Government Pushes Selective Support... 4th Disaster Relief Fund Focused on Small Business Owners and Self-Employed

Exclusion of Some Wage Earners Including Vulnerable Corporate Taxi Drivers Confirmed
Hong Ik-pyo, Policy Committee Chair: "Fiscal Situation Relatively Stable... Ample Room for Expansion"
Conflict with Ruling Party Expected to Deepen

[Asia Economy Reporters Kim Hyunjung and Jang Sehee] The government, which has shown differing opinions with the Democratic Party of Korea regarding the target recipients of the 4th disaster relief fund, has begun preparing its own plan focusing on selective payments limited to small business owners and self-employed individuals. It has settled on excluding some wage earners such as vulnerable employment groups and corporate taxi drivers who had been included as beneficiaries so far. The conflict between the ruling party and the government appears to be deepening after Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki opposed the Democratic Party leader Lee Nak-yeon's policy of selective and universal support.

According to the Ministry of Economy and Finance on the 4th, the government is narrowing the beneficiaries of the 4th disaster relief fund to small business owners and self-employed individuals and is reviewing the budget and payment methods. A senior government official said, "For this 4th disaster relief fund, we intend to include only small business owners and self-employed individuals who have suffered significant sales damage due to COVID-19," adding, "This is to fill the gap just before the institutionalization of the loss compensation system, and others will be excluded from the target." Specifically, a differentiated support plan based on the previous 3rd disaster relief fund case is likely. This includes calculating the amount of support proportionally to the level of restrictions, such as △businesses prohibited from gathering like karaoke rooms, PC rooms, and indoor group exercise facilities △businesses with operational restrictions like general restaurants and franchise coffee shops △and other general businesses with annual sales under 400 million KRW. Wage earners, special types of workers/freelancers, unemployed youth, and corporate taxi workers are expected to be excluded from the 4th disaster relief fund targets under government review.

The legislative enactment of the loss compensation system, considered a key COVID-19 response measure by the government, is being pushed to a lower priority. A government official said, "After discussing the 4th disaster relief fund in March, we can start full-scale review of the loss compensation system," adding, "There are many detailed issues to negotiate, from securing funding to determining the support targets." However, the government has decided not to tax the paid loss compensation amounts, explaining that since it is not income from business activities, partial recovery through taxation is not possible.

The government's "my way" approach is increasing the likelihood of clashes with the ruling party. The ruling party is expected to oppose the government's plan to narrowly limit the recipients of the 4th disaster relief fund due to fiscal capacity concerns. Hong Ik-pyo, the Democratic Party Policy Committee Chair, said at the party's policy coordination meeting that "Korea's fiscal support relative to last year's GDP was 3.5%, resulting in a national debt ratio increase of 3% from the previous year to 44%," adding, "This means Korea's fiscal situation is relatively sound and there is still room to further expand the role of fiscal policy for the people and economic stimulus." He continued, "Conversely, it can be said that Korea's fiscal policy was relatively passive compared to other countries last year and did not fulfill its role properly."

He also expressed willingness to combine selective support funds. Hong said, "We plan to prepare a supplementary budget as soon as possible through active consultation with the government, and that supplementary budget will strongly reflect both universal payments to all citizens and selective payments."

Experts tend to support the government's stance. There are claims that it is necessary to more precisely identify low-income earners and those who suffered sales losses rather than simply providing disaster relief funds to specific industries.

Professor Sung Tae-yoon of Yonsei University's Department of Economics pointed out, "It is more important to identify those with low income or whose existing income has sharply declined due to COVID-19 than to categorize small business owners and self-employed individuals." A government official added, "It is important to set the scope of the disaster relief fund as quickly as possible," adding, "If the number of candidates for review increases, the execution speed may slow down."

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