Passport Think Tank "Government Self-Employment Measures May Instead Produce More Credit Delinquents"

[Asia Economy Reporter Park Cheol-eung] 'The Future Research Institute,' the largest think tank within the Democratic Party of Korea, criticized the government's support measures for self-employed businesses, stating that they "could rather lead to the production of more credit delinquents." They pointed out that without addressing structural problems, merely providing loans in a 'pouring water into a bottomless jar' manner will deepen the crisis.

Kim Ki-sik, Policy Director of The Future Research Institute, emphasized in the recent '2020 Korea Self-Employment Report' that "while measures for self-employed individuals facing immediate difficulties are necessary, since the crisis is based on structural causes, there are points to be cautious about in support policies aimed at maintaining self-employment."

Director Kim noted, "The crisis in self-employment, centered on retail and food service sectors, has accelerated due to the COVID-19 pandemic, but it had already been structurally declining even before that," adding, "Even with liquidity support, the probability of reversing the current situation or restoring sales to previous levels is low."

He continued, "Even if businesses continue through ultra-low interest loans, the likelihood of being unable to repay debts is high, and the government's support measures for self-employed individuals could instead result in the creation of more credit delinquents," he analyzed.

Since March, the government has implemented financial measures such as supplying ultra-low interest emergency management funds and guarantee support for self-employed individuals hit by COVID-19. The third supplementary budget also includes support measures such as loans and guarantees worth 10 trillion won to assist small business owners facing liquidity crises.

Director Kim cited a report from the credit rating agency NICE in February, stating, "The issue of self-employed business loans had been steadily raised even before the COVID-19 outbreak." As of October 2019, the personal business loan market had increased by 11% compared to the same period the previous year, which was much higher than the 4% increase in the household loan market. Additionally, it was found that 474,000 self-employed individuals had loans from two or more financial institutions.

Director Kim proposed "fundamental and effective measures for the entire self-employment sector through this opportunity," arguing that "encouraging entrepreneurship without experience just because youth employment is difficult should be avoided, and for retirees, appropriate tailored job policies for the elderly should be established to restrain unprepared entry into low-barrier industries such as retail or food service." He stressed that efforts should be made to absorb them into the wage labor market as much as possible.

He further emphasized, "Above all, premature operating fund loans must be carefully guarded against so that they do not lead to situations where accumulated assets during youth and middle age are squandered and debts pile up."

The Future Research Institute was established in 2015 as the think tank of 'The Better Future,' a reform-oriented group within the Democratic Party. Former lawmaker Won Hye-young serves as chairman, and lawmaker Woo Sang-ho is the director. Lawmakers Nam In-soon, Park Hong-geun, and Hong Ik-pyo are also board members. Director Kim previously served as policy director of the People's Solidarity for Participatory Democracy, a member of the 19th National Assembly, and chairman of the Financial Supervisory Service.

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