Lee Dong-joo "Korean-style 'Payroll Protection Program (PPP)' Should Be Included in the Loss Compensation Act"

[Asia Economy Reporter Oh Ju-yeon] On the 25th, Lee Dong-ju, a member of the Democratic Party of Korea, argued that the 'Korean-style PPP system' should be included in the Loss Compensation Act. This is from the perspective that special financial support is needed for businesses in industries that were not directly subject to the government's gathering ban and restriction measures.

In a press release distributed ahead of the legislative hearing on the Loss Compensation Act held by the National Assembly's Industry, Trade, Small and Medium Enterprises and Venture Businesses Committee on the same day, Rep. Lee proposed the '3 Dome Strategy,' stating, "To recover damages to small business owners and revitalize the economy, three domes are needed: loss compensation, ultra-low interest loans and Korean-style PPP, and nationwide disaster relief funds." He argued that loss compensation should be provided to industries affected by gathering bans and restrictions, emergency funds should be injected through ultra-low interest loans covering the scope of small and medium enterprises including other business sites, and finally, nationwide disaster relief funds should be used to stimulate the economy.

Lee Dong-joo, Democratic Party lawmaker

According to materials from the National Assembly Library disclosed by Rep. Lee, the U.S. PPP (Paycheck Protection Program) system under the 'Coronavirus Aid, Relief, and Economic Security Act' (CARES Act) is an unsecured low-interest loan that small businesses and self-employed persons can use to pay employee wages, business rent, and various utility bills.

If the number of employees and wage levels are maintained within 8 weeks after receiving the loan and 60% of the loan is spent on wages and 40% on operating expenses, the entire loan amount is forgiven. The interest rate is 1% per annum, which can be considered virtually interest-free when considering inflation. This rate applies to loans for which forgiveness is not applied for or not granted.

As of the 10th, approximately 10.85 million loans have been made, totaling $782.2 billion, which is about 881 trillion Korean won. Among these, as of 2020, 3.1 million loans were forgiven. About 30% of the total loan count received forgiveness. The forgiven amount reached $257.5 billion, equivalent to 290 trillion Korean won.

Rep. Lee said, "Because of differences in economic scale and finances, we cannot do exactly as the U.S. does, but considering that our GDP is about one-twentieth of the U.S., we can create a system at that level." He emphasized, "Along with loss compensation, ultra-low interest loans for business owners outside of small business owners, implementation of a Korean-style PPP similar to the U.S. Paycheck Protection Program, and policies such as nationwide disaster relief funds that have shown definite economic stimulus effects should be implemented layer by layer."

He continued, "If loss compensation is to heal wounds, ultra-low interest loans will restore the vitality of small business owners, and nationwide disaster relief funds will be the power that makes small business owners run again." He added, "The Loss Compensation Act should include grounds for financial support for business owners outside the scope of small business owners as well as substantial compensation for industries subject to gathering bans and restrictions." The special Loss Compensation Act, which Rep. Lee has sponsored, includes provisions to provide special financial support to small and medium enterprises including small business owners.

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