Joint Import of 'Raw Materials' Including Mask Fabrics... Response to the Impact of COVID-19

[Asia Economy Reporter Kim Daeseop] The Ministry of SMEs and Startups will officially implement support for 'joint import of raw and subsidiary materials' to assist small and medium-sized enterprises (SMEs) struggling due to the spread of the novel coronavirus infection (Wuhan pneumonia). Additionally, starting from the 13th, financial support including policy funds and guarantees worth 250 billion KRW will be provided to support SMEs and small business owners.

According to the Ministry of SMEs and Startups on the 12th, at the Economic Ministers' Meeting and the 4th Economic Vitality Measures Meeting held at the Government Seoul Office, the 'Support Measures for SMEs and Small Business Owners in Response to the Novel Coronavirus' containing these details were announced.

First, the joint purchasing system, which was only implemented domestically, will be expanded to imports through collaboration among the Korea Federation of SMEs, Korea Technology Finance Corporation, Export-Import Bank of Korea, and specialized trading companies.

This is a countermeasure against supply difficulties of Chinese raw and subsidiary materials such as mask fabric, aiming to reduce the import unit price of raw and subsidiary materials for SMEs through joint purchasing. A dedicated guarantee for joint purchasing will be used to guarantee the purchase payments of participating companies. The guarantee limit for this year is set at 136 billion KRW.

Support will also be provided to discover alternative procurement sources and alternative export markets for problematic items through cooperation with credit rating agencies that hold extensive overseas market information.

Furthermore, management stabilization funds such as capital and guarantees will be supplied from the 13th to SMEs experiencing export and sales disruptions. In particular, financial support including 25 billion KRW in emergency management stabilization funds (Small and Medium Business Corporation) and 105 billion KRW in guarantees (Korea Technology Finance Corporation) will have reduced interest rates and guarantee fees.

The interest rate for emergency management stabilization funds will be lowered by 0.5 percentage points from the existing 2.65% to 2.15%, and the guarantee ratio will be preferentially increased from 85% to 95%. The guarantee fee rate will also be reduced from 1.3% to 1%. Additionally, to prevent chain bankruptcies caused by production and delivery disruptions, the scale of trade credit insurance underwriting will be expanded from the original 2 trillion KRW to 2.2 trillion KRW.

To stabilize the management of small business owners affected by the novel coronavirus, 20 billion KRW in management stabilization funds (Small Enterprise and Market Service) and 100 billion KRW in special guarantees (Regional Credit Guarantee Foundations) will also be supplied from the 13th. The interest rate on management stabilization funds will be reduced from 2% to 1.75%. The loan interest rate for the Yellow Umbrella Mutual Aid, a social safety net for small business owners, will also be temporarily lowered from 3.4% to 2.9% to reduce cost burdens.

The Ministry of SMEs and Startups will also expand the network of 'Caring Companies' it selects to spread a voluntary win-win atmosphere in the private sector. Through supplementing the Caring Companies business agreement, voluntary private sector efforts to support damage, such as expanding special guarantees for women-owned businesses, will be promoted.

Support for delivery of relief supplies to SMEs operating in China, and distribution of masks and hand sanitizers to small business owners and traditional markets will continue to be implemented.

This SME and small business owner support measure is a concrete follow-up to the emergency support announcement for relief supplies such as masks for SMEs and small business owners operating in China earlier this month, and the announcement of policy financial support plans for SMEs and small business owners.

The Ministry of SMEs and Startups plans to follow up by securing additional resources for management stabilization, diversifying export methods to China including fostering specialized Chinese malls, and securing additional measures to revitalize domestic demand to enhance the effectiveness of this measure.

Minister Park Young-sun of the Ministry of SMEs and Startups said, "This support plan focuses on policy support to quickly assist the damages that have occurred and proactively respond to anticipated damages," adding, "Just as the public and private sectors effectively overcame the previous Japan export regulation crisis together, the novel coronavirus situation can also be sufficiently overcome if the private sector and government join forces."

This content was produced with the assistance of AI translation services.