The ruling People Power Party has decided to prioritize the passage of an amendment to the Korea Export-Import Bank Act in a February extraordinary session of the Korean National Assembly in order to secure a second contract worth 30 trillion won for arms exports to Poland.
According to sources in the National Assembly and Korean financial circles on Feb. 1, the ruling People Power Patty will propose to the Democratic Party of Korea to hold a meeting of the Economic and Financial Affairs Subcommittee of the Strategy and Finance Committee to discuss the amendment to the Korea Export-Import Bank Act in February. The ruling and opposition parties agreed to convene the extraordinary session of the National Assembly beginning Feb. 19. The plenary session will be held on Feb. 29. Over the course of 10 days, the amendment to the Korea Export-Import Bank Act will have to pass through the Economic and Financial Affairs Subcommittee and a plenary session of the Strategy and Finance Committee, the Legislation and Judiciary Committee, and a plenary session of the National Assembly.
First Vice Minister of Strategy and Finance Kim Byung-hwan and Export-Import Bank of Korea President Yoon Hee-sung visited the National Assembly in February for the purpose of requesting that the Korea Export-Import Bank Act be amended during a January extraordinary session, but not a single meeting of the Strategy and Finance Committee was held as the ruling and opposition parties clashed over the bill.
Financial support is needed to finalize the second contract of Korea’s defense exports to Poland. Under the current Korea Export-Import Bank Act, the bank cannot lend more than 40 percent (6 trillion won or US$4.5 billion) of its equity capital (15 trillion won) to any one borrower or large business group. Korea Export-Import Bank has nearly reached this limit as it provided credit facilities worth 6 trillion won in the first project.
The second project was scheduled to be finalized in the first half of 2023 but the contract has been postponed indefinitely due to Korea Export-Import Bank’s credit limit restrictions. Currently, a plan to organize a lending group of commercial banks to provide priority financing is being promoted, but the Polish government is reportedly reluctant due to higher interest rates than those of government institutions.
A bill to amend the Korea Export-Import Bank Act is currently pending. The bill was proposed by Representative Yoon Young-seok of the People Power Party and Representative Yang Ki-dae and Jeong Sung-ho of the Democratic Party of Korea. It seeks to scale up the current 15 trillion won equity capital limit to 25 or 35 trillion won. The ruling and opposition parties had tabled the amendment in a meeting of the Economic and Financial Affairs Subcommittee in November 2023 but did not discuss the amendment for three months.
Korean defense contractors expect a significant reduction in defense exports worth 30 trillion won unless the Korea Export-Import Bank Act is revised.