All-Out Effort for Export Growth This Year... Additional 2 Trillion Won Expansion in Trade Finance

Export Investment Officers Meeting
Up to 0.6%p Interest Rate Discount for Exporting SMEs and Mid-sized Companies
Increased Special Support Limits and Reduced Premiums for Nuclear Power Export Guarantee Insurance
Enhanced Tax and Financial Support for Future Cars and Shipbuilding

The government has decided to expand trade finance supply by 2 trillion won this year to reverse the declining trend of exports, which have been struggling due to the slowdown in the Chinese economy and sluggish semiconductor sector. This decision follows requests from export companies facing difficulties in financing due to high interest rates.

On the 13th, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho chaired the Export Investment Responsibility Officers Meeting at the Government Complex Sejong, where they discussed the "Measures to Resolve On-site Difficulties and Additional Support Plans for Export Revitalization," which included these details.

Korean exports have been declining since October last year. In particular, the trade deficit has persisted since March last year. If the current trend continues until this month, the export decline will have lasted six months, and the trade deficit will have continued for 13 months.

[Image source=Yonhap News]

Accordingly, the government has identified boosting export vitality, a breakthrough for economic recovery, as the top priority of economic policy and plans to concentrate policy efforts in the first half of the year. The government has set this year's export target at 685 billion dollars, surpassing last year's record high performance of 683.7 billion dollars.

First, the government will increase the scale of trade finance supply for small and medium-sized enterprises (SMEs) and mid-sized companies from the existing 362.5 trillion won to 364.5 trillion won, an additional 2 trillion won. Within this month, through KDB Industrial Bank, a new program will be launched offering up to a 0.6 percentage point interest rate discount to export SMEs and mid-sized companies that meet certain conditions. Next month, the government will conduct on-site inspections and prepare improvement measures for the delivery system to ensure companies can smoothly utilize policy financing such as trade finance. Regular inspections of trade finance supply performance will be conducted, and additional support measures for rapid execution will be prepared if necessary.

Additionally, to ease customs and clearance burdens, starting from the 17th, companies currently in the SME grace period will be included in the simplified fixed-amount refund system, which refunds customs duties for three years based solely on simple export facts. Furthermore, additional measures to enhance the utilization of the simplified fixed-amount refund system will be reviewed by the second half of this year.

Support for strategic industries such as nuclear power generation and overseas construction will also be strengthened. The nuclear power industry has requested stable financial support measures for nuclear power exports, including expanded guarantees for nuclear power equipment companies, due to the high-risk nature of large-scale, ultra-long-term nuclear export projects amid unstable financial markets. In response, the government will offer preferential conditions for export credit insurance for the issuance of 'Performance Bonds (AP Bonds)' to small and mid-sized equipment companies that have signed nuclear project export contracts. Special support limits will be provided at 1.5 times the allocated limit, with a 20% discount on insurance premiums and a 100% application of the insurance coverage ratio to the insured amount. Furthermore, to help export companies secure short-term liquidity by early monetization of export receivables through commercial banks, the export credit guarantee limit will be preferentially increased by 1.5 times, and guarantee fees will be discounted by 20%, thereby strengthening guarantee support.

Financial support for securing large-scale overseas construction projects with high added value, such as contractor-financed and investment-development types, will also be enhanced. During the first half of this year, an additional 'Indonesia One Team Korea' will be formed to consolidate the order-winning capabilities of Korean companies.

Support measures for Korea's key export industries such as future vehicles and shipbuilding have also been announced. Following requests from the Korea Automobile Manufacturers Association and others to strengthen tax incentives for expanding future vehicle investments, the government will consider designating core future vehicle technologies such as autonomous driving and hydrogen vehicles as new growth and original technologies under the Restriction of Special Taxation Act. If designated as new growth and original technologies, investment tax credit rates of 3% for large companies, 6% for mid-sized companies, and 12% for SMEs will apply.

To expand shipbuilding orders, support for Refund Guarantees (RG) will also be increased. In shipbuilding, it is common to prepay a certain percentage of the shipbuilding cost by process, and ordering companies require payment guarantees for advance payments at the time of contract to prepare for the risk of non-delivery of ships. Recently, due to rising ship prices and other factors, the RG limit is nearing exhaustion. Accordingly, support will be provided to utilize the remaining RG special guarantee limits of the Korea Trade Insurance Corporation, and measures to expand support, such as raising the current guarantee ratio from 70-85%, will be prepared and implemented.