Financial companies in South Korea will provide troubled local companies at the inter-Korean industrial park with an emergency fund of up to 700 billion won ($636.5 million) to help them avoid cash shortages amid high political tension, the financial regulators said Friday.
The Financial Services Commission (FSC) and its executive body the Financial Supervisory Service (FSS), have called on financial companies here -- banks, savings banks, insurers and credit card firms -- to offer a special short-term loan to companies based in the Gaeseong Industrial Complex, located at North Korea's border, according to the authorities.
The nine-year-old industrial park ground to a halt early last month when the communist state withdrew its 53,000 workers from the complex in protest of U.S.-involved military drills in the South.
Seoul responded by pulling its own workers and managers from the 123 South Korean firms operating at the complex last week. Only seven South Koreans currently remain at the park to settle overdue wages and other outstanding issues with the North.
To prevent Gaeseong firms from going insolvent, the financial regulators first instructed state-run policy lenders and large commercial banks to offer special relief funds.
Woori Bank, the flagship unit of the country's biggest lender Woori Finance Holdings Co., and state-run Industrial Bank of Korea will provide 100 billion won each, with policy lender Export-Import Bank of Korea to set aside 300 billion won for emergency loans, the FSC and the FSS said.
The remaining 200 billion won will come from other commercial banks, credit cooperatives and insurance companies, they added.
The fund provided by the financial sector comes in addition to the 300 billion won emergency fund set up by the government to be offered to troubled companies in Gaeseong. Altogether the country has arranged a total of 1 trillion won to prop up the small and medium enterprises that are vulnerable to abrupt changes.
Banks will extend a special loan of up to 500 million won to a company experiencing financial difficulties, the authorities said.
The FSC and the FSS have also asked banks to defer repayment of maturing debts owed by Gaeseong companies as part of an effort to help them avoid default. Banks cannot raise their loan interest rate citing falling credit, the regulators said.
The outstanding amount of loans extended by banks to Gaeseong companies currently stands at 1.6 trillion won, according to the FSS.
The Gaeseong complex is the result of the historic summit between late South Korean President Kim Dae-jung and his counterpart Kim Jong-il, held in June 2000.
The launch of operations at the complex when products first came off the assembly line in late 2004 marked a groundbreaking ceremonial moment for the two Koreas, which have remained at a stalemate since the 1950-53 Korean War. Since its establishment, the Gaeseong complex's total output reached $2.05 billion as of the end of 2012, according to government data. (Yonhap News)