Kwonikwi Requests Investigation of Manufacturers... Allegations of Collusion and Collusion Raised
Ministry of Environment, "Plans to Conduct Additional Investigation on Kwonikwi Allegations"
Heo Jae-woo, spokesperson for the Anti-Corruption and Civil Rights Commission, briefs on the 8th at the Government Seoul Office about the result of collusion between supervisory agencies and companies, which led to the embezzlement of hundreds of billions of won in subsidies for diesel particulate filters funded by taxpayers. (Photo by Yonhap News)
[Asia Economy Reporter Moon Chaeseok] It has been revealed that a manufacturer of Diesel Particulate Filters (DPF) attached to old diesel vehicles inflated the production costs by more than double, embezzling hundreds of billions of won in government subsidies. In response, the Ministry of Environment announced that it will conduct an additional investigation into the suspicions surrounding the DPF support project.
On the 8th, the Ministry of Environment stated, "We have received all related materials from the Anti-Corruption and Civil Rights Commission and plan to review them," regarding the investigation results announced by the Commission on the "embezzlement of hundreds of billions of won in DPF subsidies."
An official from the Ministry of Environment said, "If the facts are clearly confirmed through police investigations, we plan to take appropriate legal measures."
Earlier, the Commission revealed at a briefing at 11 a.m. that Company A reported the manufacturing cost of its Type 1 DPF product as 8.7 million won, which was significantly higher than the actual cost of 4.05 million won. The Ministry of Environment then added operating costs and paid a subsidy of 9.75 million won per unit.
Company A exploited the fact that the subsidy amount is based on the cost data they submit, and through this method alone, they received about 30 billion won in subsidies last year.
The Commission requested the police to investigate Company A and notified the Fair Trade Commission of suspicions of collusion, stating that other companies are also setting manufacturing costs at similar inflated levels.
In response, the Ministry of Environment explained, "To objectively calculate manufacturing costs, we have commissioned the Korea Price Association, a professional cost calculation service agency authorized by the Ministry of Strategy and Finance, to conduct cost estimation services. The costs applied in subsidy calculations are based on the average cost of all manufacturers, so the manufacturing cost of a specific company is not directly reflected in the subsidy unit price."
The Ministry added, "Although the facts regarding the suspicions raised by the Commission have not yet been confirmed, we plan to review the related materials provided by the Commission."
Members of the Korea Federation of Trade Unions (KCTU) National Ready-Mixed Concrete Transport Federation held a press conference on April 9 in front of the Blue House fountain plaza in Jongno-gu, Seoul, opposing the Ministry of Environment's policy to install diesel particulate filters (DPF) on old ready-mixed concrete vehicles. (Photo by Yonhap News)
Additionally, the Commission raised suspicions of collusion between the installation application window, the Attachment Support Center, and manufacturers.
The Commission claims that the actual representative of the Attachment Support Center, established through consultations among the Ministry of Environment, the Korea Automobile Environment Association, and manufacturers, is from the association, and that the association has former Ministry of Environment officials as executives, making proper management and supervision of the center difficult.
According to the Commission, manufacturers paid tens of millions of won annually in membership fees to the association based on the number of devices attached, and also paid tens of millions of won to the center as referral fees ranging from 250,000 to 850,000 won per unit.
The Commission pointed out, "The Ministry of Environment granting the center a monopoly position and allowing it to collect referral fees violates the Ministry's related work guidelines."
The Ministry of Environment responded to the collusion allegations raised by the Commission by stating, "Payments are made through legal procedures."
The Ministry explained, "The membership fees to the Automobile Environment Association are paid legally by manufacturers who are members of the association according to its articles of incorporation and board resolutions. The Attachment Support Center fees are autonomously decided by manufacturers and the center, considering past cases of excessive competition."
It added, "The fees are used to provide convenience to vehicle owners, such as towing (transportation) of attached vehicles and handling contract document preparation. In the past, excessive competition among device manufacturers to attract vehicle owners led to a sharp increase in operating expenses and concerns about business instability, so fair distribution of volume is now managed through the Attachment Support Center."
According to the Ministry of Environment, the Attachment Support Center has signed service contracts with manufacturers to facilitate smooth project progress in the metropolitan area and serves as a support window. Previously, in April, the Fair Trade Commission dismissed complaints that the center's business activities constituted unfair collective conduct.
The Ministry explained that regarding manufacturers paying the vehicle owners' self-pay amounts on their behalf or post-payment, "Both pre-payment (at the time of device attachment) and post-payment (at vehicle deregistration) were possible in the past, but post-payment caused disputes such as refusal of payment by used car buyers, so since 2017, only pre-payment is allowed."
It added, "In August, the subsidy payment claim form was revised so that vehicle owners must submit receipts, tax invoices, etc., when claiming subsidies from local governments."
The Ministry of Environment stated, "We plan to manage subsidy execution more thoroughly through future audits and other measures. Regarding the suspicions raised by the Commission, if any illegalities are found based on the results of investigations by law enforcement agencies, we will take actions such as recovering undue subsidy gains."
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