SEOUL, SOUTH KOREA, August 9, 2019 — As the Japanese government decided on August 2 to remove Korea from its whitelist of preferential trading partners, the Seoul Metropolitan Government started on August 5 to operate a comprehensive situation room led by the Vice Mayor I for Administrative Affairs and released two-stage countermeasures in an effort to minimize damage to Korean companies and reform the industrial structure.
The city government’s countermeasures are: ① to organize a damage investigation team and establish a response system; ② to provide urgent financial support to companies damaged by the recent Japan’s economic retaliation; and ③ to support the technology development for the localization of parts and materials.
① Organize a damage investigation team and establish a response system
In order to find out the extent and scope of damages to Korean companies, the Seoul Metropolitan Government forms a damage investigation team consisting of experts from industries, associations and organizations and related public agencies and will investigate the status of the companies related to items subject to export restrictions.
The investigation team conducts its investigation on items that are highly dependent on imports from Japan; develops measures to support companies according to the types of damage; cooperate with the central government to develops joint measures; and confirms export-regulated items and investigate on the companies’ difficulties and damages.
With the Korea Strategic Trade Institute, an affiliated organization of the Ministry of Trade, Industry and Energy, the Seoul Metropolitan Government provides quick and specific information on the “export control self-compliance system” and which imported products are eligible so as to relieve anxieties of the companies. It increases the number of counselors at the Help and Support Center that has been in operation since July 8, and also provides information services on how to respond by using the export control self-compliance system, so called the Internal Compliance Program (ICP)*.
* When a Japanese company has management abilities and it was registered with the Ministry of Economy, Trade and Industry, it is allowed to export the products by obtaining a special “general comprehensive permit” instead of an individual permit.
② Provide urgent financial support to companies to minimize damage by the recent Japan’s economic retaliation
The Seoul Metropolitan Government will offer 200 billion won of urgent financial support to small and medium businesses. It increases the loan limit to up to 500 million won and minimizes interest on the loan to around 1.5 percent, lowering the burden on companies. The companies directly or indirectly damaged from Japan’s export control are eligible for the loan. Seoul will urgently inject the reserve fund and provide additional funds.
It also supports newly the payment of insurance fee of accounts receivables for the damaged industries. Since there are some concerns that companies having difficulties in import transactions with Japan are likely to fail to collect receivables and face chain reaction bankruptcies, the city government and the Korea Credit Guarantee Fund support the companies when they take out accounts receivable insurance.* 50 percent of the insurance fee are supported and the total guaranteed amount is estimated to be around 1 trillion won.
* Accounts receivable insurance protects small and medium companies against financial losses caused by damage to its accounts receivable records, preventing chain bankruptcy and playing a role as a business management safety net (SMALL AND MEDIUM ENTERPRISES PROMOTION ACT)
The Seoul Metropolitan Government will spend 2 billion won and triple the number of companies that receive the city government’s support for their export credit insurance from the current 1,000 to 3,000 to eliminate fear factors when they make export transactions. If a company faces difficulties in the process of manufacturing, processing and procurement of export goods because of unstable imports of intermediate goods from Japan, the scale of support for export credit insurance will be expanded. The Korea Trade Insurance Corporation will guarantee the debt when the businesses manufacture, process and procure export goods, while the Seoul Metropolitan Government will pay the insurance premium paid by a company within 5 million won.
If a company is directly affected by Japan’s export regulations, the city government will provide tax relief – for instance, it delays the notification of the property tax for up to one year and the tax collection of existing local taxes for up to one year.
③ Support the technology development for the localization of parts and materials
The Seoul Metropolitan Government also supports the localization of parts and materials by largely supporting R&D for technology commercialization in order to strengthen the competitiveness of innovative technologies and secure original technologies. In cooperation with the government, universities and companies, it plans to identify target areas needed for localization and support, and make and implement support measures in line with the central government’s plan to “strengthen competitiveness of materials, parts and equipment industries.”