Gov't to pay cash to S. Korean firms hit by chill with North

The Korean government will pay cash to local firms financially distressed by the suspension of inter-Korean trade and economic cooperation, the Unification Ministry said Tuesday.

The unprecedented aid totaling 7.5 billion won (US$6.7 million) will go to South Korean business concerns, which have financially suffered from Seoul's imposition of economic sanctions on North Korea on May 24, 2010 in the wake of the North's sinking of the South's naval vessel Cheonan in March of the same year, the ministry said.

Korea's government has previously offered low-interest loans to financially troubled South Korean investors in the North, but it is the first time that cash with no strings attached will be given to South Korean firms involved in inter-Korean economic cooperation.

The so-called "May 24 sanctions" led to the suspension of the South's aid programs to the North and joint businesses run by South Korean firms and the North, including the Mount Kumgang tour program operated by Hyundai Asan.

Affected firms will be entitled to assistance of between 5 million won and 20 million won, a ministry official said, adding the assistance will be given after reviewing applications for the next three months.

The decision came after the government extended loans worth 56.9 billion won to 253 local firms whose businesses with the North were severely battered due to the 2010 anti-North measures.

Those firms have long demanded the government lift the punitive measures.

"Following the May 24 measures, firms trading with the North have diverted their business to countries like Vietnam and Myanmar, but they are still facing difficulties like logistics costs and high entry barriers," the official said. (Yonhap)