"Quickly vs. Thoroughly" The Loss Compensation System Dilemma

"First lend and repay differentially later" vs. "No disruption of financial order"
Retroactive application, majority opposition "Depends on circumstances, but against populism"

On the 22nd of last month, small business owners belonging to the Emergency Survival Measures Committee for the Travel Industry held a press conference in front of the Blue House Fountain in Jongno-gu, Seoul, urging the guarantee of the right to livelihood for workers in the travel industry. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Kim Jong-hwa] "If we delay too long, the damage accumulates and dissatisfaction grows. Let's implement it quickly." "We must not rush. Even if it takes longer, we need to examine it thoroughly."

"Let's first provide loans and then have differentiated repayments based on the scale of damage." "This is an unacceptable act that disrupts financial order."

Korean society is caught in a dilemma over the implementation of the loss compensation system. To reduce the damage to small business owners and self-employed individuals, the ruling party is rushing to propose related bills, but the government insists that more time is needed to create a proper bill, thus moving at a different pace from the ruling party. Experts also have differing opinions on the timing of implementation.

A government official said on the 13th, "Since legal conditions such as the target, criteria, scale, and procedures for loss compensation must be met, time is needed," adding, "It will take time until the government proposal is ready." This directly contradicts the ruling party's claim that the bill proposed on the 27th of last month by Rep. Song Gap-seok of the Democratic Party of Korea, titled the 'Loss Compensation Act (Amendment to the Act on Protection and Support for Small Business Owners),' was a "party-government agreement reached through consultation with the government."

The government is awaiting the results of a research project by a national policy research institute on the implementation of the loss compensation system. The task force (TF) from the Ministry of Economy and Finance and the Ministry of SMEs and Startups plans to prepare a government proposal in April after reviewing the detailed issues once the research results are released around the end of this month. However, both the government and the ruling party have agreed not to apply loss compensation retroactively.

In response, a representative from the Korea Federation of Small and Medium Business said, "The fourth disaster relief fund is insufficient to recover losses caused by business suspension. We urge the prompt implementation of loss compensation," adding, "Although 83.5% of small self-employed business owners say retroactive application of loss compensation is necessary, it is wrong for the government and ruling party to refuse retroactive application."

Some opposition lawmakers also raised their voices, saying, "The government and ruling party are ignoring loss compensation despite knowing that disaster relief funds alone cannot resolve the damages suffered by small business owners and the self-employed," and "Small business owners and the self-employed are despairing over the government and ruling party's stance not to apply loss compensation retroactively."

Experts' views are also divided. Professor Lee Jeong-hee of the Department of Business Administration at Chung-Ang University said, "If we delay too long, damage accumulates and dissatisfaction grows. But we cannot handle it hastily," suggesting, "Given the urgency, we might consider providing loans through policy finance proactively and later assessing the damage scale to allow differentiated repayments."

On the other hand, Professor Kim Jeong-sik, Professor Emeritus of Economics at Yonsei University, argued, "While it is possible to extend loan periods or reduce interest through policy finance, differentiating repayment amounts disrupts financial order and is unacceptable," adding, "Since this is uncharted territory for everyone, it is necessary to proceed cautiously even if it takes longer."

Regarding retroactive application, Professor Lee said, "We cannot ignore practical issues, namely fiscal aspects," and "We must first consider whether it is manageable." Professor Kim also expressed a negative view, saying, "If there is a budget, retroactive application should not be a problem," but "if it is populism driven by political factors despite limited resources, it should not be done."

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