More emergency spending vowed by gov’tThe government pledged 36 trillion won ($29.4 billion) to support Korean exporters, 17.7 trillion won to boost domestic market and 2.2 trillion won for help to start-ups.
It is also encouraging consumers to spend more on debit and credit cards and at traditional markets.
Those were the main decisions reached at the fourth emergency economic council chaired by President Moon Jae-in on Wednesday.
The government will commit 30 trillion won to extend export insurance and guarantees to prevent lowered credit ratings of exporters due to the coronavirus pandemic from affecting their business.
The government will offer 1 trillion won to exporters in emergency liquidity.
More than 5 trillion won will be offered “preemptively” in trade finance to aggressively help exporters win major foreign project orders, especially when the global economy starts to bounce back from the pandemic.
The government will try to create a Korean export model that can be adopted around the world, showing how Korea rebounded from the coronavirus.
According to the government, it will utilize its IT infrastructure to develop an entire export process from counseling to contract signing and payment online while creating a new marketing tool of special online exhibition via virtual or augmented reality technology.
To boost the domestic economy, the government will spend 3.3 trillion won on advanced purchases and payments led by the public sector.
The government said it will lead in the consumption campaign.
The government will spend 400 billion won on advanced purchases, paying 80 percent of future commitments to international and local events.
Another 510 billion won will be used to pay 80 percent of outsourced projects including maintenance of public institutions.
The government will spend 800 billion won to stockpile such things as smart devices for online classes and sanitation and medical supplies in the first half of the year.
It will advance purchases of roughly 640,000 barrels of oil as well as 1,600 vehicles to be used for public purposes that were supposed to be bought in the second half to support Korean refineries and the automotive industry.
A total of 1.2 trillion won in spending to help the construction industry will be advanced: 600 billion won for government construction projects and 600 billion won for public institution’s investments. That spending was initially planned for the second half of this year.
To encourage people to spend more, the government decided to double certain tax credits.
The tax credit on credit card spending will be raised from 15 percent to 30 percent; the credit for debit spending will be raised from 30 to 60 percent; and the credit for spending at traditional markets will be raised from 40 to 80 percent.
Tax credits on spending between April and June at businesses that have been hard hit by the coronavirus will be 80 percent, whether on credit or debit cards.
Those businesses include restaurants, hotels and passenger transport services.
Additionally, the government will be giving tax breaks totaling 12 trillion won to 7 million small businesses that have been affected by the coronavirus outbreak.
Those businesses will get three-month extensions on income tax payments due both by the central and local government in May.
During a press briefing on Wednesday, Finance Minister Hong Nam-ki said the goal is to inject liquidity into the market to boost consumption and investment.
“[The latest measures] will provide small but practical assistance to small businesses and the self-employed, who are in desperate need,” Hong said.
For start-ups, the government will be offering 2.2 trillion won in assistance, including low-interest loans and special loan guarantees.
The government has expanded its start-up exclusive fund from 1.6 trillion won to 2.1 trillion won. It said it will fast-track loans under 150 million won.
Additionally, it will offer 400 billion won in special loan guarantee for start-ups.
“Last year, start-up investment amounted to an all-time record of 4.3 trillion won,” said Park Young-sun, Minister of SMEs and Startups. “This year, due to Covid-19, investment sentiment in the market has weakened.”
She said the government estimates start-up investment will shrink 30 percent compared to the same period a year ago.
“The government earlier provided support to [private] companies with a 100 trillion-won emergency finance [package] and decided on unprecedented emergency disaster aid to the public,” President Moon said during the meeting. “However, that is not enough.”
Moon asked the public to trust the government to overcome the difficulties ahead.
During the press briefing, Finance Minister Hong said there was no additional discussion of the government’s emergency disaster grants announced last week.
“The government has already made a decision on the emergency disaster aid including its standard [for recipients] and announced it,” Hong said.
“The government is currently in the final stage in regards to designing the supplementary budget [for the emergency aid] including changes to the [existing] budget according to the announcement that we made.”
He said the government plans to submit the new supplementary budget proposal to the National Assembly next week.
While the government last week announced grants of between 400,000 to 1 million won for 14 million households whose incomes are in the lower 70 percent, there has been growing pressure from political parties to expand them to all households.
If the government gives grants to all, it would cost between 13 and 25 trillion won, far higher than the 9.1 trillion-won estimate for the government’s proposal.
BY LEE HO-JEONG [firstname.lastname@example.org]