Issuance Amount Soars to '2 Trillion' in One Year... 605.4 Billion Won Uncollected Last Year
"Populist Policy" "Need to Accurately Assess Demand to Prevent Excessive Issuance" Criticized
Ministry of SMEs and Startups: "Takes One Year to Reach 96% Recovery Rate... No Major Issues"
Onnuri Gift Certificate
[Asia Economy Reporter Junhyung Lee] It has been confirmed that the amount of Onnuri gift certificates left unredeemed and dormant in wallets has exceeded 800 billion KRW. Of this, 600 billion KRW accumulated last year alone, accounting for 72% of the total unredeemed amount of Onnuri gift certificates. There are concerns that without precise demand forecasting, simply increasing issuance will make it difficult to expect a consumption stimulation effect.
According to the Small Enterprise and Market Service on the 5th, the cumulative unredeemed amount of Onnuri gift certificates sold over 12 years from 2009 to last year (totaling 11.76 trillion KRW) is approximately 840 billion KRW. The unredeemed amount last year was 605.4 billion KRW, meaning about three-quarters of the total unredeemed amount accumulated in just one year.
One of the main causes is the issuance amount last year, which doubled compared to the previous year. The issuance amount of Onnuri gift certificates remained in the 1 trillion KRW range until 2018, increased to 2.0274 trillion KRW in 2019, and doubled again to 4.0487 trillion KRW last year. The purpose was to revitalize traditional markets and shopping districts that had been depressed due to COVID-19. Although issuance surged, usage rates did not keep pace due to restrictions such as gathering bans.
The problem lies in financial waste. Onnuri gift certificates operate on a system where customers pay for goods with the certificates, and stores exchange them for cash. The government fully bears the financial costs related to issuance fees and purchase discounts. This funding essentially supports merchants and consumers in traditional markets, but if the gift certificates are not redeemed, the funds invested in issuance are wasted. Last year, a total of 669.6 billion KRW was invested in issuing Onnuri gift certificates, combining the main budget of 231.3 billion KRW and supplementary budget of 438.3 billion KRW.
Experts point out that the expansion was excessive. Professor Donggeun Cho, Emeritus Professor of Economics at Myongji University, said, "(Onnuri gift certificates) are a concept where the state sells at a loss equivalent to the discount rate," adding, "If they are not redeemed, not only is the budget wasted, but the benefits returned to merchants are not as significant as expected." Professor Cho added, "Since it is a kind of quasi-currency without systematic regulation, moral hazard such as 'kkang' (fraudulent use) may occur. A supervisory authority is needed to regulate issuance based on accurate demand data to prevent excessive issuance."
There are also concerns that increasing issuance by injecting tax revenue will not easily reverse the depressed consumer sentiment. Professor Taeyoon Sung of Yonsei University’s Department of Economics explained, "(The budgeting for Onnuri gift certificates) ultimately expects effects beyond the invested funds," adding, "It seems unlikely that the economy will be stimulated to that extent." He further explained, "Basically, both local love gift certificates and Onnuri gift certificates restrict usage locations and involve financial input, so it is true that significant effects are hard to expect."
The Ministry of SMEs and Startups maintains that there is no major problem with the redemption rate. A ministry official stated, "Redemption of gift certificates is a problem that naturally resolves over time," and "Analysis of statistics from 2015 to 2019 shows that it took about one year for sold Onnuri gift certificates to reach a redemption rate of 96%."
The ministry also noted that 1.7 trillion KRW, equivalent to 42.5% of last year’s issuance amount, was sold in the fourth quarter, meaning that a considerable amount of gift certificates have been in circulation for less than four months as of now.
Meanwhile, the Ministry of SMEs and Startups will sell Onnuri gift certificates at a 10% discount this month, with a sales target of around 1 trillion KRW.
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