40 Trillion Draft Fund, Total Borrowing 500 Billion Won · Support for Aviation and Shipping Companies with Over 300 Employees

[Asia Economy Reporter Kim Hyo-jin] At the 4th Emergency Economic Central Countermeasures Headquarters meeting held on the 20th at the Government Seoul Office, chaired by Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki, specific support targets and utilization plans for the 40 trillion won-scale Period Industry Stabilization Fund were decided.

The Period Industry Stabilization Fund will provide support within target industries such as aviation and shipping, with a total borrowing amount of 500 billion won, to companies with 300 or more employees that have been affected by COVID-19. Essentially, the focus is interpreted as supporting medium-sized or larger companies.

The recently confirmed amendment to the Enforcement Decree of the Korea Development Bank Act reduced the originally seven supported industries to aviation and shipping. However, if it significantly impacts core technology protection, industrial ecosystem maintenance, the national economy, employment stability, or national security, the Ministry of Strategy and Finance and the Financial Services Commission may consult and provide support regardless of the industry regulations in the Enforcement Decree.

The government plans to provide funds in various ways suitable to the company's conditions, such as liquidity support and capital expansion. It calculates the necessary operating funds that are difficult to cover with the expected revenue flow reduced due to COVID-19 and supports that amount accordingly.

Funds required for repayment of existing borrowings are not included in the calculation of the support amount. However, if repayment of existing borrowings is impossible despite changes in borrowing conditions, and it is judged that achieving employment stability is difficult even with fund support, exceptions may be made to include such cases.

Additionally, to support partner companies of businesses classified as period industries, a 'Partner Company Support Specialized Program' utilizing the Period Industry Stabilization Fund within a limit of 1 trillion won may be introduced.

The controversial condition of 'maintaining a certain employment retention rate' has been finalized as maintaining at least 90% employment as of June 1 for six months from the start date of fund support. For example, if a company has 100 employees as of June 1 and receives support at the end of June, it must maintain employment of 90 or more employees until the end of this year.

If it is unavoidable to set the rate lower than 90%, adjustments may be made after consulting relevant ministries. Compliance with employment retention will be checked by verifying the number of insured employees under employment insurance.

Companies receiving support must submit efforts made by labor and management to maintain employment to the Korea Development Bank, and if necessary, the bank will verify this with the cooperation of the Ministry of Employment and Labor. 'Efforts' refer to joint efforts by labor and management such as refraining from layoffs for business reasons, job transfers, adjustment of working hours, and reduction of welfare expenses.

To ensure that the benefits from fund support are shared beyond the supported companies to the public, at least 10% of the support amount will be provided in the form of acquiring stock-related bonds such as convertible bonds (CB) and bonds with warrants (BW). Measures to prevent moral hazard, such as restrictions on dividends and treasury stock acquisition, are also maintained.

These conditions reflect the principle that the establishment of the Period Industry Stabilization Fund is not merely to support crisis-hit companies but to protect jobs, and that the benefits of support should not be concentrated within the supported companies and their management.

The government intends to expedite the start of support from the Period Industry Stabilization Fund by next month. In this regard, the Financial Services Commission announced at the Financial Risk Response Team meeting chaired by Vice Chairman Son Byung-du on the previous day that the Period Industry Stabilization Fund Secretariat will be launched at the Korea Development Bank within this week, and the Fund Operation Committee will be formed by next week.

Period Industry Stabilization Fund bonds will be issued early next month, and applications for support will also be accepted early next month.

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