Saneun and Su-eun Provide Support Before Fundraising When Companies Need Emergency Funds (Comprehensive)

Deputy Prime Minister Hong Nam-ki Announces Industry-Specific Support Measures at 5th Crisis Management Meeting

Liquidity Supply to Major Airlines... Tariff Cost Reduction for the Automotive Industry

Total KRW 1.25 Trillion Support for Shipping Companies

"Full Effort for Economic Recovery in the Second Half"

[Asia Economy Reporters Kim Hyun-jung (Sejong), Park So-yeon, Joo Sang-don (Sejong)] The government will provide emergency liquidity support to full-service carriers (FSCs) facing crisis due to the COVID-19 pandemic, contingent on their self-help efforts. For the automotive industry, tariff burdens will be reduced and future vehicle research and development (R&D) will be supported through a dedicated task force. As the shock from COVID-19 expands to key industries, the government has introduced additional measures. While the industry welcomes these steps, there is a consensus that more decisive responses are necessary.

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, announced these industry-specific support measures on the morning of the 23rd at the 15th Economic Ministers' Meeting on COVID-19 Response and the 5th Crisis Management Meeting held at the Government Seoul Office. Hong said, "From the second quarter, the global economic downturn is expected to intensify, and the real economy and employment shocks are likely to expand. We will make every effort to withstand the downward pressure on growth and employment in the second quarter and to ensure that domestic demand and exports show signs of recovery in the second half."

◆ Expansion of Support for LCCs= First, the government will provide emergency liquidity support to FSCs, which had previously been excluded from support, through the Industrial Stability Fund exceeding KRW 40 trillion, announced the day before, contingent on their self-help efforts. The Korea Development Bank and the Export-Import Bank of Korea will provide urgent funds before the fund is established. For low-cost carriers (LCCs), the government is also considering expanding the existing support scale of about KRW 300 billion. The reduction and deferral of airport facility usage fees will be extended at least until August, with the reduction effect expected to reach KRW 54.9 billion by August. Additionally, the aircraft property tax rate will be temporarily lowered from 0.3% to 0.25%, and special employment support sectors will be expanded to include ground handling, duty-free shops, and airport bus services, allowing up to 90% of wages to be supported by employment retention subsidies.

For the automotive industry, tariff and inventory stockpiling burdens will be eased. The government is considering expanding the tariff exemption on air freight charges, which currently applies to three parts including wiring harnesses, to include vehicle electric motors and filters. Payment deadlines for tariffs and value-added tax (VAT) related to parts imports for the first half of the year will be extended up to 12 months, with collection deferred for up to 9 months. The purchase of approximately 8,700 vehicles by the public sector this year will be expedited, with up to 70% of the payment made in advance upon contract. Starting next month, a 'Parts Company Business Restructuring Support Task Force' will be launched to support future vehicle-related R&D.

◆ Up to KRW 470 Billion Support for HMM= Shipping companies will receive a total of KRW 1.25 trillion in liquidity support. In particular, the national deep-sea shipping company HMM (formerly Hyundai Merchant Marine) is expected to receive up to KRW 470 billion. For ship financing, the Korea Ocean Business Corporation will invest KRW 100 billion in subordinated investments for existing vessels of shipping companies. The loan-to-value ratio (LTV) of ships, currently at 60-80%, will be increased up to 95% to provide additional liquidity for ships with existing financing.

The Korea Ocean Business Corporation will also defer principal and interest payments for all ships under its existing sale and leaseback (S&LB) program for 2020. The deferral will cover all ships, totaling 23 vessels, with an annual principal and interest payment deferral amounting to KRW 28.86 billion. Furthermore, the funding for the S&LB program promoted by the Korea Ocean Business Corporation and the Asset Management Corporation will be increased to KRW 200 billion this year. From the KRW 1.68 trillion Korea Credit Guarantee Fund's 'COVID-19 Corporate Bond Issuance Support Program (P-CBO),' shipping company bonds will be secured up to about KRW 260 billion. The Korea Ocean Business Corporation will participate as a subordinated investor in the P-CBO to increase the proportion of shipping company bonds and reduce the burden of subordinated purchases on companies.

For the refining and shipbuilding industries, tax payment deferrals and production financing support will be provided. The refining industry will have extended deadlines for fuel taxes (transportation, energy, environmental taxes, and individual consumption tax) and tariffs and VAT on imported items such as crude oil. The shipbuilding industry will continue to receive production financing support (about KRW 8 trillion in 2020) and order support through the issuance of refund guarantees (RG). The extension of the special employment sector designation for shipbuilding is also under consideration.

◆ Industry Calls for Additional Measures to Prepare for Prolonged COVID-19= While the industry welcomes the current measures, it emphasizes the need for additional support. An aviation industry official said, "Cost relief measures are positively evaluated, but given the sharp drop in passengers, the practical benefits may not be significant," adding, "More prompt and bold decisions from financial authorities are needed regarding liquidity issues." In the automotive industry, some questioned the effectiveness of government support. An industry insider said, "The main contents of this support plan are short-term financing and leave allowances, with no measures to prepare for the prolonged COVID-19 situation," and added, "Small and medium-sized vendors with low collateral and credit ratings find it difficult to obtain loans."

The refining industry expressed relative neglect in this support. Compared to other industries receiving active government support such as emergency liquidity, the refining sector is limited to passive measures like tax payment deferrals. A refining industry official said, "The refining industry is a 'Grade A' facility under national security objectives and a key national industry where public authority is first deployed in crisis situations, but the support is not proactive." Some interpret this as due to the capital-intensive nature of the industry, relatively low employment numbers, and lower risk of restructuring, which may have deprioritized it.

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