KCCI "Severe Liquidity Issues Due to COVID-19... Support Needed for Large Corporations Too"

'Presentation on Challenges and Suggestions by Major Industries Due to the Spread of COVID-19'

[Asia Economy Reporter Kim Ji-hee] As the novel coronavirus infection (COVID-19) worsens into a pandemic stage, a survey has revealed that South Korean companies are facing severe financial difficulties. Accordingly, there are calls for the government to expand liquidity supply regardless of company size and to significantly allow special extended working hours.

The Korea Employers Federation (KEF), the secretariat of the Economic Organizations Council, announced on the 12th the "Difficulties and Requests by Major Industries Due to the Spread of COVID-19." It compiled opinions from 15 organizations severely affected by COVID-19, centered on 71 industry groups affiliated with the Economic Organizations Council, organizing 8 common requests and 19 key requests by industry.

KEF explained, "The COVID-19 crisis has confronted the world with a complex crisis situation where real economy shocks and financial market volatility are occurring simultaneously," adding, "Our economy, which is highly dependent on global markets, is relatively more affected in terms of production and exports."

It continued, "With our economic sentiment falling to levels seen during the global financial crisis, production, consumption, and investment have all decreased," emphasizing, "Although February indicators worsened, there are concerns that the real economy indicators for March, when the COVID-19 impact fully materialized, deteriorated even further." In fact, last month, the Consumer Sentiment Index (CSI) and the Business Survey Index (BSI) recorded 78.4 and 54 respectively, the lowest since March 2009 during the global financial crisis.

KEF argues that since the current crisis facing Korean companies makes it difficult to predict the extent and intensity of future crises, the government must implement comprehensive measures. Companies commonly requested ▲expansion of liquidity supply regardless of company size or industry ▲resolution and support for corporate financial difficulties ▲significant allowance of special extended working hours ▲expansion of employment retention support ▲early execution of public procurement budgets within the first half of the year ▲strengthened support for smooth overseas business trips of corporate personnel ▲expanded tax support to secure corporate competitiveness.

In particular, most industries pointed to liquidity issues as a priority. KEF stated, "Overall sales are at rock bottom and profits are worsening, while fixed costs to maintain workplaces and labor costs to retain employment are being spent at levels similar to previous years, causing serious liquidity problems," and explained, "Companies affected by COVID-19 should be included in policy fund support targets according to the scale of damage to expand liquidity supply."

Especially in the aviation industry, there are concerns about the collapse of the domestic air transport industry due to liquidity shortages, making government guarantees and loan expansions urgently needed. It was also pointed out that short-term funding support, such as purchasing commercial paper (CP) issued by major manufacturers, should be expanded depending on the situation.

Following liquidity issues, many also pointed to working hours and employment retention. KEF said, "To compensate for production disruptions caused by COVID-19, special extended working hours should be broadly approved regardless of company size if they meet the authorization requirements," and added, "Employment retention support should also be significantly expanded to minimize future employment insecurity."

By industry, the automobile sector requested various incentives to stimulate automobile demand and support to minimize parts supply disruptions. Especially since 62% of Korea’s imports of materials and parts depend on four countries? the United States, Japan, Germany, and China?there are concerns about supply disruptions of key parts if COVID-19 prolongs. The aviation industry, severely affected by COVID-19, requested temporary reductions in property tax on business aircraft and temporary exemptions from rural special taxes on aircraft acquisition tax and parts tax reductions.

Additionally, the electronics and information communication industry called for continued policy projects such as the Korea Sale Festa to revitalize home appliance sales, and the petrochemical industry proposed applying a zero tariff rate on naphtha flexible tariffs. The construction industry requested priority promotion of SOC projects in disaster-declared areas and exemption from preliminary feasibility studies, while the transportation industry requested emergency management fund support for route bus transportation and full support for fuel subsidies.

KEF stated, "Some of these requests have already been accepted by the government, but the extent and targets of acceptance are limited," and added, "Especially large corporations are also experiencing difficulties similar to small and medium enterprises and small business owners due to COVID-19. Since problems faced by large corporations have a broad impact on the entire industry, we ask the government to actively address difficulties regardless of company size."

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