South Korea’s financial regulator is planning to provide 3.50 trillion won (US$3.03 billion) worth of low-cost loans to companies in core manufacturing industries, including shipbuilding and automobiles.
Choi Jong-ku, chairman of the Financial Services Commission (FSC) announced the financial support plan at a meeting with officials from the manufacturing industry at the head office building of Auto Industry, an auto component producer based in Ulji-gun, Ulsan, on June 27. The plan is a follow-up measure of the “Manufacturing Industry Renaissance Vision” declared by the government on June 19.
First, Korea Development Bank (KDB) will supply 2.50 trillion won (US$2.16 billion) worth of money with up to 1 percentage point lower interest rate by utilizing its “special operation fund for economic vitality improvement.” The fund will go to small and mid-sized firms in the country’s four major industries, such as car, shipbuilding, display and petrochemical, and innovative growth industries, including drone and fintech. Each mid-sized company can take out a loan worth up to 7 billion won (US$6.05 million), while each smaller company can receive up to 5 billion won (US$4.32 million).
KDB will also set aside 1 trillion won (US$864.68 million) by creating a “special on-lending for facility investment” program to provide funds through commercial banks. Each firm can receive up to 30 billion won (US$25.94 million) worth of loans, or 15 billion won (US$12.97 million) per occasion, at up to 0.45 percentage point lower rate of interest. The government will decide on whether to increase the size of financial support next year after watching the result of operating 1 trillion won (US$864.68 million) of funds this year first.
It is also planning to offer consulting services to small and mid-sized companies which experience a management crisis. With a “value-up program” for small and mid-sized companies, the Korea Credit Guarantee Fund (KODIT) will help smaller firms with vulnerable financial conditions among those which have a total of 1 billion to 10 billion won (US$864,678 to 8.65 million) of loans to stabilize the business.
In addition, the FSC has decided to expand support targets and guarantee limits for existing financial support programs. The mutual growth guarantee program will be expanded from shipbuilding equipment manufacturers which have won contracts to general equipment companies. The agency has also increased the limit of guarantee from 3 billion won (US$2.59 million) to 7 billion won (US$6.05 million). It will raise the limit of special refund guarantee, which supports contracts of medium-sized ships worth more than 10 billion won (US$8.65 million), from 7 billion won (US$6.05 million) to 15 billion won (US$12.97 million) as well.