WORLD TRADE
ORGANIZATIONG/SCM/N/95/KOR
5 May 2004
(04-2012)
Committee on Subsidies and
Countervailing MeasuresOriginal: English
SUBSIDIES
New and Full Notification Pursuant to Article XVI:1
of the GATT 1994 and Article 25 of the Agreement
on Subsidies and Countervailing Measures
KOREA
The following communication, dated 3 May 2004, is being circulated at the request of the
Delegation of Korea.
_______________
The following notification is submitted for the purposes of transparency and without prejudice
to the legal status and nature including specificity, or effects of the notified programmes or measures
under the ASCM and GATT 1994.G/SCM/N/95/KOR
Page 2
TABLE OF CONTENTS
Page
I. AGRICULTURE.......................................................................................................................3
A. FOODGRAIN MANAGEMENT PROGRAMME ..................................................................................3
B. SUPPORT FOR MARKETING IMPROVEMENT AND PROMOTION OF AGRICULTURAL AND
LIVESTOCK PRODUCTS ................................................................................................................5
C. SUPPORT FOR LIVESTOCK PRODUCTS .........................................................................................7
1. Hanwoo Industry Stabilization Programme...........................................................................7
2. Support for stabilizing the Demand and Supply of Livestock Products..............................9
II. FORESTRY..............................................................................................................................10
A. PLYWOOD &BOARD ASSISTANCE PROGRAMME ......................................................................10
B. FOREST PRODUCTS UTILIZATION ASSISTANCE PROGRAMME ..................................................11
III. FISHERY..................................................................................................................................12
A. SUPPORT FOR DEVELOPMENT OF DEEP-SEAFISHERY ..............................................................12
B. SUPPORT FOR FISHPRODUCTS PROCESSING DEVELOPMENT ...................................................13
C. SUPPORT FOR FISHING ACTIVITIES ...........................................................................................13
D. SUPPORT FOR AQUACULTURE FISHERY DEVELOPMENT ..........................................................14
E. LOCAL TAXREDUCTION FOR BUILDING AND ACQUISITION OF DEEP-SEAFISHING
VESSELS ....................................................................................................................................15
IV. COAL INDUSTRY..................................................................................................................16
A. SUPPORT FOR THE COAL INDUSTRY THROUGH THE SPECIAL ACCOUNT FOR ENERGY
AND RESOURCES .......................................................................................................................16
V. MANUFACTURING INDUSTRY.........................................................................................18
A. SUPPORT FOR FOREIGN INVESTED ENTERPRISES ......................................................................18
B. TARIFF REDUCTION ON AIRCRAFT PARTS ................................................................................19
C. SUPPORT FOR FARM MACHINERY MANUFACTURING ...............................................................19
D. SUPPORT FOR THE STONE INDUSTRY THROUGH THE SPECIAL ACCOUNT FOR ENERGY
AND RESOURCES .......................................................................................................................20
VI. ENVIRONMENT, RESEARCH AND DEVELOPMENT..................................................22
A. ENVIRONMENTAL IMPROVEMENT LOAN PROGRAMME ............................................................22
B. SUPPORT FOR R&D OFENVIRONMENTAL TECHNOLOGY DEVELOPMENT PROJECTS ...............22
C. AUTOMOBILE LOWEMISSION TECHNOLOGY DEVELOPMENT SUPPORT ...................................23
D. NATURAL GASBUSSUPPLY PROJECT ......................................................................................24G/SCM/N/95/KOR
Page 3
E. SUPPORT FOR RECYCLING EQUIPMENT AND TECHNOLOGY DEVELOPMENT ............................25
F. LOAN PROGRAMME FOR R&D OFINFORMATION AND COMMUNICATION ................................27
G. SCIENCE AND TECHNOLOGY PROMOTION FUND ......................................................................28
I. AGRICULTURE
A. FOODGRAIN MANAGEMENT PROGRAMME
1. Title of the subsidy programme
Foodgrain Management Programme
2. Period covered by the notification : 2001-2002
3. Policy objective and/or purpose of the subsidy:
To maintain buffering stocks of staple foods for food security
4. Background and authority for the subsidy
Law:
- Article 4 of Foodgrain Management Act
- Article 10 of the Agro-Fisheries Marketing and Price Stabilization Act
- Article 14 of the Special Act for Rural Development
Authority: Ministry of Agriculture and Forestry (MAF)
5. Form of the subsidy
Government purchase of selected items: rice, barley, soy beans, corn
*Financial Resource
- Rice, barley: Government budget (Foodgrain Management Special Account)
- Soy bean: Fund for Agriculture & Fisheries Product Price Stabilization
- Corn: Government budget (Special Account for Structural Development of Rural
Areas)
6. Recipients and Terms
(1) Rice and barley
The government purchases rice and barley from farmers. The quantities and prices are
approved by the National Assembly within the Aggregate Measurement of Support
(AMS) commitments under the WTO Agreement on Agriculture.
(2) Soy bean
The government determines the purchasing price and quantity every year before the
planting of soybeans within the AMS commitment under the WTO Agreement onG/SCM/N/95/KOR
Page 4
Agriculture. Pursuant to the government decision, the Agriculture and Fishery
Marketing Corporation (AFMC) purchases soybean from farmers during the harvest
season.
(3) Corn
Pursuant to the guidelines for purchasing price and quantity set by the government
within the AMS commitment under the WTO Agreement on Agriculture, the National
Agricultural Cooperatives Federation (NACF) purchases corns from farmers during
the harvest season and sells the commodity at market price. The government
compensates the NACF for losses incurred as a result of the above transaction.
7. Amount of the subsidy (Government expenditures for foodgrain purchases)
(Unit: billion KRW)*
Item /Year 2001 2002
Rice 870.9 824.1
Barley 47.5 54.4
Soy bean 11.2 15.3
Corn 2.5 1.4
* KRW: Korean Won
8. Duration of the subsidy
The governmental purchase system for the above items was introduced before beginning of
the UR negotiations, and will be implemented within the AMS commitments as agreed upon under the
WTO Agreement on Agriculture.
9. Trade effects of the subsidy
The self-sufficiency ratio of Korea's grain production has been declining from 56 per cent in
1980 and 43.1 per cent in 1990 to 30.4 per cent in 2002
As stated above, the governmental intervention in the grain market is to secure the stable food
supply and the adequate stock of basic grains for food security. Therefore, the effects of government
purchases on trade are considered to be insignificant.
Statistics on Production, Consumption and Trade for Food Grain
(Unit: 1,000 M/T)
Commodity 2001 2002
RiceProduction 5,291 5,515
Import 128 154
Export - -
Consumption 5,151 5,157
BarleyProduction 268 212
Import 162 183
Export - -
Consumption 347 351
Soy beanProduction 113 118
Import 1,344 1,489
Export - -G/SCM/N/95/KOR
Page 5
Commodity 2001 2002
Consumption 1,463 1,614
CornProduction 64 57
Import 8,529 8,620
Export - -
Consumption 8,511 8,697
* Note: 1. Years refer to the 12-month period from November to October.
2.400,000 tons of food aid provided to North Korea in 2002 was excluded.
B. S UPPORT FOR MARKETING IMPROVEMENT AND PROMOTION OF AGRICULTURAL AND
LIVESTOCK PRODUCTS
1. Title of the subsidy programme
Support for Marketing and Promotion of Agricultural and Livestock Products
2. Period covered by the notification: 2001-2002
3. Policy objective and/or purpose of the subsidy
To improve quality and reduce the marketing costs of agricultural products (Fruits, Flowers,
Gimchi, Vegetables, Ginseng, Livestock products)
4. Background and authority for the subsidy
Law: Article 16 of the Special Act for Rural Development
Authority: Ministry of Agriculture and Forestry
5. Form of the subsidy
Grants
*Source of fund: Special Account for Structural Improvement of Rural Areas
6. Recipients and criteria
Recipients: Exporters of Fruits, Flowers, Gimchi, Vegetables, Livestock products
Content of the subsidy: Financial assistance for selection, packaging, transportation, etc.
7. Amount of the subsidy
(Unit: million KRW)
2001 2002
Total amount of the subsidy 25,955 26,605
Fruit 7,735 12,247
Flower 6,962 4,597
Gimchi 1,775 2,045
Vegetable 8,593 6,556G/SCM/N/95/KOR
Page 6
2001 2002
Ginseng 727 1,040
Livestock product 163 138
8. Duration of the subsidy
No fixed time period
9. Trade effects of the subsidy
This programme provides financial assistance to support packaging, transportation, etc. and to
improve quality and reduce distribution cost of agricultural and livestock products (only packaging for
livestock products), but the trade effect is presumed to be insignificant
Statistics on Production, Consumption and Trade
- Fruit (Apples and Pears)
(Unit: M/T)
2000 2001 2002
Production 813,200 820,743 819,000
Import - - -
Export 11,074 15,188 34,390
Consumption 802,126 805,555 784,610
- Flower
(Unit: million US$)
2000 2001 2002
Production 510 536 540
Import 19 21 23
Export 29 32 32
Consumption
(Billion KRW)500 525 531
- Gimchi
(Unit: M/T)
2000 2001 2002
Production 487,405 449,806 472,296
Import 473 393 474
Export 23,433 23,785 29,213
Consumption 1,556,621 1,499,353 1,574,321
*Note: Consumption here is the sum of consumption of processed, self-made and imported Gimchi.
- Vegetable
(Unit: 1,000 M/T)
2000 2001 2002
Production 11,282 11,310 9,796
Import 220 239 258
Export 41 70 50
Consumption 11,461 11,479 10,004G/SCM/N/95/KOR
Page 7
- Ginseng
(Unit: M/T)
2000 2001 2002
Production 13,664 13,215 16,662
Import 107 133 140
Export 2,078 1,983 2,163
Consumption 11,693 11,275 14,639
- Livestock
(Unit: M/T)
2000 2001 2002
Production 975,900 1,000,100 1,073,700
Import 213,325 188,523 225,326
Export 30,002 43,262 21,414
Consumption 1,159,223 1,145,361 1,277,612
C. S UPPORT FOR LIVESTOCK PRODUCTS
1. Hanwoo Industry Stabilization Programme
1.1. Title of the subsidy programme
Hanwoo Industry Stabilization Programme
1.2. Period covered by the notification : 2001-2002
1.3. Policy objective and/or purpose of the subsidy
To promote the competitiveness of Hanwoo through quality improvement, and to maintain
Hanwoo (Korean native cattle) production capacity against the continuous decline of the number of
cattle and calf
1.4. Background and authority for the subsidy
Law: Article 3 and Article 26 of the Livestock Act
Authority: Ministry of Agriculture and Forestry
1.5. Form of the subsidy
Grants
*Source of fund: The Livestock Development Fund
1.6. Recipients and terms
Castration Subsidy
In 2001~2002, 100,000~200,000 KRW per the castrated bull was subsidized to Hanwoo-
raising farmers enrolled in Calf Production Stabilization Programme and farmers who raise dairy
cattle, bull, and hybrid cattle of Korean origin.G/SCM/N/95/KOR
Page 8
Support for Calf Production Infrastructure
Supports are provided to create infrastructure of a cattle production including building
livestock barns, cultivation of feed with creation of grasslands, purchase of facilities and equipment.
Recipients include members of the National Agricultural Cooperative Federation, Hanwoo-raising
incorporated associations, and full-time Hanwoo-raising farmers who have already acquired more than
20 ha of grassland.
Subsidy for Hanwoo Productivity
Subsidy is provided to Hanwoo-raising farmers enrolled in Calf Stabilization Programme, and
producing more than three heads of calf per Hanwoo.
High Quality Cattle Production Reward
In 2001~2002, 100,000~150,000 KRW per head was subsidized to farmers who produce
castrated cattle obtaining certain grade or higher.
1.7. Amount of the subsidy
(Unit: million KRW)
2001 2002
Castration Subsidy 18,528 15,783
Support for Calf Production Infrastructure - 800
Subsidy for Hanwoo productivity 29,337 40,451
High Quality Cattle Production Reward 2,302 -
1.8. Duration of the subsidy: No fixed time period.
1.9. Trade effects of the subsidy
As the number of domestic cattle head decreased, Korea’s self sufficiency rate of beef has
been in decline.
- The number of Hanwoo raised was decreased from 2,383,000 heads in December 1998
to 1,410,000 in December 2002.
- The self-sufficiency rate of beef was decreased from 75.4 per cent in 1998 to 36.6 per
cent in 2002.
The programme’s impact on trade is expected to be minimal, because it has been established
to secure the domestic beef supply infrastructure under the declining beef self-sufficiency rate.
Beef production, Consumption and Trade
(Unit: 1,000 M/T)
2001 2002
Production 164 147
Import 181 338
Export - -
Consumption 384 403G/SCM/N/95/KOR
Page 9
2. Support for stabilizing the Demand and Supply of Livestock Products
2.1. Title of the subsidy programme:
Government Purchase of Pigs due to the outbreak of swine fever
2.2. Period covered by the notification: From May to December 2002
2.3. Policy objective and/or purpose of the subsidy
To minimize the damage by preventing classical swine fever from spreading to pig-raising
farm households
2.4. Background and authority for the subsidy
Law: Article 3 of the Livestock Act
Authority: Ministry of Agriculture and Forestry
2.5. Form of the Subsidy
Grant and Loan
*Source of fund: The Livestock Development Fund
2.6. Recipients and terms
Recipient: Grant and loan have been given to the pig-raising farm households within the
designated area, and applying for them.
Purchasing was made at market price for pig-raising farm households
Terms of loan: Full redemption should be made all at once after 6 month at the annual interest
rate of 0 per cent
2.7. Amount of the subsidy: 1,548 million KRW
(Unit: million KRW)
Grant (A) 1,541
Loan 226
Estimated Subsidy of Loan (B) 7.6
Total (A+B) 1,548
* The subsidy effect is estimated based on the difference between the average market interest
rate and the loan rate
2.8. Duration of the subsidy: No fixed time period
2.9. Trade effects of the subsidy
Trade effects of the subsidy is expected to be insignificant, considering the purpose of the
subsidy of minimizing damage caused to pig raising farm households by preventing swine fever from
spreading.G/SCM/N/95/KOR
Page 10
Production, Import, Export and Consumption of Pork
(Unit: 1,000 M/T)
2001 2002
Production 733 785
Import 105 131
Export 41 20
Consumption 807 810
II. FORESTRY
A. PLYWOOD &BOARD ASSISTANCE PROGRAMME
1. Title of the subsidy programme: Plywood & Board Assistance Programme
2. Period covered by the notification: 2001-2002
3. Policy objective and/or purpose of the subsidy
To provide support for board production facilities, using culled-out trees, small unmarketable
trees and waste wood materials.
4. Background and authority for the subsidy
Law: Forestry Development and Promotion Act
Authority: Forestry Administration
5. Form of the subsidy
Loan
*Source of fund: The Special Account for Financial Investment and Loan (2001), The Special
Account for agro-fisheries & rural structure improvement (2002)
6. Recipient and terms
Recipient: plywood and board producers, Conditions: Interest rate of 5.5 per cent
Terms of loan: 10 years (7-year repayment period with a 3-year grace period)
7. Amount of the subsidy
(Unit: million KRW)
2001 2002
Subsidy effect 120 40
* The subsidy effect is estimated, based on the difference between the interest rate on
the loan and market interest rate.
8. Duration of the subsidy: No fixed time periodG/SCM/N/95/KOR
Page 11
9. Trade effect of the subsidy
Most of board and plywood production is used to meet the domestic demand and the export of
these products which have been declining. Therefore, the trade effect is presumed to be insignificant.
Production, Consumption and Trade
(Unit: 1,000m3)
2001 2002
Production 2,478 2,788
Imports 1,922 2,483
Exports 154 98
Consumption 4,246 5,173
B. FOREST PRODUCTS UTILIZATION ASSISTANCE PROGRAMME
1. Title of the subsidy programme: Forest Products Utilization Assistance Programme
2. Period covered by the notification: 2001-2002
3. Policy objective and/or purpose of the subsidy
To provide financial assistance for modernization of forestry machinery and facilities
4. Background and authority for the subsidy
Laws: Forestry Development and Promotion Act (Article 10), Forestry Act (Article 109)
Authority: Forestry Administration
5. Form of the subsidy
Loan
Source of fund: Special Account for Structural Improvement of Rural Areas
6. Recipient and terms
Recipient: individuals or corporations that operate wood processing facilities
Terms of loan:
- Utility processing facilities: Interest rates of 4.0-8.0 per cent (7-year repayment period
with a 3-year grace period)
- Purchase of raw materials: Interest rate of 5.5 per cent (2-year repayment period with
a 3-year grace period)
7. Amount of the subsidy
(Unit: million KRW)
2001 2002
Subsidy effect 900 90
* The subsidy effect is estimated, based on the difference between the interest rate on the loan
and market interest rate.G/SCM/N/95/KOR
Page 12
8. Duration of the subsidy : No fixed time period
9. Trade effects of the subsidy
Most of domestic wood production is used to meet the domestic demand. Therefore, the
effect on trade is presumed to be insignificant.
Production, Consumption and Trade
(Unit: 1,000m3)
2001 2002
Production 4,319 4,009
Import 761 848
Export 19 14
Consumption 5,061 4,843
III. FISHERY
A. SUPPORT FOR DEVELOPMENT OF DEEP-SEAFISHERY
1. Title of the subsidy programme: Support for Development of Deep-Sea Fishery
2. Period covered by the notification: 2001-2002
3. Policy objective and/or purpose of the subsidy
To support the management of deep-sea fishery
4. Background and authority for the subsidy
Law: Article 87 of the Fisheries Act
Authority: Ministry of Maritime Affairs and Fisheries
5. Form of the subsidy: Loan
6. Recipient and terms
- Recipient: deep-sea fishermen
- Terms of loan: One-year loan at the interest rate ranging from 4.50 to 5.50 per cent.
7. Amount of the subsidy
(Unit: million KRW)
Amount of the loan Estimated subsidy amount
2001 331,000 2,000
2002 300,000 1,900
* The subsidy amount is estimated based on the difference between the loan rate and the
market rate.
8. Duration of the subsidy or time restriction under related laws: No fixed time periodG/SCM/N/95/KOR
Page 13
9. Trade effect of the subsidy
It is difficult to estimate the trade effects.
B. SUPPORT FOR FISHPRODUCTS PROCESSING DEVELOPMENT
1. Title of the subsidy programme: Support for Fish Products Processing Development
2. Period covered by the notification: 2001-2002
3. Policy objective and/or purpose of the subsidy
To develop new fishery products, increase the production of high quality products and
modernize the storage and processing facilities.
4. Background and authority for the subsidy
Law: Article 15 and 16 of the Law on the Fisheries Products Quality Control
Authority: Ministry of Maritime Affairs and Fisheries
5. Form of the subsidy: Grants, Loan
6. Recipient and terms
Recipient: Companies engaged in constructing facilities for handling, storing and processing.
Terms of the loan:
- Support for operations of fish processing: 1 year
- Support for the storage and processing facilities of fish products: 10 years (repayment
within 7 years with a 3-year grace period)
- Interest rate: 5 per cent
7. Amount of the subsidy
(Unit: million KRW)
2001 2002
Grants (a) 2,000 3,000
Loan 17,500 11,500
Estimated subsidy by loan (b) 400 200
Amount of total subsidy (a+b) 2,400 3,200
* The subsidy effect is estimated based on the difference between the market rate and the loan
rate.
8. Duration of the subsidy: No fixed time period.
9. Trade effect of the subsidy: It is difficult to estimate the trade effect.
C. SUPPORT FOR FISHING ACTIVITIES
1. Title of the subsidy programme: Support for Fishing ActivitiesG/SCM/N/95/KOR
Page 14
2. Period covered by the notification: 2001-2002
3. Policy objective and/or purpose of the subsidy
To relieve financial burden and support stable fishing business operation by providing loans
4. Background and authority for the subsidy
Laws: Article 87 of the Fisheries Act
Authority: Ministry of Maritime Affairs and Fisheries
5. Form of the subsidy:
Loan
6. Recipient and terms
- Coastal and off-shore fishermen as well as inland fishermen
- Period of the loan: 1 year
- Interest rates: 4.0 - 4.5 per cent
7. Amount of the subsidy
(Unit: billion KRW)
2001 2000
Loan amount 1,205 1,405
Subsidy effect* 53.6 40
* The subsidy effect is estimated based on the difference between the market rate and the loan
rate.
8. Duration of the subsidy: No fixed time period.
9. Trade effect of the subsidy
It is difficult to estimate the trade effects.
D. SUPPORT FOR AQUACULTURE FISHERY DEVELOPMENT
1. Title of the subsidy programme: Support for Aquaculture Development
2. Period covered by the notification: 2001-2002
3. Policy objective and/or purpose of subsidy
To have stable supply of fishery products by supporting the establishment of aquaculture
fishery under the changing circumstances of domestic and overseas industries.
4. Background and authority for the subsidy
Law: Article 4 of the Law on the Special Account for Infrastructure Improvement of Rural Area.
Authority: Ministry of Maritime Affairs and FisheriesG/SCM/N/95/KOR
Page 15
5. Form of the subsidy
Grants, Loan
6. Recipient and terms
- Recipient: fishermen engaged in aquaculture fishery.
- Terms of loan: 10 years (repayment within 7-year with a 3-year grace period)
- Interest rate: 5 per cent
7. Amount of the subsidy
(Unit: million KRW)
2001 2002
Amount of grants (a) 1,000 1,400
Loan 5,500 11,400
Subsidy effect of loan (b) 100 200
Total amount of the subsidy (a + b) 1,100 1,600
* The subsidy effect is estimated based on the difference between the loan rate and the market
rate.
8. Duration of the subsidy: Until 2011
9. Trade effect of the subsidy
It is difficult to estimate the trade effect.
E. LOCAL TAXREDUCTION FOR BUILDING AND ACQUISITION OF DEEP-SEAFISHING VESSELS
1. Title of the subsidy programme
Local Tax Reduction for Building and Acquisition of International Line Vessels and Deep-Sea
Fishing Vessels
2. Period covered by the notification: 2001-2002
3. Policy objective and/or purpose of the subsidy
To contribute to the promotion of shipping industry by reducing the tax burden on acquiring
international line vessels and deep-sea fishing vessels.
4. Background and authority for the subsidy
Law: Article 284 of Local Tax Act
Authority: Ministry of Administration and Home Affairs
5. Form of the subsidy
Tax reductionG/SCM/N/95/KOR
Page 16
6. Recipient and term
Local Tax Reduction for International Line vessels
- Exemption of acquisition tax on vessels acquired for the purpose of registering as
international ship according to the International Vessel Registration Law.
- Exemption of Common Facility Tax on vessels registered as international ship as of
the date of taxation and 50 per cent reduction in property tax.
- If the vessel is not registered as international ship within 6 months from the date of
acquisition, the exempted acquisition tax be levied.
Local Tax Reduction for Deep-sea Fishing Vessels
- Acquisition tax and Property tax be reduced by 50 per cent for freight vessel and
international vessels on the coastal service.
7. Amount of subsidy
(Unit: billion KRW)
2001 2002
Amount 24.5 9.8
8. Duration of the subsidy: Until 31 December 2003
9. Trade effect
The subsidy is to promote the shipping industry by relieving tax burden on international line
vessels, deep-sea fishing vessels and coastal line vessels. Therefore it is not directly related to trade.
IV. COAL INDUSTRY
A. SUPPORT FOR THE COAL INDUSTRY THROUGH THE SPECIAL ACCOUNT FOR ENERGY AND
RESOURCES
1. Title of the subsidy programme
Support for the Coal Industry through the Special Account for Energy and Resources
2. Period covered by the notification: 2001-2002
3. Policy objectives and /or purpose of the subsidy
- To support the restructuring of the coal industry, such as the shutdown of coal mines
and reduction in coal production, in line with the reduced demand for hard coals.
- To stimulate the local economy contracted due to the restructuring of the coal
industry.
- To compensate for the difference between production cost and retail price of coal and
briquettes. (The difference was due to the controlling of the retail price of coal and
briquettes to secure the demand for domestically-produced hard coal)G/SCM/N/95/KOR
Page 17
4. Background and authority for the subsidy
Law: Article 26 of the Coal Industry Act
Authority: Ministry of Commerce, Industry and Energy
5. Form of the subsidy
Grants, Loan
6. Recipient and term
(a) Grants
- Coal producers who sought to install modernized coal-producing facilities were
given the subsidy for coal production. However, this subsidy was phased out in
2000.
- Briquette producers and coal miners are granted the subsidy in the form of direct
payment and premium for industrial accident compensation insurance and education
fees.
(b) Loan
- Entrepreneurs who start business in the abandoned mine areas are financed with a low
preferential interest rate of 5.25 per cent for the equipment and operation cost.
7. Amount and duration of the subsidy
(Unit: million KRW)
2001 2002
Lump sum transfer (a) 314,810 269,385
Loan 20,000 16,000
Benefit of loan*(b) 90 88
Total (a+b) 314,900 269,473
* The subsidy effect is estimated based on the difference between the loan rate and the
market rate.
8. Duration of the subsidy
Grants for stimulating the economy in abandoned mine areas and the loans with preferential
interest rates will be made available by 2005.
9. Trade effects of the subsidy
The reduced domestic demand for hard coal led to the abandonment of coal mine and the
reduction in production with the aid of the subsidy, which contributed to the upward trends in the
import of soft coal. However, it is hard to measure the quantitative effects of the subsidy.G/SCM/N/95/KOR
Page 18
V. MANUFACTURING INDUSTRY
A. SUPPORT FOR FOREIGN INVESTED ENTERPRISES
1. Title of the subsidy programme: Support for Foreign Invested Enterprises
2. Period covered by the notification: 2001-2002
3. Policy objective and /or purpose of the subsidy
To induce Foreign Direct Investment (FDI)
4. Background and authority for the subsidy
Laws: Article 121 of Special Tax Treatment Control Law, Foreign Investment Promotion Act
Authority: Ministry of Finance and Economy; Ministry of Commerce, Industry and Energy;
Ministry of Administration and Home Affairs
5. Form of the subsidy
Tax reduction
Reduction in the rental fee of government land.
6. Recipient and term
- Foreign-invested enterprises engaged in service sector supporting other industries or
using advanced technology.
- Foreign invested enterprises that are operated in Foreign Investment Zones including
Free Trade Zones
7. Amount of the subsidy
- Full exemption of corporation tax and income tax for foreign-invested enterprises for
the first 7 years after income is generated and 50 per cent reduction for the following
3 years.
- Full exemption of acquisition tax, registration tax, property tax and aggregate land tax
on land acquired or owned by foreign invested enterprises for the first 5 years after
income is generated and 50 per cent reduction for the following 3 years.
- Full exemption of customs duty, special excise tax and value-added tax on capital
goods brought into Korea by foreign-invested enterprises within 3 years for operation
of businesses eligible for tax exemption or reduction.
8. Duration of the subsidy
No fixed time period
9. Trade effect of the subsidy
The main purpose of this subsidy is to induce FDI, so it is difficult to estimate the trade
effects.G/SCM/N/95/KOR
Page 19
B. TARIFF REDUCTION ON AIRCRAFT PARTS
1. Title of the subsidy programme
Tariff Reduction on Aircraft Parts
2. Period covered by the notification: 2001-2002
3. Policy objective and/or purpose of the subsidy
To encourage the importation of aircraft parts not domestically produced and to reduce
production cost.
4. Background and authority for the subsidy
Laws: Article 89 of Customs Act
Authority: Ministry of Finance and Economy
5. Form of the subsidy
Tax reduction
6. Recipient and terms
Those who are authorised as manufacturing or repairing aircraft in accordance with the
Promotion Act for the Development of Aircrafts and Space Industries.
7. Amount of the subsidy
8.
(Unit: billion KRW)
2001 2002
Amount of Duty Reduction 25 25.5
9. Duration of the subsidy
No fixed time period
10. Trade effect of the subsidy
None
C. SUPPORT FOR FARM MACHINERY MANUFACTURING
1. Title of the subsidy programme
Support for Farm Machinery Manufacturing
2. Period covered by the notification: 2001-2002
3. Policy objective and/or purpose of the subsidy
To assist off-season manufacturing of farm machinery and to help machinery manufactures to
meet high demand for farm machinery in the farming seasonsG/SCM/N/95/KOR
Page 20
4. Background and authority for the subsidy
Laws: Article 4 of Farm Mechanization Promotion Act
Authority: Ministry of Agriculture and Forestry
5. Form of the subsidy
Loan
Source of fund: Special Account for Structural Development of Rural Areas
6. Recipient and terms
1-year loan is provided for farm machinery manufacturers and developers of new-tech
machinery at the annual interest rate of 5 per cent.
7. Amount of the subsidy
(Unit: million KRW)
Amount of the loan Estimate of the subsidy
2001 40,000 700
2002 20,000 350
* The subsidy effect is estimated based on the difference between the loan rate and the market
rate.
8. Duration of the subsidy
No fixed time period
9. Trade effect of subsidy
Its effect on trade is expected to be insignificant since the amount of the subsidy accounts only
for 0.1 per cent to 0.2 per cent of the annual sale of farm machinery production.
Statistics of Sales and Trade
Classification 2001 2002
Sales (billion KRW) 738 564
Imports (million US$) 134 118
Exports (million US$) 146 147
D. SUPPORT FOR THE STONE INDUSTRY THROUGH THE SPECIAL ACCOUNT FOR ENERGY AND
RESOURCES
1. Title of the subsidy programme
Support for the Stone Industry through the Special Account for Energy and Resources
2. Period covered by the notification: 2001-2002G/SCM/N/95/KOR
Page 21
3. Policy objective and/or purpose of the subsidy
To support rational exploitation of domestic stone resources
4. Background and authority for the subsidy
Law: Article 6 of the Law Concerning the Special Account for the Energy and Resources
Industry
Authority: Ministry of Commerce, Industry and Energy
5. Form of the subsidy
Grants, Loan
6. Recipient and criteria
(a) Grants
- The following persons are granted subsidies equivalent to the whole drilling and
construction costs:
Stony mountain developers;
Owners of the stone-quarrying rights who wish to exploit stony mountains
Persons who acquired the recommendation of the mayor or the governor
(b) Loan
- Quarriers and stone-processors are financed with a low preferential interest rate of
4.75 per cent for the equipment and operation cost.
7. Amount of the subsidy
(Unit: million KRW)
2001 2002
Lump sum transfer(A) 437 381
Loan 11,000 10,000
Benefit of loan*(B) 105 95
Total(A+B) 542 476
* The subsidy effect is estimated based on the difference between the loan rate and the
market rate
8. Duration of the subsidy
No fixed time period
9. Trade effects of the subsidy
It is hard to measure the quantitative effect of the subsidy.G/SCM/N/95/KOR
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VI. ENVIRONMENT, RESEARCH AND DEVELOPMENT
A. ENVIRONMENTAL IMPROVEMENT LOAN PROGRAMME
1. Title of the subsidy programme
Environmental Improvement Loan Programme
2. Period covered by the notification: 2001-2002
3. Policy objectives and/or purpose of the subsidy
To encourage and promote private firm's environmental investment
4. Background and authority for the subsidy
Laws: Article 34 of Basic Environmental Policy Act
Authority: Ministry of Environment
5. Form of the subsidy
Loan
*Source of fund: Special Account for Financial Loan
6. Recipient and term
Loan of 7-year repayment period with a 3-year grace period is provided for small & medium
enterprises subject to installing, purchasing, operating and improving the environmental equipment, at
the annual interest rate of 4.78 per cent.
7. Amount of the subsidy
(Unit: billion KRW)
8. Duration of the subsidy :No fixed time period.
9. Trade effect of the subsidy
The subsidy is expected to have almost no trade effect since the purpose of this programme is
to support the instalment or improvement of environmental equipment
B. SUPPORT FOR R&D OFENVIRONMENTAL TECHNOLOGY DEVELOPMENT PROJECTS
1. Title of the subsidy programme
Support for R&D of Environmental Technology Development Projects
2. Period covered by the notification: 2001~20022001 2002
Amount of loan 60 70G/SCM/N/95/KOR
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3. Policy objectives and/or the purpose of the subsidy
To develop cutting-edge environmental technologies in order to improve the nation's
environment
4. Background and authority for the subsidy
Laws:
Article 5 of Act Relating to Environmental Technology Support and Development
Authority: Ministry of Environment
5. Form of the subsidy
Government contribution
*Source of fund: Special Account for Environmental Improvement
6. Recipient and terms
Government-invested research institutions, universities, research institutions and private
enterprises that participate in the Environmental Technology Development Project.
7. Amount of the subsidy
(Unit: billion KRW)
2001 2002
Amount 50 70
8. Duration of the subsidy: No fixed time periods
9. Trade effect of the subsidy
Since the subsidy focuses on basic environmental technologies, it would not have significant
trade effect that is normally expected in the field of applied industrial technology.
C. AUTOMOBILE LOWEMISSION TECHNOLOGY DEVELOPMENT SUPPORT
1. Title of the subsidy programme
Automobile Low Emission Technology Development Support
2. Period covered by the notification: 2001 ~ 2002
3. Policy objective and/or purpose of the subsidy
To develop low emission technology for large-size diesel vehicles
4. Background and authority for the subsidy
Laws:
- Article 31.2 of Air Quality Preservation Act (Support for Technology Development)
- Article 5 of Act Relating to Environmental Technology Support and DevelopmentG/SCM/N/95/KOR
Page 24
- Article 11 of the Law on Environmental Improvement Fee
- Article 4 of the Law on Special Account for Environmental Improvement
Authority: Ministry of Environment
5. Form of the subsidy
Government contribution for R&D
6. Recipient and terms
Research institutions developing the following 4 technologies:
- High pressure injection technology
- Recycling technology for waste gas
- Function matching technology
- Hybrid automobiles intended for public shuttle buses in small and medium size
Terms: Research institutions that have appropriate research facilities, equipments and human
resources to carry out the project and have accepted the financial responsibility of the project.
7. Amount of the subsidy
(Unit: billion KRW)
2001 Total
Amount 1.5 1.5
8. Duration of subsidy: 1998-2001
This programme was terminated in 2001. Because it has been included and conducted in the
project of "Eco-technopia 21" to promote cutting-edge core environmental technologies.
9. Trade effect of the subsidy
It is hard to secure statistical data on its effect on trade, since it is primarily to provide support
for environmental technology development, with a view to resolving domestic air pollution problem.
D. NATURAL GASBUSSUPPLY PROJECT
1. Title of the subsidy programme
Subsidy for the natural gas bus procurement and/or fuel expenses
2. Period covered by the notification: 2001-2002 (Started in 2000)
3. Policy objective and/or purpose of the subsidy
To expedite air quality amelioration in metropolitan areas, it is required to replace diesel
engine buses that offer more frequent commuter services and are responsible for air pollution in urban
areas, into cleaner and low-emission vehicles.G/SCM/N/95/KOR
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4. Background and authority for the subsidy
Law: Article 36.2 of Air Quality Preservation Act
Authority: Ministry of Environment
5. Form of the subsidy
Grants for vehicle and fuel procurement
6. Recipient and terms
Recipient:
- Subsidy for natural gas bus purchase is granted to the parties that purchase natural gas
buses for the purpose of providing urban commuter services in accordance with the
Air Quality Preservation Act.
- Fuel subsidy is granted to the parties that intend to purchase natural gas for vehicles
that use natural gas as fuel, in accordance with the Air Quality Preservation Act.
Terms: In the case of the procurement of natural gas buses for an urban commuter service
7. Amount of the subsidy
(Unit: billion KRW)
2001 2002
Amount 14.1 13.9
8. Duration of the subsidy: 2000~2007
9. Trade effect of the subsidy
Since the subsidies are intended to support natural gas bus service providers and natural gas
suppliers, its trade effect is expected to be insignificant.
E. SUPPORT FOR RECYCLING EQUIPMENT AND TECHNOLOGY DEVELOPMENT
1. Title of the subsidy programme
Loan Programme for recycling industry promotion
2. Period covered by the notification: 2001~2002
3. Policy objective and/or purpose of the subsidy
To promote and encourage recycling and recycling industry by offering long-term, low
interest loan to private firms engaged in recycling business for the development in recycling
equipment and related technology, management of distribution & sales.
4. Background and authority
Laws:G/SCM/N/95/KOR
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- Article 31 of Act Relating to Promotion of Resource Saving and Re-utilization
- Article 4 of Act Relating Special Accounting for Environmental Improvement
Authority: Ministry of Environment
5. Form of the subsidy
Loan
*Source of fund : Special Account for Environmental Improvement
6. Recipient and terms
Recipient :
(a) Equipment
- A party or parties engaged in recycling business under the Resource Conservation and
Recycling Promotion Act that intends to install recycling equipment.
- Parties that discharge industrial wastes under the Waste Management Act
(b) Technology development
- Parties intend to be engaged in R&D activities related to resource recycling under the
Resource Conservation and Promotion Act
(c) Management stabilization
- Firms engaged in recycling business and repairs or sales of second-hand electric
appliances, furniture, etc.
(d) Distribution & sales support
- Parties engaged in recycling product sales that sell general manufacturing products at
the price lower than 30 per cent of original prices and engaged in repairs and sales of
business of second-hand electric appliances, furniture, etc.
Terms of loan
(a) Equipment & (b) Technology development
- 7-year repayment period with a 3-year grace period at the annual interest rate of
4.78 per cent
(c) Management stabilization & (d) Distribution & sales support
- 3-year repayment period with a 2-year grace period at the annual interest rate of
4.78 per cent
7. Amount of the subsidy
(Unit: billion KRW)
2001 2002
Amount of loan 60 60G/SCM/N/95/KOR
Page 27
8. Duration of the subsidy: No fixed time period
9. Trade effect of the subsidy
Trade effect of the subsidy is expected to be insignificant for the following reasons:
First, rather than being a direct subsidy to the recycling industry, it is a loan programme that
does not restrict foreign investment or foreign participation;
Second, considering inferior quality of recycled products in general, they would hardly have
consequential competitive edge against general products.
F. LOAN PROGRAMME FOR R&D OFINFORMATION AND COMMUNICATION
1. Title of the subsidy programme
Loan Programme for R&D of Information and Communication
2. Period covered by the notification: 2001-2002
3. Policy objective and/or purpose of the subsidy
To provide loan to research and develop the information and communication project that is
large size and involves high risks.
4. Background and authority for the subsidy
Laws: Article 34 of Basic Act on Information Promotion
Authority: Ministry of Information and Communication
5. Form of the subsidy
Loan
*Source of fund: Information Promotion Fund
6. Recipient and terms
Loan is provided for private firms in the field of information and communication including
domestic corporations owned by foreigners.
Conditions of the loan: changeable depending on market interest rates.
7. Amount of the subsidy
(Unit: billion KRW)
2001 2002
Amount of loan 274 268
8. Duration of the subsidy
No fixed time periodG/SCM/N/95/KOR
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9. Trade effect of the subsidy
This support programme provides no special benefits in terms of interest rates and loan period
compared to those provided by private financial institutions. Therefore, trade effect is expected to be
insignificant.
G. SCIENCE AND TECHNOLOGY PROMOTION FUND
1. Title of the subsidy programme
Science and Technology Promotion Fund
2. Period covered by the notification: 2001-2002
3. Policy objective and/or purpose of subsidy
To assist R&D activities of private enterprises
4. Background and authority for the subsidy
Laws: Article 22 of Science and Technology Framework Law
Authority: Ministry of Science and Technology
5. Form of the subsidy
Loan
6. Recipient and terms
Loan of 7-year repayment period with a 3-year grace period at the annual interest rate of 4.75-
5.25 per cent is provided for Organizations that carry out R&D on high technology industry and pre-
competitive R&D activities.
7. Amount of the subsidy
(Unit: billion KRW)
2001 2002
Amount of loan 108 102
8. Duration of the subsidy
No fixed time period
9. Trade effect of the subsidy
Difficult to estimate.
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