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South Korea

Government and institution measures in response to COVID-19.

Government and institution measures in response to COVID-19.

Return to homepage  |  Last updated: 28 October, 2020

General Information

Between 7 February and 3 March, the financial sector (from both state-invested banks, private banks and credit card companies) provided financial support directed at SMEs worth EUR 2.1 billion. On 4 March, the Ministry of SMEs and Start-ups announced its plan to provide support worth EUR 1.2 billion as supplementary budget, including the following measures:

  • An Emergency Fund, providing direct financial support to SMEs and self-employed, aimed at encouraging these firms to keep their employees;
  • Government guarantees, and insurance on loans.
  • Sanitary support for the reopening of SMEs that closed due to exposure to infected patients;
  • Encouraging brick-and-mortar shops to open their business online.
  • Simplification of procurement processes by limiting on-site inspections.

Priority is given to regions that were affected the most.

  • 19 March: the Government announced a further USD 39 billion package including emergency financing for small businesses and other stimulus measures, and loan guarantees for struggling small businesses with less than USD 78 000 in annual revenue to ensure they can easily and cheaply get access to credit. Domestic commercial banks and savings banks will also allow loans to be rolled over for small businesses if they cannot afford payment when due.

Tax measures – Direct and Indirect

(e.g. payment deferrals, rate reductions…)

Click here to see a comprehensive summary of jurisdictional tax measures and government reliefs in response to COVID-19.

Economic stimulus measures

(e.g. loans, moratorium on debt repayments…)

  • The supplementary budget passed on March 17 contains funding for a wide range of programs to provide loans and other types of assistance to distressed firms and their employees.

Monetary Policy

  • On March 23, The Bank of Korea ledged to begin purchasing an unspecified amount of local bonds to help prevent a possible liquidity crunch as well as expand the scope of its purchase program to include bonds issued by public enterprises.
  • The Bank of Korea slashed its benchmark interest rate to 0.75% in an emergency move following actions by the Federal Reserve. 
  • Korea will lower interest rates applied to its loan facility for smaller companies, and add bonds issued by banks to its open market operations to enhance liquidity

Customs Measures

Measures announced

  • Delayed payment of duties/instalment payment
  • Suspension of Customs audits 
  • Filing paperless duty drawback

Other measures and sources

Trade restrictions:
  • On March 19, Tokyo imposed additional restrictions on South Koreans seeking entry into Japan. Subsequently, Seoul imposed similar restrictions. These restrictions have not produced any new obstacles to bilateral trade, but it could indicate rising tension and further complicate efforts to resolve an existing trade dispute between the two countries that began last summer.

Main sources of information

Recovery Plan Overview

  • Recovery plan : Korean New Deal
  • Budget : 160 trillion won
  • Announcement : July 14th, 2020
  • Main orientations : First-mover economy, Low-carbon economy and Inclusive Society
     

Main measures

Digital New Deal
  • The Digital New Deal aims to build a digital economy and promote growth in promising ‘untact’ industries. It heightens the competitiveness of Korea and its industries by establishing digital infrastructures in areas such as data, network and artificial intelligence (DNA). At the same time, major infrastructures including those for transportation, water resources, urban planning, and logistics will be digitalized.

Key Measures

  • Stronger Integration of DNA throughout the Economy – 38.5 trillion won including 31.9 trillion won from the treasury will be invested by 2025 to create 567,000 jobs.
  • Digitalization of Education Infrastructure –1.3 trillion won including 0.8 trillion won from the treasury will be invested by 2025 to create 9,000 jobs.
  • Fostering the ‘Untact’ Industry – 2.5 trillion won including 2.1 trillion won from the treasury will be invested by 2025 to create 134,000 jobs.
  • Digitalization of Social Overhead Capital (SOC) – 15.8 trillion won including 10 trillion won from the treasury will be invested by 2025 to create 193,000 jobs.

Sectors/Industries/Areas affected

  • ‘Untact’ industries, digital infrastructures, small and medium-sized enterprises (SMEs) and micro-businesses.

Green New Deal

  • The Korean government plans to move towards a net-zero society by supporting ongoing policies such as the 2030 target for greenhouse gas emissions reduction, and the plan to have renewables account for 20% of the country’s generation capacity by 2030. This includes a green transitioning of infrastructure to strengthen the safety net against climate and environmental risks. In addition, the use of low-carbon and decentralized energy will be promoted, while those regions and groups that lag behind the transition will be protected. Moreover, the foundations for innovation and growth will be consolidated for the green industry.

Key measures

  • Green Transition of Infrastructures - creating a green-friendly environment towards a future where humans and nature coexist. (Investment of 30.1 trillion won including 12.1 trillion won from the treasury will be made by 2025 to create 387,000 jobs.)
  • Low-carbon and Decentralized Energy Supply – preparing for a paradigm shift towards future energy by actively investing in R&D facilities that promote the use of sustainable and renewable energy throughout the country. (Investment of 35.8 trillion won including 24.3 trillion won from the treasury will be made by 2025 to create 209,000 jobs.)
  • Innovation in the Green Industry – finding areas of the green industry that strategically address climate change and environmental risks, and building infrastructure in support of this to create an innovative environment. (7.6 trillion won including 6.3 trillion won from the treasury will be invested by 2025 to create 63,000 jobs.)

Sectors/Industries/Areas affected

  • Public facilities, terrestrial, marine and urban ecosystems, water supply system

Stronger Safety Net

  • To add protection through stronger employment and social safety systems, while also increasing the levels of investment in human resources.

Key Measures

  • Employment and Social Safety Net – protecting those who are particularly vulnerable in times of crisis, and building a stronger and tighter employment and social safety net. (24 trillion won including 22.6 trillion won from the treasury will be invested by 2025 to create 159,000 jobs.)
  • Investment in Human Resources – Against the changing economic structure, investment will be made in human resources to build talent and provide employment support for new types of jobs, and to reduce the digital gap. (4.4 trillion won including 4 trillion won from the treasury will be invested by 2025 to create 180,000 jobs.)

Sectors/Industries/Areas affected

  • Future-oriented industries, rural areas, vulnerable people

Contact us

Tax: Sang-Bum Oh – sangbumoh@kr.kpmg.com
Restructuring: Jae Hyeon Lee – jaehyeonlee@kr.kpmg.com
Legal: So-Hyeon Jung – sohyeonjung@kr.kpmg.com