject to inspection every year by the Korean Register of Shipping (KR), a private organization that, like the KSA, has been run by retired officials from the Oceans Ministry.

The Sewol ferry underwent an inspection in February and received the highest rating for all items on the checklist, which numbered some 200. Yet the outcome of the inspection is highly questionable.

The KR does not inspect vessels itself. For each part of a vessel, there are a large number of specialized private companies that carry out the inspection on the KR’s behalf.

The problem is that it is not the KR but each shipping firm that selects which inspection service providers to work with. Under these circumstances, shipping companies can easily rig the outcomes.

Thus Chonghaejin Marine could commit malpractices as the organizations in charge of safety inspections did not have the teeth to enforce regulations. The Oceans Ministry did not bother to intervene to correct the situation either.

Furthermore, the Incheon Regional Maritime and Port Administration under the ministry’s wing is suspected of granting favors to Chonghaejin as the company has been monopolizing the Incheon-Jeju route for over two decades.

The cozy regulator-industry relationship can be found in many industrial sectors in Korea. The Sewol ferry tragedy has shown that the coastal shipping industry is no exception. The government needs to tackle regulatory capture as it breeds corruption and manmade disasters.