Deputy Prime Minister and Finance Minister Hong Nam-ki. (Yonhap)
South Korea’s government will establish a guarantee fund program worth 500 billion won ($405 million) to provide extra loans to auto parts firms amid the COVID-19 pandemic, according to the nation’s fiscal chief on Thursday.
“(The government) will protect the automobile industry’s ecosystem by providing cash to small and medium-sized auto parts firms that struggle to secure loans in spite of outstanding technology or sound contract delivery performances,” Deputy Prime Minister and Finance Minister Hong Nam-ki said in a meeting with economy-related ministers held at Seoul Government Complex.
The chief policymaker also vowed to advance the purchase of official vehicles, aiming at buying 9,500 units or 90 percent of the yearly target by the end of the third quarter, and to grant a year of grace period concerning customs probes over the tax on imported auto parts.
Taking a blow from the global economic downturn and lackluster demand, Korea’s auto exports plunged 44.3 percent in April from a year earlier. Consequently, local auto parts makers saw their sales dip nearly 20 percent during the first quarter alone.
The latest guarantee fund came in the wake of an earlier lending program that caused a bottleneck in providing sufficient loans to small and medium-sized businesses.
The auto parts industry, in which more than 60 percent of companies have credit ratings of B or below, has largely been excluded from the government-funded loans that require credit rating assessments.
Addressing the nation‘s shipbuilding industry, the government vowed to buy some 30 vessels from local mid-sized shipbuilders for public use and to extend the deadline, in case the epidemic fallout impedes the manufacturing timeline.
To support the textile and apparel industry, it said that it would speed up the purchase and replacement of police and firefighter uniforms, seeking to execute 90 percent of the yearly budget allocation by the end of June.
In a gesture to boost consumption in the private sector, the government will open a two-week nationwide shopping festival starting June 26.
“(The festa) will be held in consecutive order in various regions across the country, starting with the Namdaemun (traditional market shopping district) in Seoul,” Hong said, vowing to carry out thorough quarantine measures.
“We expect the two-week event to lighten the burden for small-sized distributers, vendors and owner-operators who have received extensive damages from the COVID-19 crisis.”
In May, the country saw its consumer sentiment rebound from the previous 11-year low amid eased social distancing rules, which the fiscal chief described as a “meaningful progress.”
By Choi Jae-hee (email@example.com