The government announced on Wednesday a set of measures to buffer losses to small and medium enterprises incurred from operation suspension in the inter-Korean industrial complex in Gaeseong.

The Ministry of Unification said that state agencies will further provide liquidity, credit guarantees and tax breaks for SMEs whose Gaeseong plant operations had been ceased for more than two weeks amid escalating tensions with North Korea.

It is considering further extending loans to those companies from its inter-Korean cooperative fund, while the Ministry of Strategy and Finance will oversee the whole process of financial assistance.

The Financial Services Commission plans to work with commercial banks to inject liquidity into the financial market for SMEs so that they can further tap loans, as well as expand credit guarantees through the state-run Korea Credit Guarantee Fund.

The National Tax Service will offer speedier tax rebates on value-added tax payments to the companies, and the Ministry of Security and Public Administration will further extend the period of regional tax filings, or waive SMEs from paying local taxes to regional governments.

The Ministry of Trade, Industry and Energy, meanwhile, will back those companies to continuously supply their goods to their customers, and the Ministry of Employment and Labor will also seek to help SMEs maintain their payrolls, or boost assistance such as unemployment benefits should the companies inevitably have to cut down manpower due to losses on the Gaeseong suspension.

Korea’s Small and Medium Business Administration will offer emergency policy funds and exempt some of the companies from repaying their debt.

About 13 companies are expected to receive 9 billion won ($8 million) through credit guarantee funds, while overall, emergency funds worth 17 billion won will be injected into the market. The government will extend policy loans and postpone debt repayments worth 16 billion won for 25 companies.

“We know that these measures are not enough to support SMEs that are suffering (from operation suspension),” said a spokesperson for the Unification Ministry.

“However, this is just the beginning, and the government will correct previous measures or further come up with additional ones (to support the companies).”

This comes after Finance Minister and Deputy Prime Minister Hyun Oh-seok said that the government will further draw up comprehensive measures for SMEs withdrawn from Gaeseong to minimize the impact on the economy.

The Finance Ministry has offered assistance such as postponing corporate audits and VAT filings, as well as urged banks not to call in loans by SMEs with operations in Gaeseong.

Hyun said earlier on the day during his meeting with economic-related officials that the government will move to abolish joint loan guarantees demanded by the nonbanking industry such as mutual savings banks and investment banks.

SMEs or entrepreneurs seeking loans have been required by nonbanks to provide a third party that can guarantee their credit.

Hyun said that the joint liability requirement has been hindering entrepreneurs from launching businesses, while making nonbanks take less responsibility over loans they extend to SMEs or venture start-ups.

By Park Hyong-ki (hkp@heraldcorp.com)