Government to Provide Comprehensive Support Including 2 Trillion Won in Financing and Tax Relief
Restructuring of Yeosu and Ulsan Industrial Complexes to Gain Speed
Minister of Trade, Industry and Energy Kim Jungkwan stressed thorough implementation management and acceleration of follow-up restructuring in relation to the first petrochemical restructuring project, the “Daesan No. 1 Project,” saying that “The anchor has been raised, but the voyage starts now.”
Kim Jeonggwan, Minister of Trade, Industry and Energy (left), is delivering remarks on the afternoon of the 25th at the "CEO roundtable for companies approved for petrochemical business restructuring" held in a meeting room at the Korea Trade-Investment Promotion Agency (KOTRA) in Seocho-gu, Seoul. Photo by the Ministry of Trade, Industry and Energy
In his opening remarks at the “Business Restructuring CEO Meeting” held on the afternoon of the 25th, Minister Kim stated, “Daesan No. 1 is not just a task for the companies gathered here, but a leading project that will serve as a barometer for petrochemical restructuring,” adding, “The government will provide close support to ensure there are no disruptions in the implementation process.”
He said, “Only when the business restructuring of the Daesan industrial complex settles stably can the restructuring of other industrial complexes such as Yeosu and Ulsan gain momentum,” and added, “The success or failure of Daesan No. 1 will determine the direction of our petrochemical restructuring.”
Minister Kim particularly emphasized, “Today’s achievement is not the final destination. The anchor has been raised, but the voyage starts now,” and continued, “The government and companies must look in the same direction and stay together until the end so that the approved plan can lead to tangible results on the ground.”
Earlier that day, when announcing approval of the business restructuring plan for the Daesan No. 1 Project, the government unveiled a support package that includes financial, tax, and energy cost support. According to the restructuring plan, Lotte Chemical’s Daesan plant will be split off and then merged with Hyundai Chemical to integrate the operation of NCC and downstream facilities. Hyundai Oilbank (the largest shareholder of Hyundai Chemical) and Lotte Chemical will each inject 600 billion won, for a total capital increase of 1.2 trillion won, into the newly established integrated corporation.
The government will provide around 2 trillion won in support in the financial sector. Creditor financial institutions will provide up to 1 trillion won in new funding, and convert existing loans of up to 1 trillion won into perpetual bonds to improve financial soundness.
On the tax side, the government will ease local tax burdens arising from the processes of spin-off, merger, and asset acquisition. It will reduce acquisition tax and registration and license tax by 75% to 100%, and lower the overall tax burden by extending the corporate tax deferral period on asset sales (from a three-year installment payment after a four-year grace period to a five-year installment payment after a five-year grace period). The package also includes application of accelerated depreciation and an expansion of the limit on the deduction of loss carryforwards.
Minister Kim emphasized “co-prosperity” as much as the speed of restructuring. He said, “We must carefully examine the impact of the business restructuring process on local communities and partner companies,” adding, “The path of going far together is more important than going fast alone.” He continued, “Only when the regional petrochemical industrial ecosystem grows together can we overcome the waves of fierce global competition. The government will also work closely with companies to ensure that restructuring proceeds in a way that promotes co-prosperity with local communities.”
Minister Kim said, “Even if unexpected difficulties arise during the implementation process, we will maintain close communication and work together to find solutions,” adding, “While providing close support for the implementation of the Daesan Project, we will also actively back the swift推? of business restructuring at major industrial complexes such as Yeosu and Ulsan.”
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