Additional W2 tril. to be available

By Kim Tae-jong

The authorities said Friday that financial firms will provide up to 700 billion won ($636.5 million) in emergency funding to South Korean firms that were operating in the Gaesong Industrial Complex to help them cope with cash shortages.

The move came as South Korean firms with plants in the complex in North Korea have seen snowballing losses due to the halt of business after Pyongyang withdrew all 53,000 North Koreans working there.

According to the Financial Services Commission, Woori Bank and the Industrial Bank of Korea will provide 100 billion won each, while the Export-Import Bank of Korea will extend up to 300 billion won in loans.

Other banks and insurers will offer loans worth 200 billion won together with the Korean Federation of Community Credit Cooperatives and the National Credit Union Federation of Korea.

This will be the second financial aid of its kind. On May 1, the government decided to provide 300 billion won to troubled companies at low interest rates by tapping into the Inter-Korea Cooperation Fund.

Banks and other financial firms are also being asked to roll over maturing debts. The outstanding amount of loans extended by banks to companies based in the complex stands at 1.6 trillion won.

Local banks will offer loans up to 500 million won to each firm.

Earlier, Financial Supervisory Service (FSS) Governor Choi Soo-hyun demanded that financial firms provide a full-range of support.

“The problems of South Korean firms in the Gaesong complex are related to political issues,” an official from the FSS said. “So we have asked financial firms to help them out and they have agreed to do so.”

Along with direct financial aid, the financial authorities have also come up with other measures to support the companies. Lenders have been banned from raising interest rates on loans even though the firms have experienced credit rating cuts. State-run banks are also required to lower interest rates by 1 percentage point on loans extended to them.

The inter-Korea industrial park was the result of a historic summit between the late South Korean President Kim Dae-jung and North Korea’s Kim Jong-il, held in June 2000. Since its establishment in 2004, the complex’s total output reached $2.05 billion as of the end of 2012, according to government data.