[The Editors' Verdict] Is "Good Prepayment" Really Good?

Each local government is conducting a "Good Prepayment" campaign as one of the measures to revive the neighborhood economy. Consumers pay a certain amount in advance at restaurants, cafes, hair salons, and other places they usually visit, and then visit later. Currently, this campaign is being implemented in Busan, Gwangju, Daejeon, Jeonbuk, Changwon, Gimhae, Yangsan, and other areas, with some local governments also considering it. The promotion path generally starts with participation from local governments, local government-funded institutions, and public institutions, then expands to local businesses and residents.

Kyung-ho Lee, Head of Issue & Trend Team

Each local government has its own characteristics. Busan is encouraging private companies to join the "Busan-style Good Prepayment Campaign" every week. Choi Geumsik, chairman of Seonbo Industry, was the first to prepay at a restaurant and then nominated Park Dongho, CEO of Hwasung Networks, as the next participant. Daejeon City has expanded the closure days of the city hall cafeteria from once a month (last Friday) to twice a month (second and fourth Wednesday) starting this month. When the cafeteria is closed, about 2,000 employees working at city hall will use nearby restaurants. Jeonbuk Province decided to prepay meal costs and office supplies, rental fees, etc., for predictable events such as employee farewell parties, welcome parties, and regular meetings.

The Good Prepayment campaign started in 2020. It was led by the government to support self-employed business owners who lost customers due to the COVID-19 pandemic. At that time, the Ministry of SMEs and Startups prepaid 214 restaurants with 77 million KRW, and 11 public institutions prepaid 622 restaurants with 172 million KRW. The average amount per business was about 300,000 KRW. The campaign spread to the private sector, including economic organizations, large corporations, financial institutions, airlines, travel industries, cultural arts, and entertainment sectors. During the one-month campaign from April 27 to May 26, 2020, Shinhan Bank prepaid 1.5 billion KRW at stores near its nationwide branches, and Kookmin Bank, Woori Bank, and OK Savings Bank also participated. POSCO visited 89 partner companies and traditional markets in Pohang and Gwangyang to join the prepayment campaign.

Self-employed business owners unanimously say that the current situation is even tougher than during COVID-19. The indicators support this. According to Statistics Korea, the retail sales index from January to November last year decreased by 2.1% compared to the same period the previous year. This is the largest drop in 21 years since the 2003 card crisis (-3.1%). The Korea Employers Federation reported that 986,000 business operators closed their businesses in 2023 alone, the highest number since statistics began in 2006. The current Good Prepayment campaign is mainly centered on some local governments and has not spread to the Ministry of SMEs and Startups, economic organizations, or private companies as before.

An official from an economic organization said, "COVID-19 brought an unprecedented crisis. There was consensus on the need to restore the collapsed economy, and participating in the prepayment campaign was one of the efforts," but added, "Now, not only small business owners and self-employed but also all economic actors including the government, companies, and households are in crisis. If the government or local governments request participation, we will consider it, but active participation immediately may be difficult."

Prepayment carries risks, is cumbersome, and its effects are not significant. Prepayment is made by credit card, but the payment time and the time of goods or services delivery do not coincide. There are side effects such as card fraud (prepaying and then getting cash back) or tricks (unnecessary spending). Users must spend within the prepayment limit and manage usage details and remaining balance carefully. As lunch prices exceed 10,000 KRW, there are complaints about "lunchflation" (lunch + inflation). Some say it would be better to raise meal allowances. Although wallets are closed, the reality is that even if wallets open, there is no money to spend.

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