[National] "Local Currency Discount Rate at 10%" vs "Concerns over Kkang"

[Asia Economy (Uijeongbu) = Reporter Lee Young-gyu] Gyeonggi Province and the government are expressing differing opinions on raising the 'local currency' incentive (discount rate) to 10%.

Local governments within the province argue that local currency has greatly contributed to revitalizing neighborhood commercial districts and insist that the discount rate should be increased from the current 6% range to 10%. Especially amid the recent spread of the novel coronavirus infection (COVID-19), which has caused unprecedented stagnation in local markets such as small business owners and self-employed individuals, local governments claim that expanding local currency incentives is urgently needed to revitalize traditional markets within the region.

On the other hand, the government opposes raising the local currency discount rate to 10%, citing concerns that it could be abused for fraudulent circulation such as 'local currency kkang' (illegal cash conversion), which could become frequent.

According to Gyeonggi Province and each city and county on the 28th, 31 local governments in the province have been issuing local currency since April last year to revitalize the local economy. The issuance scale this year is 287.7 billion KRW for policy issuance and 512.3 billion KRW for general issuance, totaling 800 billion KRW. This is 61% more than last year's issuance target of 496.1 billion KRW.

These local governments provide a 6% discount as an incentive when purchasing local currency. In other words, if you purchase 100,000 KRW, you get 106,000 KRW credited. This is according to current government guidelines. The guidelines stipulate that the local currency discount rate is normally 5-8%, and temporarily 10% for a limited period.

The issue is that recently, to expand the positive effects of local currency, local governments in the province have been pushing to raise the local currency discount rate from 6% to 10%, showing disagreement with the government.

Yangpyeong-gun and Hwaseong-si recently decided to apply a permanent 10% discount rate.

A Yangpyeong-gun official said, "Compared to other regions, Yangpyeong-gun lacks large marts, so a lot of funds that should circulate locally are flowing out," adding, "To encourage consumers to spend within the jurisdiction, a stronger incentive than other regions was needed, so we decided to raise the discount rate."

A Hwaseong-si official also explained, "We believe local currency greatly helps small business owners in the city," and "We are considering applying a permanent 10% discount rate to promote revitalization."

However, the government opposes the permanent 10% application.

The government’s view is that raising the incentive rate alone without establishing penalty regulations to prevent fraudulent circulation could increase transactional risks. In particular, the government points out that the higher the incentive rate, the greater the profit gained through 'kkang'. However, the government has shown a flexible stance, stating that if measures to sanction fraudulent circulation are established, it may consider raising the permanent discount rate.

A Gyeonggi Province official stated, "The best way is for small business owners and residents to use local currency without incentives, but since local currency is still in its early stages, various alternatives such as additional discount rate increases can be considered to establish a virtuous cycle of revitalizing local commercial districts through expanding local currency."

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