Government to Establish 40 Trillion Won Industrial Stability Fund... Expands 35 Trillion Won in Financial Support for Livelihoods

President Moon Jae-in is presiding over the 5th Emergency Economic Meeting at the Blue House on the morning of the 22nd. (Yonhap News)

[Asia Economy Reporter Kim Hyo-jin] The government has decided to raise more than 40 trillion won to support key industries facing crises due to the impact of the novel coronavirus infection (COVID-19). Additionally, the government plans to increase the existing "100 trillion won + alpha (α)" support for companies affected by COVID-19 by 35 trillion won.

The Financial Services Commission announced on the 22nd that the "Employment and Corporate Stability Measures to Overcome the Job Crisis," containing these details, were finalized at the 5th Emergency Economic Meeting chaired by President Moon Jae-in.

The government will establish a stabilization fund of more than 40 trillion won to support seven key industries experiencing difficulties in raising funds, including aviation, shipping, automobiles, shipbuilding, and machinery. The 40 trillion won will be raised by issuing government-guaranteed fund bonds, and additional necessary funds will be attracted through private funds or investments in special purpose vehicles, according to the government's plan.

However, support will be conditional on maintaining employment for a certain period, restricting executive compensation and dividends, and prohibiting treasury stock acquisitions to prevent moral hazard. Furthermore, 15-20% of the support funds will be provided in the form of equity-linked securities or preferred stocks, allowing investors to share in profits if gains occur later.

The government explained that before establishing the fund, urgent funds for the aviation industry and others will first be supported by the Korea Development Bank and the Export-Import Bank of Korea, with operations being temporary for five years. The government requested the National Assembly's cooperation, stating that amendments to the Korea Development Bank Act and other laws are necessary.

Previously, financial support for small business owners and companies decided at the 1st and 2nd Emergency Economic Meetings will be increased by 35 trillion won to a total of more than 135 trillion won. Support for small business owners will be increased by 10 trillion won, and the issuance scale of P-CBOs (bond-backed securities) to assist companies will be expanded by 5 trillion won. Additionally, 20 trillion won will be invested to purchase corporate bonds of companies with low credit ratings to facilitate liquidity.

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