HD Hyundai Heavy Industries and HD Korea Shipbuilding & Offshore Engineering have decided to establish a new corporation in Singapore within this year. The Singapore corporation will manage overseas subsidiaries and is expected to lead future acquisitions and mergers of overseas shipyards.
Singapore has a lower maximum corporate tax rate compared to Korea and does not levy taxes on dividend income, making it favorable for corporate operations. There are also expectations that the local corporation will actively participate in maintenance, repair, and overhaul (MRO) bids for U.S. Navy vessels, as the U.S. Navy's 7th Fleet has a core hub at Changi Naval Base.
According to the shipbuilding industry on the 6th, HD Hyundai Heavy Industries plans to hold a board meeting on the 26th of this month to resolve the establishment of the overseas corporation. Subsequently, on December 23rd, HD Hyundai Heavy Industries and its parent company HD Korea Shipbuilding & Offshore Engineering will invest 40% and 60%, respectively, to establish the Singapore corporation.
Once the Singapore corporation is established, HD Korea Shipbuilding & Offshore Engineering and HD Hyundai Heavy Industries plan to contribute equity from their subsidiaries: HD Hyundai Vietnam Shipbuilding, HD Hyundai Heavy Industries Philippines, and HD Hyundai Vina (tentatively Doosan Vina). The plan is to establish a management system for overseas corporations centered around the Singapore corporation, after which they will aggressively pursue shipyard acquisitions and mergers.
The corporate tax rate in Singapore is a maximum of 17%, and a tax relief benefit is provided for net profits generated within the first three years after establishment. Korea applies higher tax rates in higher brackets, resulting in a heavier burden on corporations.
Singapore offers tax exemptions for income, dividends, and capital generated overseas. With tax treaties in place with over 80 countries, the tax burden is reduced for overseas operations. Additionally, there is no taxation on dividends when distributed to shareholders.
There is also a possibility that the Singapore corporation will perform well in U.S. Navy MRO bidding contests. The U.S. 7th Fleet, based in Japan, has established maintenance and supply bases in allied nations, with Changi Naval Base in Singapore being one of the key locations. In March, during an MRO bidding contest involving a logistics support vessel from the 7th Fleet, Singapore's ST Engineering won the bid, reportedly highlighting its geographical advantage.
The Singapore corporation of HD Hyundai Heavy Industries is geographically close to the Philippines and Vietnam, enabling collaboration in workforce and equipment supply chains among overseas shipyards. In particular, the Philippine Subic Shipyard, where vessel construction began this month, has previously served as a U.S. naval base and is mentioned as a potential MRO base.
HD Hyundai has ruled out the possibility of an initial public offering for the Singapore corporation. A company official noted, "There are no plans for an IPO yet. Singapore was chosen as the optimal location to efficiently manage production facilities in Southeast Asia; hence the decision to establish the corporation."