Export-Import Bank's 'Territorial Infringement' Controversy... K-Sure to File Injunction Request

Sooeun's Amendment to the Enforcement Decree Expanding 'Foreign Debt Guarantee'
Korea Trade Insurance Corporation: "No Reason for Mubo to Exist"

[Asia Economy Sejong=Reporter Lee Jun-hyung] The Korea Trade Insurance Corporation (K-SURE) labor union is filing an injunction against the government's amendment to the Enforcement Decree of the Export-Import Bank of Korea Act. The reason is the concern that excessive cutthroat competition may occur between K-SURE and the Export-Import Bank of Korea (KEXIM) if the Enforcement Decree is amended. The government insists that the amendment is inevitable to strengthen support for export companies.

According to a comprehensive report from our coverage on the 18th, the K-SURE labor union plans to file a provisional injunction to suspend the effect of the amendment to the Enforcement Decree of the Export-Import Bank of Korea Act at the Seoul Central District Court around the 20th. Earlier, on the 9th, the Ministry of Economy and Finance announced the legislative notice of the amendment to the Enforcement Decree of the Export-Import Bank of Korea Act, which focuses on expanding the limit of external debt guarantees by the Export-Import Bank. A K-SURE labor union official said, "The government's amendment comprehensively defines the role of the Export-Import Bank to the extent that it negates the existence of K-SURE," adding, "We also believe there were problems with the legislative notice procedure."

Expansion of Export-Import Bank's Role

The key issue of the government's proposed amendment to the Enforcement Decree of the Export-Import Bank of Korea Act is external debt guarantees. External debt guarantees are a type of 'trade insurance' that guarantees the debt when overseas corporations importing domestic goods borrow purchase funds from domestic or foreign financial institutions. The Ministry of Economy and Finance's amendment increases the Export-Import Bank's external debt guarantee limit from 35% to 50% of K-SURE's annual trade insurance underwriting amount. This means that the Export-Import Bank's role in trade insurance support will increase accordingly.

The amendment also includes an exception clause. It allows support for external debt guarantees regardless of loan linkage when conducting business in local currency. The Ministry of Economy and Finance expects that through this system improvement, the Export-Import Bank's external debt guarantee scale will increase by more than $1 billion annually on average. An increase in external debt guarantees will enhance the financial competitiveness of domestic companies, facilitating smoother exports and orders.

However, the K-SURE labor union argues that the amendment could rather shrink support for export companies. They warn that excessive 'cutthroat competition' due to overlapping duties between K-SURE and the Export-Import Bank could reduce guarantee fee revenues, thereby decreasing support for small and medium-sized enterprises (SMEs). K-SURE has provided trade insurance to SMEs at relatively low prices using profits earned from trade insurance for large corporations. Regarding this, the K-SURE labor union recently commented in a statement that the amendment is a "clear deterioration."

Ministry of Economy and Finance: "Implementation within Q1"

The Ministry of Economy and Finance does not see a high possibility of 'overlapping duties' that the K-SURE labor union fears. A ministry official explained, "The increase in external debt guarantees under the amendment is not large compared to the overall trade insurance," adding, "Considering the expansion of large-scale nuclear power and defense exports, there will be more opportunities for collaboration between K-SURE and the Export-Import Bank."

Some view the conflict between K-SURE and the Export-Import Bank as an extension of an inter-ministerial power struggle. There are criticisms that the Ministry of Economy and Finance (KEXIM) and the Ministry of Trade, Industry and Energy (K-SURE) are fighting over their affiliated agencies' work domains. Former Yoo Myung-hee, head of the Trade Negotiation Department at the Ministry of Trade, Industry and Energy, opposed the Ministry of Economy and Finance's announcement in July 2021 to expand the Export-Import Bank's external debt guarantee, stating that "there is insufficient basis."

The key issue is whether the court will accept the injunction filed by the K-SURE labor union. If the court rejects the injunction, the amendment to the Enforcement Decree of the Export-Import Bank of Korea Act will be promulgated and enforced as early as mid-March after review by the Ministry of Government Legislation, vice ministerial and Cabinet meetings. The legislative notice period lasts until the 20th of next month. The Ministry of Economy and Finance stated, "The goal is to implement it within the first quarter of this year."

Bang Gi-seon, First Vice Minister of the Ministry of Economy and Finance, is attending the Emergency Economic Vice Ministers' Meeting held at the Export-Import Bank in Yeouido, Seoul, on December 9 last year. Photo by Kang Jin-hyung aymsdream@