Small Business Support Fund, Up to 10 Million Won... Expanded and Broadened Selective Assistance

Ministry of Economy and Finance Announces '2021 Supplementary Budget'... Approved at Cabinet Meeting on 2nd → Submitted to National Assembly on 4th

[Sejong=Asia Economy Reporters Son Seon-hee and Moon Chae-seok] The fourth round of disaster relief funds announced by the government on the 2nd amounts to a total of 19.5 trillion won, including the 15 trillion won supplementary budget approved at the Cabinet meeting that day and the already allocated budget of 4.5 trillion won. This is 10 trillion won more than the 9.3 trillion won third round of disaster relief funds released at the end of last year. The plan is characterized by being designed to provide thicker support to areas that have suffered substantial damage due to the government’s COVID-19 quarantine measures. For businesses under the ‘closure order’ category that had to completely shut down, a maximum of 5 million won in Small Business Owner Support Funds will be provided.

In particular, this disaster relief fund plan provides for up to double the damage support funds if one business owner operates four or more business locations. Accordingly, karaoke room and fitness center owners with multiple establishments can receive up to 10 million won. Additionally, further support such as electricity bill reductions will be provided, so the actual benefits are expected to increase.

However, since deficit bonds must be issued to secure funding, difficulties are expected during the National Assembly’s review process. Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, held a briefing on the matter that day and said, "The power of the supplementary budget is maximized when injected timely," urging the National Assembly to "confirm it as quickly as possible during the March extraordinary session."

◆Small Business Owner Support Fund ‘Plus’: Expanded Targets and Support Amounts= The most notable part of this plan is the significant expansion of both the target recipients and the scale of support compared to the existing Small Business Owner Support Fund. The government named it ‘Support Fund Plus’ and is investing a total of 6.7 trillion won. The previous restriction on the number of employees in service industries (fewer than 5) has been removed, and the sales cap has been raised from 400 million won to 1 billion won, increasing the number of eligible businesses by 1.05 million to a total of 3.85 million. The types of support have also been subdivided from the previous three (closure order, gathering restriction, general business) to five. Closure order businesses are divided into cases where measures continued this year following last year and cases where restrictions were eased to gathering restrictions. For general businesses, cases where average sales in industries such as travel and performance dropped by 20% or more have been newly designated as ‘general (management crisis).’ Other businesses with annual sales under 1 billion won that experienced sales declines are classified as general businesses and receive 1 million won in support.

Notably, unlike before, this plan provides up to double the support funds if one business owner operates multiple business locations. Two locations receive 150% of the support amount, three locations 180%, and four or more locations 200%.

In addition, the government will reduce electricity bills for small business owners for up to three months, with a maximum limit of 1.8 million won (up to 600,000 won per month). The total number of eligible businesses is 1,151,000, including 185,000 closure order businesses and 966,000 gathering restriction businesses.

◆50,000 won Support for Street Vendors... Minimal Support for Vulnerable Groups= One of the most controversial points in this damage support plan was the support for street vendors. Some criticized that providing disaster relief funds through the budget to street vendors who do not pay taxes was inappropriate, but the ruling party and government included them on the grounds that support is necessary from a social community perspective. However, only 40,000 street vendor locations (estimated) that are administratively managed by local governments and registered as businesses will receive 500,000 won per location.

Street vendors not managed by local governments in the informal sector will receive support through a ‘temporary livelihood support fund.’ The government will provide a one-time payment of 500,000 won to 800,000 households of marginal working poor who are struggling to make a living due to the COVID-19 crisis. The required budget is 406.6 billion won. Additionally, 10,000 university students facing difficulties due to their parents’ unemployment or business closure will receive a special work-study scholarship of 2.5 million won over five months.

While small business owners receive direct support of around 6 trillion won along with electricity bill reductions and financial support, support funds for vulnerable groups amount to only about 1 trillion won. Kim Tae-gi, a professor of economics at Dankook University, said, "The discussion on the fourth disaster relief fund itself started from damage compensation, but because the concept of ‘damage compensation’ is ambiguous, the policy has become confused and lost its principles," adding, "Ultimately, since the amount had to be increased compared to the first to third rounds, this is the result, but dissatisfaction among those who do not receive support will grow."

◆Fourth Disaster Relief Fund Payments Begin on the 29th... Opposition Criticizes as ‘Vote-Buying’= According to the roadmap announced by the ruling party and government, the fourth disaster relief funds will be paid starting on the 29th with text message notifications. Coincidentally, this is just nine days before the by-elections to elect the mayors of Seoul and Busan (April 7). Because of this, strong criticism of ‘money politics’ has been raised mainly by the opposition, foreshadowing a difficult review of the supplementary budget.

Kim Jong-in, emergency committee chairman of the People Power Party, pointed out at the party’s emergency committee meeting at the National Assembly that morning, "The ruling party and government suddenly discussed the fourth disaster relief fund and announced urgent payments ahead of the by-elections." Joo Ho-young, floor leader, also strongly criticized, saying, "This is practically no different from vote-buying," and "The public must be awakened to the ruling party’s reckless vote-buying using the national treasury."

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