5 Months Left for Kian Fund... 40 Trillion Won in Funds Also Useless

National Assembly Budget Office "Reconsideration Needed for Support Requirements and Loan Interest Rate Calculation"

[Asia Economy Reporter Park Sun-mi] The Industrial Stabilization Fund (ISF), established with a scale of 40 trillion won, is at risk of becoming useless despite the extension of its support period due to high barriers. Although it was launched to support industries affected by COVID-19, the fund has hardly been utilized. In the National Assembly, there are calls for a review of the support conditions and loan interest rate calculations, considering the ISF’s purpose of protecting jobs in key industries and their workers.

According to the National Assembly Budget Office on the 11th, as of May this year, only 587.5 billion won out of the total 40 trillion won has been supplied. A total of 332.1 billion won was provided to Asiana Airlines and Jeju Air, and since November last year, the fund began acquiring loan claims from the cooperative support organization, acquiring 255.4 billion won in loan claims by the end of May.

The funding targets industries that have a significant impact on the national economy, employment stability, and national security, specifically companies with total borrowings exceeding 500 billion won that have a large impact on the national economy, and companies with 300 or more employees that have a significant impact on employment stability. When receiving funding, companies must maintain the number of employees as of the end of May at a minimum of 90%, prohibit dividend payments to shareholders during the funding period, and freeze salaries of high-income executives.

Although the ISF support period was extended from the original end of April to the end of the year, the high application thresholds and unattractive support levels are believed to have resulted in poor performance.

The Financial Services Commission states that support is possible through the Fund Operation Deliberation Committee even if the support requirements are not fully met, so there is no need for separate easing of conditions. However, the National Assembly Budget Office expressed the view that, considering the ISF is a fund to support companies with difficulty in financing, a review of support requirements and levels is necessary.

Since many companies appear not to have applied for funding because they did not meet the requirements of “total borrowings of 500 billion won or more and 300 or more employees,” it is necessary to assess the demand for fund support applications from companies and review whether the current requirements and support levels are appropriate.

KDB Industrial Bank also expects that if the total borrowings criterion is relaxed to 300 billion won, an additional 14 companies would be eligible for support, including 2 in aviation, 1 in shipping, 2 in machinery, 4 in automobiles, 3 in steel, and 2 in chemicals.

There are also criticisms that the interest rates on loans supported by the ISF are excessively high.

The National Assembly Budget Office diagnosed, “As of the end of May, the weighted average interest rate on ISF bonds was 0.97% (issued within a range of 0.72% to 1.45%), but considering the loan interest rates for Asiana Airlines and Jeju Air are 7.6% and 2.98%, respectively, the loan interest rates are higher than the procurement cost.”

It also emphasized, “Although the loan interest rate is determined as ‘market interest rate + α,’ if the ISF support conditions are similar to those of other COVID-19 livelihood and financial stability package programs and market interest rates, it raises the question of whether there was a need to establish a separate ISF on the premise of employment retention efforts.”

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