GOVT SUBSIDY GUIDELINES FOR CERTAIN SECTORS

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The government announced the subsidy guidelines for the struggling aviation and shipping industries. It is stipulated that jobs must be protected with more than 90% of their workforce ensured of employment and moral hazard must be guarded against by banning industry executives from paying dividends or buying company stocks.

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Aviation and shipping. Two pillar industries of South Korea. As 183 nations banned cross-border entries due to COVID-19, international flights and goods transport decreased by 98 and 11 percent respectively, dealing a significant financial blow to the sectors. The government decided to grant 40 trillion won in stabilization fund to these two industries first. Companies with more than 300 employees and 500 billion won in loans are eligible for the subsidy. Three aviation and ten shipping companies reportedly meet these requirements. Low cost carriers may be eligible for government aid as well.

[Soundbite] KIM YONG-BEOM(VICE MINISTER, MINISTRY OF ECONOMY AND FINANCE) : "Only key businesses of certain size qualify, but exceptions can be made for companies that protect core technologies and maintain the industrial ecosystem."

The first condition for subsidy is employment. A potential recipient must maintain at least 90% of its workforce for six months. The government is lending money to help keep those jobs. In order to prevent moral hazard, recipients are prohibited from using the money to buy company stocks or pay dividends. Another trillion won is allocated to help out financially strapped contractors.

[Soundbite] (AVIATION INDUSTRY CONTRACTOR) : "Liquidity is the biggest problem. It will be of great help if that issue is resolved."

The government presented detailed plans to create more than 550,000 jobs in the public sector. 3.5 trillion won needed to put that plan into action will be obtained in the third round of supplementary budget.

[Soundbite] HONG NAM-KI(DEPUTY PRIME MINISTER) : "We will use all our resources to create jobs and a part of that measure will be included in the supplementary budget plan to be finalized in early June."

There are also plans to operate a special corporation with 10 trillion won to purchase corporate bonds and commercial papers from companies that are financially struggling.