Government Working to Boost Demand for Tourism
The Korean government will provide support for the Korea Development Bank (KDB) and the Bank of Korea (BOK) to set up an SPV, through which they will purchase corporate debt including low rated bonds, the Ministry of Economy and Finance said on May 20.
The two state-run banks will invest a total of 10 trillion won in the SPV: KDB to invest 2 trillion won (1 trillion won government investment in KDB and 1 trillion won in subordinated loans) and BOK to invest 8 trillion won (primary loans).
The SPV will purchase corporate debt, including low rated corporate bonds and CPs. It will be run for six months, and then a decision will be made on whether it will be extended or not, and whether it will be expanded to 20 trillion won.
The SPV is a model of cooperation among the government, central bank and state-owned bank in responding to a crisis, the ministry said.
The decision on the SPV was made at the 4th Meeting of the Central Economic Response Headquarters that was presided over by Deputy Prime Minister Hong Nam-ki.
Participants also discussed ways to manage the 40 trillion won key industry relief package, action plans for over 550,000 job creation in the public sector, and how to revive tourism.
Regarding the industry relief package, the government will provide support to airlines, shipping companies and other key industry companies if they owe more than 500 billion won in debt and employ over 300 workers. In addition, support can be expanded to those with core technologies and those whose businesses are critical to maintain the country’s industrial ecosystem.
Support will be given in the type the company wants from liquidity to other types of recapitalization. A total of 1 trillion won can be spent on supplier relief programs drawn up by the company.
Recipient companies will be obliged to retain at least 90 percent of their employees for six months since the support is given. Support funds can be used for ELS purchases (10 percent of the support), but not for dividend payment and stock buybacks.
The government will work to revitalize tourism-related businesses, which have been hit hardest by the COVID pandemic. It will work to boost demand for domestic tourism, as well as devise mid-term measures to attract foreign tourists after the pandemic.