"Knowing the Impact of COVID-19 but Facing Legal Difficulties" Large Corporations' Support Measures Left Unaddressed

Government "No Separate Support Considered"
Experts "Must Prevent Chain Reactions Like Partner Company Bankruptcies"

[Sejong=Asia Economy Reporters Kim Hyun-jung, Joo Sang-don, Jang Se-hee] Although South Korea's major conglomerates are facing an unprecedented crisis due to the novel coronavirus disease (COVID-19) outbreak, the government is delaying the preparation of support measures citing social atmosphere and public sentiment. Experts unanimously agree that proactive support is urgently needed as the situation could worsen with a chain bankruptcy of partner companies and employment instability if even large corporations falter.

According to the National Assembly and the Ministry of Economy and Finance on the 23rd, the government is not discussing separate support measures for large corporations beyond the emergency support plans for industries and sectors related to COVID-19 that have been announced so far. A senior official from the Ministry of Economy and Finance said, "We are aware that large corporations are experiencing difficulties," but added, "However, it is true that it is difficult from a public sentiment and legal standpoint for the government to step in and support large corporations with taxpayers' money." Another official from the Ministry also explained, "We are not considering support plans specifically for large corporations," and said, "As with the airline industry, if support plans are announced by industry, it is possible that large corporations will naturally benefit."

The departure hall of Terminal 1 at Incheon International Airport was quiet on the 23rd due to the impact of COVID-19. Photo by Moon Honam munonam@

Some criticize the government not only for being passive about support plans for large corporations but also for explicitly excluding them. The duty-free shop industry, which is effectively facing store closures due to paying huge rents to the government, is a representative example. Incheon International Airport Corporation collected a total of 1.0761 trillion KRW in rent from duty-free shops at Incheon Airport last year, of which 91.5% (984.6 billion KRW) was paid by large corporations and 8.5% (91.5 billion KRW) by small and medium-sized enterprises. The government decided to reduce rent by 25% for six months only for some duty-free shops (City Plus and Grand) due to the COVID-19 crisis, but excluded large corporate affiliates and some mid-sized companies (SM and Entas Duty Free). The additional support measure offered was a '3-month payment deferral.' This means the payment deadline is postponed, but the full agreed amount will still be collected.

The monthly sales of the three major duty-free shops at Incheon Airport?Lotte, Shilla, and Shinsegae?used to reach 200 billion KRW, but in March, sales are expected to plummet 80% to 40 billion KRW. However, the rent to be paid is 80 billion KRW, which is twice the sales amount. While the government had proposed a 'good landlord' support plan to share the pain through rent reductions as the market was hit by COVID-19, it has ironically positioned itself as a 'bad landlord.'

At the same time, the government is actively requesting support from large corporations to revitalize consumption in specific industries affected by COVID-19. It asked large corporate-affiliated hotels to increase flower purchases to help the floral industry, which lost its graduation and entrance ceremony peak seasons, and started utilizing large corporations' offline stores and online malls as the largest sales channels for agricultural producers of school meal ingredients who lost their supply destinations.

Experts advise that support for large corporations, including tax reductions, is urgent. Professor Kim Jung-sik of Yonsei University's Department of Economics emphasized, "For large corporations, as exports become difficult and losses increase, credit ratings will fall, which inevitably leads to capital outflows," and added, "Temporary financial support including tax reductions is necessary." He further stressed, "Since the COVID-19 situation is expected to be prolonged, proactive measures are needed," and "We must accurately analyze the impact and implement bold reduction policies accordingly."

Professor Ahn Dong-hyun of Seoul National University (former head of the Korea Capital Market Institute) stated, "It is a situation where funds must be directly provided to companies," and argued, "The government should lend fiscal funds almost interest-free to prevent corporate bankruptcies for the time being."

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