[3rd Supplementary Budget] 'Record-breaking' Trade Finance Increased Again... Home Appliance Refunds Cut by 150 Billion Won by the National Assembly, Raised by 300 Billion Won

Sung Yoon-mo, Minister of Trade, Industry and Energy. / Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Moon Chaeseok] The Ministry of Trade, Industry and Energy announced that it will submit the third supplementary budget bill worth 1.1651 trillion KRW to the National Assembly. An additional 327.1 billion KRW was allocated to trade finance, which saw the largest ever increase in support. For the "High-Efficiency Home Appliances Rebate Program," which the National Assembly cut by 150 billion KRW in the first supplementary budget in March, the ministry is requesting an increase of 300 billion KRW.

On the 3rd, the Ministry of Trade, Industry and Energy stated that it plans to submit this supplementary budget bill to the National Assembly. To overcome the economic crisis and prepare for the post-COVID-19 era, 26 projects will be promoted. Specifically, funds will be allocated to ▲export and investment activation (361.7 billion KRW for 4 projects) ▲domestic demand stimulation and crisis industry support (317.5 billion KRW for 4 projects) ▲Korean-style (Green and Digital) New Deal (478 billion KRW for 16 projects) ▲K-quarantine industry development (7.9 billion KRW for 2 projects), among others.

Source: Ministry of Trade, Industry and Energy

First, 90.4% of the export and investment activation budget, amounting to 327.1 billion KRW, will be allocated to contributions to the Korea Trade Insurance Corporation (K-SURE). According to the ministry, the trade insurance fund has been increased by about 673 billion KRW this year (296 billion KRW in the base budget + 50 billion KRW in the first supplementary budget + 327.1 billion KRW in the third supplementary budget). The contributions will strengthen trade finance in six areas, including ▲support for winning overseas economic stimulus projects ▲support for early cash conversion of export receivables ▲guarantees for emergency export stabilization funds.

Support for winning overseas economic stimulus projects is a program that provides trade finance to overseas ordering parties on the premise of ordering from Korean export companies, enabling our export companies to participate in overseas infrastructure and construction projects.

Early cash conversion of export receivables is a system that helps companies convert export receivables into cash immediately at commercial banks without waiting for the usual credit period of more than three months after export on credit.

Guarantees for emergency export stabilization funds are policies where K-SURE guarantees loans from banks to export SMEs for export preparation and execution funds.

All 327.1 billion KRW of contributions will be transferred to K-SURE. K-SURE selects export companies to support based on its own evaluation of credit ratings and business history.

Source: Ministry of Trade, Industry and Energy

Additionally, 20 billion KRW will be prepared as exclusive subsidies for returning companies. Previously, only 10 billion KRW per company was supported by national funds, but with the third supplementary budget, 15 billion KRW will be provided to companies in the metropolitan area (limited to advanced industries) and 20 billion KRW to companies outside the metropolitan area, respectively.

Furthermore, to refine the global value chain (GVC) restructuring policy to be announced next month, a "Pan-Government Return Attraction Team" will be formed together with the Ministry of Economy and Finance, Ministry of Land, Infrastructure and Transport, and the Office for Government Policy Coordination. The team will investigate whether companies have the willingness to return to their home country.

An additional 300 billion KRW will be allocated for the "High-Efficiency Home Appliance Purchase Rebate" program. This program refunds 10% of the purchase price when buying high-efficiency home appliances to revive consumer sentiment. If the ministry's request is accepted, this year's budget will increase to 450 billion KRW (including 150 billion KRW from the first supplementary budget).

The ministry stated that since the policy was implemented on March 23, the response has been positive, and the previous budget of 150 billion KRW is expected to be fully exhausted around August. It explained that about 50 to 60 billion KRW per month in rebates will be needed until the end of the year, which is why 300 billion KRW was allocated.

The fact that the funds are raised through the "Electricity Fund," which is deducted from the national electricity bill, is a point of controversy. According to Article 36 of the Enforcement Decree of the Electricity Business Act, the fund is accumulated by deducting 3.7% from the electricity bills paid by the public.

In 2016, the ministry fully funded the same program with Korea Electric Power Corporation's (KEPCO) funds amounting to 100 billion KRW, and last year, 60% of the 30 billion KRW was covered by the Electricity Fund and 40% by KEPCO's funds. In the first supplementary budget, it was decided to cover 100% with the Electricity Fund.

At the time of the first supplementary budget, the National Assembly Budget Office pointed out that "the Electricity Business Act does not specify 'stimulating consumption' as a purpose, and promoting the rebate program as a supplementary budget project is somewhat inconsistent with the fund's purpose." In response, the ministry said, "Article 49 of the Electricity Business Act states that the fund can be used for 'electricity demand management,' so we applied for the supplementary budget necessary for the rebate program."

Source: Ministry of Trade, Industry and Energy

Among the 16 projects under the "Korean New Deal," the new project "Industrial Complex Solar Loan Support" stands out with an investment of 200 billion KRW. It is a core policy of the ministry's plan to build "low-carbon green industrial complexes." The policy will be applied to seven industrial complexes including Changwon National Industrial Complex in Gyeongnam and some of the more than 1,200 general industrial complexes.

Lee Hojun, Director of Planning and Coordination at the Ministry of Trade, Industry and Energy, said, "Of the government's total budget of 512 trillion KRW this year, the ministry's budget was about 9.5 trillion KRW, or 1.8%. In the third supplementary budget, its share increased to 4.6%. Especially, about 70% of the Korean New Deal supplementary budget will be spent on new projects, which will accelerate 'low-carbon and energy transition' projects through these new initiatives."

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