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

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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 Stabilization Fund) 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 legal basis for establishing the Stabilization Fund, 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: aviation, shipping, machinery, automobile, shipbuilding, electricity, and telecommunications. However, it was revised during the public notice period for the enforcement decree (from the 6th to the 8th) through consultations with related ministries.

The enforcement decree, which passed the Cabinet meeting, designates two industries, aviation and shipping, as support targets, and stipulates that the Financial Services Commission shall designate other industries that are recognized as requiring 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.

Lee Se-hoon, Director of the Financial Policy Bureau at the Financial Services Commission, explained, "The support policy centered on the originally announced seven industries remains unchanged. Aviation and shipping were included because they raised urgent support needs first, and support timing for other period industries will be adjusted through consultations with related ministries while monitoring market conditions and funding demands."

He also said, "Support for partner companies is expected to be largely provided through a 100 trillion won-scale livelihood and financial stability package program, but if a consensus is formed that protecting partner companies is inevitable to safeguard period industries and the ecosystem, it will be difficult to exclude support."

The Fund Operation Deliberation Committee consists of seven members with a two-year term (renewable). They are recommended by related institutions such as the National Assembly’s relevant standing committees, 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 draft for public notice, 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 corporate support methods include loans, asset purchases, debt guarantees or underwriting, bond underwriting, equity investment (including convertible bonds and bonds with warrants), and support for special purpose entities 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 assets of the fund.

These exceptions are when "resolving matters that may 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."

Companies receiving support must maintain 90% of their employment for a certain period. Financial authorities plan to adjust the employment retention rate within this framework, considering the circumstances and specificities of each industry and company.

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.