Support Industries for 40 Trillion Draft Fund Reduced to Two: Aviation and Shipping

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[Asia Economy Reporter Kim Hyo-jin] The support targets of the 40 trillion won-scale Period Industry Stabilization Fund (hereinafter referred to as the PISF) have been narrowed down to aviation and shipping.

The Financial Services Commission announced that the amendment to the Enforcement Decree of the Korea Development Bank Act (KDB Act), which serves as the basis for establishing the PISF, containing this content, passed the Cabinet meeting on the 12th.

The amendment to the KDB Act passed the National Assembly on the 29th of last month. It aims to support period industries struggling due to the novel coronavirus infection (COVID-19).

Initially, the support targets were seven industries including aviation, shipping, machinery, automobile, shipbuilding, electricity, and telecommunications. However, it was revised during the consultation process with related ministries during the legislative notice period (from the 6th to the 8th).

The Enforcement Decree, which passed the Cabinet meeting, designates two industries, aviation and shipping, as support targets, and allows the Financial Services Commission to designate industries that are recognized as needing financial support due to concerns about significant impacts on the national economy, employment stability, or national security, after collecting opinions from the relevant ministries and consulting with the Ministry of Economy and Finance.

The Fund Operation Deliberation Committee consists of seven members with a two-year term (renewable). These members are recommended by the relevant institutions, including the standing committee of the National Assembly in charge, the Minister of Economy and Finance, the Minister of Employment and Labor, the Chairman of the Financial Services Commission, the President of the Korea Development Bank, and the Chairman of the Korea Chamber of Commerce and Industry.

The Financial Services Commission explained that although the Minister of Trade, Industry and Energy was included in the originally proposed draft, it was changed to the Chairman of the Korea Chamber of Commerce and Industry during the opinion collection process.

The issuance of bonds necessary for raising funds follows the procedures for issuing industrial finance bonds under the KDB Act. The methods of corporate support include loans, asset purchases, debt guarantees or underwriting, bond underwriting, equity investment (including convertible bonds and bonds with warrants), and support for special purpose vehicles or funds.

In principle, the exercise of voting rights for stocks acquired by the Korea Development Bank is restricted, but there are two exceptions necessary to preserve the fund’s assets.

These exceptions are when “resolving matters that could significantly affect the value of the stocks” or when “a company receiving financial support applies for restructuring procedures and it is necessary to exercise voting rights to preserve the assets of the Period Industry Stabilization Fund.”

Financial authorities and others plan to coordinate detailed matters for fund operation and aim to activate the fund as early as the end of this month.

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