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S. Korea to extend $445M in loans to Kaesong firms

February 24, 2016

SEOUL (Yonhap) — The South Korean government said Thursday that it will extend special low-interest loans worth 550 billion won (US$445 million) to firms based in a jointly run industrial park in a North Korean border town that have suffered losses due to the abrupt shutdown.

Earlier this month North Korea expelled South Korean workers from the Kaesong Industrial Complex and froze the assets of companies operating there a day after the South suspended operations in retaliation for Pyongyang’s rocket launch.

The government will also extend the maturity date of outstanding loans to more than 120 South Korean companies that have been operating in the zone, officials said.

The package of support measures were drawn up during a meeting by a special government task team headed by Lee Suk-joon, the top official in charge of government policy coordination at the Prime Minister’s Office.

The government has pushed ahead with measures to minimize the firms’ losses due to the shutdown of the industrial park, regarded as the greatest achievement of inter-Korean reconciliation and cooperation efforts.

“The size of the special loans has increased compared to when the Kaesong Industrial Complex was closed in 2013,” said Lee, adding that the interest rate is also relatively very low.

When the industrial park was closed in 2013 for 160 days, South Korean firms reported a combined loss of 1.05 trillion won. The government extended the loans worth 350 billion won at the time.

An association of the firms estimated Wednesday that their combined loss reached more than 815 billion won. The association urges the Seoul government to roll out full support measures, as their losses from the park’s shutdown are unimaginable.

It claimed that the government should also cover their losses related to liquid assets as they had to leave behind materials and finished products at the factory zone due to Seoul’s sudden suspension.

The government said it is considering compensating them for part of their losses related to materials and finished products that they were unable to take from the complex. Such losses are estimated to reach more than 246 billion won.

On Thursday, South Korea began to pay out insurance claims to 112 firms at the zone through the insurance policy covering losses related to fixed assets from economic cooperation projects between the two Koreas.