1.5 Trillion KRW 'Global Plant, Construction, and Smart City' Fund Established to Recover Overseas Orders

Measures to Revitalize Overseas Orders

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is presiding over the 215th Ministerial Meeting on External Economic Affairs held at the Government Seoul Office on the 15th.
[Image source=Yonhap News]

[Asia Economy Reporter Joo Sang-don] The government has decided to establish a global PIS fund worth a total of 1.5 trillion KRW to support financing for large-scale overseas order projects such as plants, construction, and smart cities (PIS). This is intended to support overseas orders, which have become more uncertain due to the spread of the novel coronavirus disease (COVID-19) and the decline in oil prices.

On the 15th, the government held an external economic ministers' meeting at the Government Seoul Office, chaired by Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki, and approved the "Overseas Order Activation Plan" containing these details.

Initially, the global infrastructure market was expected to grow moderately this year, but it is currently contracted due to the unprecedented global economic crisis caused by the COVID-19 shock. The UK market information provider IHS Markit has sharply lowered its 2020 market growth forecast from 3.4% to -1.7%.

As worsening conditions such as global economic contraction and falling international oil prices are expected to negatively impact the global infrastructure market for the time being, the government has taken measures to prepare for a decline in overseas orders in the future.

First, the government will comprehensively assess the importance of projects (project scale, economic effects, etc.), efforts to diversify by region, and the possibility of orders within a visible period (2020-2021), and by the second half of this year, select 30 core projects with a total project cost of 100 billion USD to focus support on.

A public-private joint dedicated support system will also be established. The Overseas Order Support Council and working-level meetings will be held regularly to check progress, and the list of core projects will be updated when conditions change. A Team Korea order support group will also be dispatched locally. Additionally, among the core projects, key public institution projects will be selected to exempt project managers from liability in cases of no intentional or gross negligence, and temporary measures will be devised to minimize delays caused by COVID-19 by extending the allowable period for special overtime work at overseas construction sites.

Support for core projects through financial platforms will also be strengthened. A global PIS fund (1.5 trillion KRW) will be established to sufficiently back large-scale projects in the plant, construction, and smart city sectors. Through a leading investment of 150 billion KRW by the Korea Export-Import Bank, private funds will be smoothly attracted, and sector-specific funds will be accelerated: 300 billion KRW for plants, 600 billion KRW for infrastructure, and 400 billion KRW for smart cities. Furthermore, early results will be pursued through the first project investment this year from the previously established rapid investment fund (200 billion KRW).

To respond to new market infrastructure demands such as Iraq reconstruction, financial support of 1.8 trillion KRW targeting ultra-high-risk countries, newly introduced last year by the Korea Export-Import Bank and the Korea Trade Insurance Corporation, will continue. For large-scale investment development projects where domestic companies participate as equity investors, loan support for capital payment will also be expanded.

This plan also includes measures to discover new and additional projects and enhance order capabilities. To discover promising overseas projects early and reduce the burden on ordering companies, the Export-Import Bank will newly introduce support projects for surveys, bidding, and feasibility studies. This will fully cover the costs of feasibility studies (including preliminary feasibility studies). Additionally, government policy advisory services such as joint research to preempt national projects of interest to target countries will be expanded.

Along with this, the government will expand and support a total of "150 trillion KRW + α" by adding 10.9 trillion KRW in guarantees and loans from policy financial institutions to the existing 37 trillion KRW financial package support for new promising projects. Furthermore, to actively promote overseas orders, the average preliminary feasibility study period for overseas projects will be shortened from 7.5 months to within 4 months, and institutional improvements such as improving the joint guarantee system (currently a joint guarantee by 7 institutions) will be actively pursued in parallel.

Deputy Prime Minister Hong said, "The overseas order activation plan is a measure to revitalize overseas orders that will cover this year's export slump," and added, "We will make every effort to achieve this year's order target of 30 billion USD despite the COVID-19 situation through all-out order efforts."

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