[Takryucheongron] Viruses Do Not Consider Size.

Yoo Hwan-ik, Head of Corporate Policy Office, Federation of Korean Industries

Normally, when we have a fever, we go to a pharmacy to buy medicine or visit a local clinic. If symptoms worsen, we go to a general hospital for treatment. However, in the current emergency disaster situation caused by the novel coronavirus infection (COVID-19), our response is on a completely different level than when we simply have a fever.

Before going to a hospital, we call 1339 for consultation, and if COVID-19 is suspected, we go to a screening clinic for testing and self-quarantine. This is to prevent any possible transmission.

Our economy is currently in an emergency disaster situation. According to the March employment trends from Statistics Korea, the number of employed people decreased by 195,000 in March, marking the largest drop since the global financial crisis. The Bank of Korea indicated negative growth in the first quarter, and the negative impact is expected to be greater in the second quarter.

How different is the government's approach to the industrial crisis now that an unforeseen emergency disaster situation has arisen compared to before COVID-19?

So far, including five comprehensive measures, the government’s announced corporate support policies have selectively supported companies based on their size, as before the spread of COVID-19. Support for small and medium-sized enterprises (SMEs) and small business owners who are struggling to survive day-to-day is of course necessary.

The problem lies in starting by excluding large corporations from the support targets. Although supplementary measures have been put in place to expand the support targets, initially, large and medium-sized enterprises were excluded from the duty-free shop rent reduction, and emergency operating funds for the airline industry were limited to low-cost carriers (LCCs).

Tax support such as income tax and corporate tax reductions for companies in special employment support industries, employment crisis areas, and disaster areas were also limited to small business owners and SMEs, excluding large corporations.

However, as mentioned earlier, this is an emergency disaster situation. The COVID-19 virus is ravaging almost all industries regardless of company size or sector. Production and consumption in February decreased at the largest rate in nine years, and as of April, the average daily export amount has dropped nearly 17% compared to the previous year.

As COVID-19 spreads worldwide, this damage is expected to worsen. The problem is that even previously sound companies are facing liquidity difficulties as their business partners and export routes are blocked and factories shut down due to COVID-19.

Even solid large corporations have started to run dry on cash flow as production and consumption activities halt due to a small virus. Korea’s leading airlines are implementing unpaid leave due to lack of funds for salaries, and major oil companies are expected to face credit rating downgrades one after another due to accumulating inventory and expanding deficits.

Domestic and overseas factories in the electronics, automobile, and chemical industries are closing, and semiconductor export performance is sharply declining. The industrial ecosystem is blocked at many points, and companies of all sizes are voicing their pain in unison.

Just as our response to a fever has changed since before the spread of COVID-19, the industrial support criteria, which used to be based on company size, must also change. Tailored corporate support policies for the emergency economic situation are needed to prevent the crisis from spreading.

On the 13th, the National Assembly Budget Office released a report analyzing major countries’ COVID-19 tax support policies, stating that the top priority of COVID-19 support measures worldwide is 'securing corporate liquidity.' Accordingly, they analyzed that relief efforts are being pursued regardless of company size if the company is affected.

COVID-19 is an unprecedented natural disaster. Both large and small companies are helplessly suffering in the face of COVID-19, which is sweeping through domestic industries in an instant. Emergency relief measures for affected companies, regardless of size, are necessary to prevent the industrial sector from collapsing like dominoes.

Since this crisis is not due to any fault of the companies but caused by an unpredictable virus, the government’s swift and full support is needed to minimize the shock. Even sound large corporations can go bankrupt due to temporary liquidity problems, and if large corporations collapse, the ripple effects will be unimaginably large and recovery even more difficult. The virus does not discriminate by size.

Yoo Hwan-ik, Director of Corporate Policy, Federation of Korean Industries

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