Retroactive Loss Compensation Gains Momentum... Hong Ik-pyo: "If Ruling and Opposition Agree, Legislation Will Proceed Despite Ministry of Economy and Finance Opposition"

Both Ruling and Opposition Parties Agree on Retroactive Application
The Starting Point of Retroactivity Remains a Controversy

Small business owners and self-employed individuals are demanding retroactive legislation for compensation of losses due to COVID-19 on the 12th in front of the National Assembly main building, together with People Power Party lawmakers Choi Seung-jae, Kim Seong-won, and Yoon Young-seok. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporters Park Cheol-eung and Oh Ju-yeon] A bill to compensate for business losses caused by COVID-19 retroactively to the past is gaining momentum. Although the government holds a negative stance due to concerns over fiscal deterioration, both ruling and opposition parties support it, making its passage through the National Assembly likely within this month. However, the key issue is deciding the starting point for the retroactive application.

Hong Ik-pyo, chairman of the Democratic Party’s Policy Committee, said in a phone interview with Asia Economy on the 15th, "The Democratic Party has maintained a position in favor of retroactive compensation for losses," adding, "Since the opposition party has recently shown a proactive attitude, we will promptly legislate through bipartisan agreement." He further stated, "Since this is a legislative matter, if both parties agree, the fiscal authorities will not be able to oppose it outright."

Woo Won-shik, a lawmaker running for the Democratic Party leadership, also emphasized that he will ensure the retroactive application of loss compensation is realized within this month. Regarding the controversy over fiscal capacity, he dismissed it as "idle talk" in a recent Facebook post. Referring to Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki’s statement in January that "the treasury is not a bottomless pit," he retorted, "Is the patience of the people a bottomless pit?"

Additionally, the day before, 26 first-term Democratic Party lawmakers issued a statement expressing regret, saying, "We made the mistake of hesitating in front of the Ministry of Economy and Finance’s claims about national finances and letting the golden time slip away. They wandered as if they did not understand the harsh reality on the ground," and pledged to actively support the retroactive application of loss compensation.

The People Power Party is also leaning toward retroactive application. Choi Seung-jae, a People Power Party lawmaker currently staging a sit-in to urge the passage of related bills, said in a phone interview, "The People Power Party’s Policy Committee has established a position that retroactive application is necessary, and since lawmaker Lee Cheol-gyu, the opposition whip of the National Assembly’s Industry, Trade, Energy, and Venture Businesses Committee, has introduced a bill, it is effectively the party’s official stance." He added, "Since partial compensation and loans can be used together for those who actually suffered losses, the fiscal burden may not be as large as expected." The Justice Party also proposed forming a special committee on loss compensation and a final debate among the floor leaders of the three parties for legislation. Once the new Democratic Party floor leader is elected on the 16th, related discussions are expected to proceed immediately.

However, there appears to be significant disagreement among parties regarding the scope of retroactivity. The Democratic Party is focusing on the amendment to the Small Business Protection and Support Act proposed by lawmaker Song Gap-seok in February. This bill stipulates in its supplementary provisions that it will take effect three months after promulgation, but compensation will apply to losses incurred after the promulgation date. It can be expected that the compensation will cover losses only during the three months or that the reference point will be set around the end of last month when the fourth disaster relief fund was distributed.

On the other hand, the bill by People Power Party lawmaker Lee Cheol-gyu explicitly states that it applies to losses suffered by small business owners during the period of administrative orders for business suspension or restriction, making it more comprehensive. Choi Seung-jae said, "Even from a constitutional perspective, it is appropriate to base the timing on when the government’s administrative orders were issued and losses occurred," adding, "It is not about full compensation; some may be provided as loans. Since many are on the brink, it is important to start compensation immediately based on principles."

Despite the strong political will, opposition from the Ministry of Economy and Finance remains a variable. On the 14th, Ando Geol, the second vice minister of the Ministry of Economy and Finance, told reporters regarding funding, "So far, we have said we would use contingency funds and supplement with supplementary budgets if insufficient, but there are limits to this approach." If a conflict between the government and ruling party recurs, the Blue House may need to intervene for coordination, and the upcoming cabinet reshuffle, rumored to be imminent, may also affect whether Deputy Prime Minister Hong Nam-ki is replaced.

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