RESTRICTED
WORLD TRADE G/SCM/N/3/KOR/Rev.1
4June1996
ORGANIZATION(96-2102)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
Notifications Pursuant toArticle XVI:1 oftheGATT 1994
andArticle 25oftheAgreement onSubsidies and
Countervailing Measures
KOREA
Thefollowing communication, dated 25April 1996, hasbeenreceived from thePermanent
Mission ofKorea.
_______________G/SCM/N/3/KOR/Rev.1
Page2
TABLE OFCONTENTS
Page
I. Agriculture
I.A. Foodgrain Management Programme ...............................4
I.B. Livestock Support Programme .................................. 6
I.C. Sericulture Development Programme .............................. 8
I.D. Government Purchase ofRapeseed ................................9
I.E. Marketing Improvement Programme forFruits andFlowers ................10
II. Forestry
II.A. Plywood andBoard Assistance Programme ...........................11
II.B. Forest Products Utilization Assistance Programme ......................12
III. Fishery
III.A. Support forDevelopment ofDeep-Sea Fishery .........................13
III.B. Support forFishProducts Processing Development ......................15
III.C. Fund forSupporting Fishing Activities .............................16
III.D. Support forDeveloping Aquaculture Fishery ..........................17
III.E. Reduction inLocal Taxation onBuilding andAcquisition of
vessel forDeep-Sea Fishery ....................................19
IV. Coal Industry
IV.A. Support Programme fortheCoalIndustry ...........................20
V. Manufacturing Industry
V.A. Reserves forExport Losses .....................................21
V.B. Reserves forOverseas Market Development ..........................23
V.C. Facility Investment Loans Provided bytheSMEs Foundation Formation Fund ..24
V.D. TaxCredit forInvestment inFacilities ..............................25G/SCM/N/3/KOR/Rev.1
Page3
TABLE OFCONTENTS
Page
V.E. TaxReduction andExemption forForeign Invested Enterprises ..............26
V.F. Reduction inCustoms Duty onParts ofAirCraft andVessel ...............28
V.G. Support programme forMaintenance ofFarm Machinery ..................29
V.H. Assistance Programme toPromote theSpread ofDomestically
Produced Mini-Computer .....................................30
V.I. Supporting Fund forStone Industry ...............................31
VI. Research andDevelopment
VI.A. Research andDevelopment Activities forLowEmission Autovehicle .........32
VI.B. Research andDevelopment Activities Supported bytheInformation
andCommunication Promoting Fund ...............................33
VI.C. Environmental Engineering andTechnological Development Programme .......34
VI.D. Promotion Fund forScience andTechnology ..........................35G/SCM/N/3/KOR/Rev.1
Page4
I. AGRICULTURE
I.A. Foodgrain Management Programme
1. Nature andextent ofsubsidy
(a) form ofsubsidy: government purchase
(b) policy objective and/or purpose ofsubsidy tomaintain abuffer stock forfood
security purposes
(c) laws, regulations andauthority
(i) laws: Foodgrain Management Law,
Agro-Fisheries Marketing andPrice Stabilization Act,
Special ActforRural Development
(ii) authority: Ministry ofAgriculture, Forestry andFisheries (MAFF)
(d) incidence
(i) RiceandBarley
Thegovernment purchases from farmers aquantity ofriceandbarley
ataprice approved bytheNational Assembly.
(ii) Soya beans andLegumes (Redbeans andGreen beans)
Pursuant totheguidelines determined bytheMAFF forpurchasing price
andquantity, theAgriculture andFishery Marketing Corporation (AFMC)
purchases soya beans andlegumes from farmers during theharvest
seasons.
(iii) Corn
Pursuant totheguidelines determined bytheMAFF forpurchasing price
andquantity, theNational Agricultural Cooperatives Federation (NACF)
purchases cornfrom farmers during theharvest seasons andsellsthe
commodity atmarket price.
TheMAFF compensates theNACF foranylossincurred asaresult of
theabove transaction.G/SCM/N/3/KOR/Rev.1
Page5
2. Amount ofsubsidy (Expenditures forfoodgrain purchases)
(Unit: 100million won)
Year 1992 1993 1994
Rice 16,722 16,987 17,286
Barley 813 721 612
Soya beans 365 115 74
Legumes (Redbeans,
green beans)54 8 0.7
Corn 144 134 82
3. Trade effect ofsubsidy
There hasbeenadecline intheself-sufficiency ofKorea 'sgrain production from a
rateof56percent in1980 to27.7percentin1994. Theself-sufficiency rates formajor
foodgrains in1994 were 87.8percent forrice, 48percentforbarley, 1.4percentforcorn
and12.6percentforbeans.
Asstated above, themotivation forgovernment intervention inthegrain market is
public stockholding forfood security andtheaccumulation ofabuffer stock. Theeffects of
government purchases ontrade areconsidered tobeinsignificant, when taken inthe
context ofadeclining self-sufficiency rate.
TheAgreement onAgriculture willbeapplied tothissubsidy programme.
TABLE 1
Statistics offoodgrain production, consumption andtrade
Commodity Classification Unit 1992 1993 1994
Rice Production 1,000 M/T 5,384 5,331 4,750
Imports 1,000 M/T - - -
Exports 1,000 M/T - - -
Consumption 1,000 M/T 5,526 5,510 5,414
Barley Production 1,000 M/T 189 177 110
Imports 1,000 M/T - - -
Exports 1,000 M/T - - -
Consumption 1,000 M/T 184 205 209G/SCM/N/3/KOR/Rev.1
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Commodity Classification Unit 1992 1993 1994
Soya beans Production 1,000 M/T 183 176 170
Imports 1,000 M/T 1,304 1,113 1,299
Exports 1,000 M/T - - -
Consumption 1,000 M/T 1,503 1,274 1,347
Redbeans Production 1,000 M/T 27 24 19
Imports 1,000 M/T 16 13 24
Exports 1,000 M/T - - -
Consumption 1,000 M/T 39 38 39
Green beans Production 1,000 M/T 5 5 5
Imports 1,000 M/T 4 5 8
Exports 1,000 M/T - - -
Consumption 1,000 M/T 9 9 11
Corn Production 1,000 M/T 75 92 82
Imports 1,000 M/T 6,386 6,418 5,322
Exports 1,000 M/T - - -
Consumption 1,000 M/T 6,209 6,520 5,678
I.B. Livestock Support Programme
1. Support forKorean Native Cattle (Hanwoo) onKanghwa Island
1.1 Nature andextent ofsubsidy
(a) form ofsubsidy: grant
(b) policy objective and/or purpose ofsubsidy toimprove thequality ofbeefproduced
asaresult ofcrossbreeding theHanwoo andCharolais onKanghwa Island.
(c) laws, regulations andauthority
(i) laws: Livestock Act
(ii) authority: Livestock Technology Research Institute ofRural Development
Administration
(d) incidence
(i) beneficiaries: farms thatproduce crossbreed female calves between
Hanwoo andCharolais cattle onKanghwa IslandG/SCM/N/3/KOR/Rev.1
Page7
(ii) content ofsubsidy: agrant of100thousand wonpernewborn calfforfeed
costs
1.2 Amount ofsubsidy
(Unit: 100Million Won)
1992 1993 1994
Total amount ofsubsidy 0.76 0.83 0.48
1.3 Trade effect ofsubsidy
Thisprogramme isexpected tocover apartofthecostofrearing crossbred Hanwoo
cattle onKanghwa Island. However, thesupport programme isimplemented onlyinspecified
areas. Itsoverall effect ontrade istherefore presumed tobeinsignificant.
TheAgreement onAgriculture willbeapplied tothissubsidy programme.
2. Support forPigmeat Production
2.1 Nature andextent ofsubsidy
(a) form ofsubsidy: grant andloan
(b) policy objective and/or purpose ofsubsidy toimprove thequality ofmeat
produced
(c) laws, regulations andauthority
(i) laws: Livestock Act
(ii) authority: National Livestock Cooperatives Federation
(d) incidence
(i) beneficiaries: pigbreeding farms thathave supply contracts with
pigmeat quality improvement complexes orlivestock cooperatives.
:meatprocessing companies.
(ii) contents ofsubsidy
- pigbreeding farms: grants topartially cover thefeedcosts of
pigmeat production.
- meatprocessing companies: 1-year loans formarketing purposes
ataninterest rateof5percent.G/SCM/N/3/KOR/Rev.1
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2.2 Amount ofsubsidy
(Unit: 100million won)
Year 1992 1993 1994
Grant (A) - 100 120
Loan 50 83 106
-Estimated subsidy (B)13 5 6
Amount ofsubsidy (A+B) 3 105 126
1Theestimated subsidy iscalculated asthedifference inthevalue oftheloaninterest rate
andtheaverage commercial interest rate(11percent).
2.3 Trade effect ofsubsidy
Since theamount ofthesubsidy isonly0.9percentofthetotalvalue ofpigmeat production
(1,300 billion wonin1993), itseffects ontrade arepresumed tobeinsignificant.
TheAgreement onAgriculture willbeapplied tothissubsidy programme.
TABLE 2
Statistics oflivestock production, consumption andtrade
Item Year Unit Production Imports Exports Consumption
Beef 1992 1,000 M/T 99.6 131.9 - 226.9
1993 129.6 99.0 - 233.0
1994 147.3 126.0 - 269.8
Pigmeat 1992 1,000 M/T 601.3 - 8.5 584.9
1993 618.4 - 11.3 613.2
1994 621.2 25.1 11.0 632.2
I.C. Sericulture Development Programme
1. Nature andextent ofsubsidy
(a) form ofsubsidy: grant
(b) policy objective and/or purpose ofsubsidy todevelop thesericulture industry
(c) laws, regulations andauthorityG/SCM/N/3/KOR/Rev.1
Page9
(i) laws: Sericulture Law
(ii) authority: Korea Sericultural Association (KSA)
(d) incidence
Government provides grants tothesericulture development projects oftheKSA. The
KSAimplements suchprojects, asinvestment insericulture, technical development,
support forcocoon purchasing, andpromotional services formarket expansion, etc.
2. Amount ofsubsidy
(Unit: 100Million Won)
1992 1993 1994
Total amount ofsubsidy 25 29.6 30
3. Trade effect ofsubsidy
AsTable 3indicates, theproduction ofcocoons hasbeendecreasing. Theeffects ofthissubsidy
ontrade aretherefore presumed tobeinsignificant. TheAgreement onAgriculture willbeapplied
tothisprogramme.
TABLE 3
Statistics ofcocoon production, consumption andtrade
(Unit: M/T)
Year 1992 1993 1994
Production 1,054 689 364
Imports 1,095 1,121 815
Exports 0 0 0
Consumption 2,149 1,810 1,179
I.D. Government Purchase ofRapeseed
1. Nature andextent ofsubsidy
(a) form ofsubsidy
Financial support forthepurchase ofrapeseed bytheNACF
(b) policy objective and/or purpose ofsubsidy
Income support forfarmers.
(c) laws, regulations andauthorityG/SCM/N/3/KOR/Rev.1
Page10
(i) laws: Special ActforRural Development
(ii) authority: Ministry ofAgriculture, Forestry andFisheries
(d) incidence
TheNACF purchases rapeseed from farmers ataquantity andprice determined
bytheMAFF, andsells thecommodity toconsumers.
Thegovernment compensates theNACF forloss incurred asaresult ofsuch
transactions.
2. Amount ofsubsidy
(Unit: 100Million Won)
1992 1993 1994
Total amount ofsubsidy 31.8 16.0 14.7
3. Trade effect ofsubsidy
Thissystem isdesigned tosupport theincomes ofrapeseed farmers onCheju Island. However,
boththecultivation areaandproduction quantity ofrapeseeds havecontinuously decreased
since 1992, duetoafreeze ofthepurchasing price at828won/kg.
TABLE 4
Statistics ofrapeseed production, consumption andtrade
(Unit: tonne)
Year 1992 1993 1994
Production 4,761 2,773 3,024
Imports 1,900 4,293 7,405
Exports - - -
Consumption 6,661 7,066 10,429
I.E. Marketing Improvement Programme forFruits andFlowers
1. Nature andextent ofsubsidy
(a) form ofsubsidy: grant
(b) policy objective and/or purpose ofsubsidy toimprove thequality offruits andflowers
(c) laws, regulations andauthority
(i) laws: Special ActforRural DevelopmentG/SCM/N/3/KOR/Rev.1
Page11
(ii) authority: Ministry ofAgriculture, Forestry andFisheries
(d) incidence
TheAgriculture andFishery Marketing Corporation subsidizes partoftheprocessing
costs andpartoftheinternal and/or theinternational transportation costs forfruit
andflower exporters.
2. Amount ofsubsidy
(Unit: 100Million Won)
1992 1993 1994
Total amount ofsubsidy 7.6 5.4 11.5
3. Trade effect ofsubsidy
Thissubsidy isintended toimprove thequality ofthefruits andflowers, andtoreduce the
processing andtransport costs.
TheAgreement onAgriculture willbeapplied tothissubsidy programme.
II. FORESTRY
II.A. Plywood andBoard Assistance Programme
1. Nature andextent ofsubsidy
(a) form ofsubsidy: loan
(b) policy objective and/or purpose ofsubsidy
Toconserve thenatural environment, thegovernment assists thereplacement ofoutworn
plywood production facilities withequipments which produce coniferous plywood andkinds ofboard.
(c) laws, regulations andauthority
(i) laws: TheActofFiscal Investment andFinancing Special Account.
(ii) authority: TheForestry Administration
(d) incidence
(i) condition ofsubsidy
- interest rate: 8percent
- Theloancancover upto70percentoftheprice oftheequipments.G/SCM/N/3/KOR/Rev.1
Page12
(ii) period ofloan: 10years (Itwillberepaid in7years after the3year
deferment.)
(e) duration ofthesubsidy andanyother time-limits attached toit:None
2. Amount ofsubsidy
(Unit: 100Million Won)
1992 1993 1994
Total amount ofloan 0 0 137
Estimates ofsubsidy 0 0 4
3. Trade effect ofasubsidy
Itisextremely difficult toestimate thequantitative trade effect ofthissubsidy.
II.B. Forest Products Utilization Assistance Programme
1. Nature andextent ofsubsidy
(a) form ofsubsidy: loan
(b) policy objective and/or purpose ofsubsidy
Toutilize natural resources efficiently, thegovernment assists thereplacement of
outworn manufacturing facilities forforest products withnewequipments.
(c) laws, regulations andauthority
(i) laws: Special Accounts Management ActforRural Restructuring
(ii) authority: TheForestry Administration
(d) incidence
(i) condition ofassistance
- interest rates: 5-8percent
- Theloancancover upto70percentofthepriceoftheequipments.
(ii) period ofloan: 10years (Itwillberepaid in7years after the3year
deferment.)
(e) duration ofthesubsidy andanyother time-limits attached toit:NoneG/SCM/N/3/KOR/Rev.1
Page13
2. Amount ofsubsidy
(Unit: 100Million Won)
1992 1993 1994
Total amount ofloan 56 47 62
Estimates ofsubsidy 3 3 4
* Estimatesofthesubsidycanbecalculatedbyusingthedifferencebetweenanaveragecommercial
rate(11percent) andloanrate(6percent).
3. Trade effects ofasubsidy
Itisextremely difficult toestimate thetrade effect ofthissubsidy.
III. FISHERY
III.A. Support forDevelopment ofDeep-Sea Fishery
1. Nature andextent ofsubsidy
(a) form ofsubsidy: loan
(b) policy objective and/or purpose ofsubsidy
- toreduce thefinancial burden ofdeep-sea fishermen.
- tosupport thecostnecessary forthetechnical cooperation withforeign
countries.
(c) laws, regulations andauthority
(i) lawsandregulations
- Article 87oftheFisheries Act
- Article 13oftheFisheries Promotion Act
- Operation Principle oftheSupport Fund forOverseas Resources
Production
- Implementation Guide forFishery Cooperation Project withCoastal
Country
- OperationGuideofFinancialFundoftheAntarcticOceanDevelopment
(ii) authority: National Fisheries AdministrationG/SCM/N/3/KOR/Rev.1
Page14
(d) incidence
(i) content ofthesupport:
providing loans fordeep-sea fishery andequipment offishing required for
technical cooperation withother countries.
(ii) period oftheloan
- support foroverseas resources production: 1year
- support forfishery cooperation project withcoastal countries: 5years
(repayment within 1yearwitha4-year grace period)
- support fortheantarctic ocean development: 1year
(e) duration ofthesubsidy: None
2. Amount ofsubsidy
(a) support foroverseas resources production
(Unit: 100million won)
Year Amount oftheloan Estimate ofsubsidy
1992 200 8
1993 450 18
1994 700 28
* Estimates ofsubsidy canbecalculated byusing thedifference between anaverage commercial
rate(12percent) andtheloanrate(8percent).
(b) support forfishery cooperation project withcoastal countries
(Unit: 100million won)
Year Amount oftheloan Estimate ofsubsidy
1992 - -
1993 - -
1994 3.54 0.12
* Estimates ofsubsidy canbecalculated byusing thedifference between anaverage commercial
rate(12percent) andtheloanrate(8percent).
(c) support fortheantarctic ocean developmentG/SCM/N/3/KOR/Rev.1
Page15
(Unit: 100million won)
Year Amount oftheloan Estimate ofsubsidy
1992 - -
1993 6.50 0.26
1994 7.50 0.30
* Estimates ofsubsidy canbecalculated byusing thedifference between anaverage commercial
rate(12percent) andtheloanrate(8percent).
3. Trade effect
Itisdifficult toestimate thetrade effect.
III.B. Support forFishProducts Processing Development
1. Nature andextent ofsubsidy
(a) form ofsubsidy: grant andloan
(b) policy objective and/or purpose ofsubsidy: todevelop newfishery foodproducts
andtoenlarge andmodernize fishstorage andprocessing facilities.
(c) laws, regulations andauthority
(i) lawsandregulations
- Article 5ofLawontheSupport forAgriculture andFishProcessing
Industry andControlling Quality
- Article 15ofSpecial ActforRural Development
- Article 13oftheFisheries Promotion Act
(ii) authority: National Fisheries Administration
(d) incidence
(i) content ofthesupport:
supporting thecostnecessary forfishprocessing facilities.
(ii) object ofsupport: companies which areengaged inconstructing facilities for
handling, storing andprocessing fish.
(iii) period oftheloan:
- support foroperation offishprocessing: 1yearG/SCM/N/3/KOR/Rev.1
Page16
- support forthestorage andprocessing facilities offishproducts:
10years (repayment within 7years anda3-year grace period)
(e) duration ofthesubsidy: None
2. Amount ofsubsidy
(a) support foroperations offishprocessing
(Unit: 100million won)
Year Amount oftheloan Estimate ofsubsidy
1992 144 5.75
1993 126 5.06
1994 130 5.19
* Estimates ofsubsidy canbecalculated byusing thedifference between anaverage
commercial rate(12percent) andtheloanrate(8percent).
(b) support forthestorage andprocessing facilities offishproducts
(Unit: 100million won)
Year Amount oftheloan Estimate ofsubsidy
1992 168 6.72
1993 140 20.94
1994 155 21.55
* These figures arecomposed offixed grant andloan.
* Estimates ofsubsidy canbecalculated byusing thedifference between anaverage
commercial rate(12percent) andtheloanrate(5-8percent).
3. Trade effect
Itisdifficult toestimate thetrade effect ofthissubsidy.
III.C. Fund forSupporting Fishing Activities
1. Nature andextent ofsubsidy
(a) form ofsubsidy: loanG/SCM/N/3/KOR/Rev.1
Page17
(b) policy objective and/or purpose ofsubsidy:
tomaintain astable fishing operation andtoalleviate thefinancial burden ofthe
fishermen
(c) laws, regulations andauthority
(i) lawsandregulations
- Article 87oftheFisheries Act
- Operation Principle oftheFunds
(ii) authority: National Fisheries Administration
(d) incidence
(i) beneficiaries ofsupport:
coastal andoff-shore fishermen, inland fisheries 'employers anddeep-sea
fisheries 'operators.
(ii) period oftheloan: 1year
(e) duration ofthesubsidy: None
2. Amount ofsubsidy
(Unit: 100million won)
Year Amount oftheloan Estimate ofsubsidy
1992 5,782 192
1993 6,570 209
1994 6,769 225
* Estimates ofsubsidy canbecalculated byusing thedifference between anaverage
commercial rate(12percent) andtheloanrate(5-6percent).
3. Trade effect
Itisdifficult toestimate thetrade effect ofthissubsidy.
III.D. Support forDeveloping Aquaculture Fishery
1. Nature andextent ofsubsidy
(a) form ofsubsidy: grant andloanG/SCM/N/3/KOR/Rev.1
Page18
(b) policy objective and/or purpose ofsubsidy:
- tosupply superior aquaculture products byimproving theaquaculture
facilities.
- toincrease thecommon benefits between producers andconsumers through
astabilization ofmarkets.
(c) laws, regulations andauthority
(i) lawsandregulations
- Special Accounts Management ActforRural Construction
(ii) authority: TheNational Fisheries Administration
(d) incidence
(i) content ofthesupport:
- providing loans forthepurchase ofaquaculture facilities and
equipments, andtheestablishment ofdistributing centres.
(ii) period oftheloan: 8-10years
(e) duration ofthesubsidy: None
2. Amount ofsubsidy
(a) support fordeveloping aquaculture farmandbasic facilities
(Unit: 100million won)
Year Amount ofloan1Estimate ofsubsidy2
1992 60 6.53
1993 42 5.49
1994 51 14.78
1These figures arecomposed offixed grant andloan.
2Estimates ofsubsidy canbecalculated byusing thedifference between anaverage commercial
rate(12percent) andtheloanrate(5percent).
(b) support forinland fishaquaculture facilities andaquaculture equipment purchaseG/SCM/N/3/KOR/Rev.1
Page19
(Unit: 100million won)
Year Amount ofloan1Estimate ofsubsidy2
1992 - -
1993 14 0.98
1994 28 9.23
1These figures arecomposed offixed grant andloan.
2Estimates ofsubsidy canbecalculated byusing thedifference between anaverage commercial
rate(12percent) andtheloanrate(5percent).
(c) support forinland fishdistribution facilities
(Unit: 100million won)
Year Amount oftheloan1Estimate ofsubsidy2
1992 1.5 0.11
1993 7 0.49
1994 3.5 0.25
1These figures arecomposed offixed grant andloan.
2Estimates ofsubsidy canbecalculated byusing thedifference between anaverage commercial
rate(12percent) andtheloanrate(5percent).
3. Trade effect
Itisdifficult toestimate thetrade effect ofthissubsidy.
III.E. Reduction inLocal Taxation onBuilding andAcquisition ofVessel forDeep-Sea Fishery
1. Nature andextent ofsubsidy
(a) form ofsubsidy
:taxreduction
(b) policy objective and/or purpose ofsubsidy
toreinforce theinternational competitiveness ofdeep-sea fisheries
(c) laws, regulations andauthority
(i) laws: Local TaxActG/SCM/N/3/KOR/Rev.1
Page20
(ii) authority: Ministry ofHome Affairs (MOHA)
(d) incidence
There isa50percentreduction intheacquisition andproperty taxofvessels built
andacquired fordeep-sea fisheries.
(e) duration ofthesubsidy and/or anyother time-limits attached toit:'97.12.31
IV. COAL INDUSTRY
IV.A. Support Programme fortheCoal Industry
1. Nature andextent ofsubsidy
(a) form ofsubsidy
(i) support forminers andworkers when mines close (grant)
(ii) pricesupport tofreeze coalprices forthestability andprotection oflow-income
households (grant)
(iii) facility support forpollution control andcoalmining mechanization (grant)
(iv) fundtodevelop theinactive coalmining area(loan)
(v) other supports forthecoalminer 'swelfare andtheimprovement briquette
plants (loan)
(b) purpose ofsubsidy and/or policy objective
(i) torestructure thecoalindustry andtofacilitate mechanization soastomaintain
appropriate production/demand level.
(ii) tosupport theprice ofcoalandbriquette
(iii) tosupport thelocaleconomy thathasshrunk asaresult ofrestructuring
(iv) tosupport pollution control incoalmines andbriquette plants.
(c) laws, regulation andauthority
(i) laws
- TheCoalIndustry Law
- TheLawonPrice Stabilization andFairTrade
(ii) authority: Ministry ofTrade, Industry andEnergy
(d) incidenceG/SCM/N/3/KOR/Rev.1
Page21
Government grants subsidy orloans tocoalminers andbriquette manufacturers.
(e) duration ofthesubsidy orthetime-limits ofrelated law
(i) Support forpollution control andtheimprovement ofworkers 'welfare does
nothaveatimelimit.
(ii) Support forcoalmine closing lasts through therestructuring period.
(iii) Support forthedevelopment ofcoalmining areadonothaveatimelimit.
(iv) Support forprices, facilities andothers willbecancelled incases where there
seems tobenegligible improvement asaresult ofthesubsidy.
2. Amount ofsubsidy
- Annual support amount forcoalindustry isabout 550billion won.
(Unit: 100Million Won)
1992 1993 1994
mine closing support 616 808 312
price support 1,865 3,329 3,802
facility support 281 262 190
localeconomy support 105 150 213
other support 1,579 1,205 769
Total 4,446 5,754 5,286
* Subsidy perunit: notavailable
3. Trade effect ofsubsidy
- Inaccordance withsharp reductions inthedemand andtheexcess supply ofcoal,the
Korean government hasproceeded withapolicy toreduce thescaleofthedomestic
coalindustry.
- Mostremaining supports forcoalindustry arepricesupports unrelated tothepromotion
ofexport oruseofdomestic goods.
V. MANUFACTURING INDUSTRY
V.A. Reserves forExport Losses
1. Nature andextent ofsubsidy
(a) form ofsubsidy: taxconcessionG/SCM/N/3/KOR/Rev.1
Page22
(b) policy objective and/or purpose ofsubsidy:
tocompensate forthelossofexport business
(c) laws, regulations andauthority
(i) laws
- TaxExemption andReduction Control Law(Article 16)
- Enforcement Decree ofTaxExemption andReduction Control Law
(Articles 14,15,16,17)
- Enforcement Ordinance ofTax Exemption andReduction Control Law
(Article 9,10)
(ii) authority: Ministry ofFinance andEconomy
(d) incidence
Inthecasewhere aresident oradomestic corporation, running abusiness earning
foreign currency (export business etc.), hassetaside reserves tocompensate for
itslosses, thereserves shallbecounted asalosswhen calculating thetaxable income
within acertain limit(that ofanamount equivalent to1percentofitsforeign
currency receipts or50percentofitsincome, whichever isless). Theamount
allocated tosuchreserves willbeadded back totheresident 's/corporation 'sgains
in3-year instalments fromtheyearaftertheyearinwhich thereserves werecounted
asaloss. Inthecaseofexport business, theamounts allocated tosuch reserves
willbeadded backtotheresident 's/corporation 'sgains in3-year instalments starting
2years aftertheyearinwhich thereserves were counted asaloss.
(e) duration ofthesubsidy and/or anyother time-limits attached toit:31December 1998
2. Amount ofsubsidy
(Unit: 100Million Won)
Year Taxconcession*
1992 234
1993 254
1994 303
* Taxconcessions arecalculated asthedecrease inrevenue which results when counting reserves
aslossincalculating thetaxable income.
3. Trade effect ofasubsidy
Itisextremely difficult toestimate thetrade effect ofthissubsidy.G/SCM/N/3/KOR/Rev.1
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V.B. Reserves forOverseas Market Development
1. Nature andextent ofsubsidy
(a) form ofsubsidy: taxconcession
(b) policy objective and/or purpose ofsubsidy
- topromote theoverseas market development ofabusiness earning foreign
currency
(c) laws, regulations andauthority
(i) law
- TaxExemption andReduction Control Law(Article 17)
- Enforcement Decree ofTaxExemption andReduction Control Law
(Articles 14,15,16,17)
- Enforcement Ordinance ofTaxExemption andReduction Control
Law(Articles 10,11)
(ii) authority: Ministry ofFinance andEconomy
(d) incidence
Inthecasewhere aresident oradomestic corporation, operating abusiness earning
foreign currency, hassetasidereserves foroverseas market development, thereserves
shallbecounted asalosswhen calculating thetaxable income within acertain
limitequivalent to1percentofforeign currency receipts (theamount equivalent
to2percentofforeign currency receipts incaseofexport business using itsown
trademark). Theamounts allocated tosuchreserves areadded back tothegains in
thesame manner asthereserves forexport losses.
(e) duration ofthesubsidy and/or anyother time-limits attached toit:31December 1998
2. Amount ofsubsidy
(Unit: 100Million Won)
Year Taxconcession*
1992 302
1993 232
1994 363
* Taxconcessions arecalculated asthedecrease inrevenue which results when counting reserves
asalossincalculating thetaxable income.G/SCM/N/3/KOR/Rev.1
Page24
3. Trade effect ofasubsidy
Itisextremely difficult toestimate thetrade effect ofthissubsidy.
V.C. Facility Investment Loans Provided bytheSMEs Foundation Formation Fund
1. Nature andextent ofsubsidy
(a) form ofsubsidy: loan
(b) policy objective and/or purpose ofsubsidy:
toincrease exports andenforce theinternational competitiveness ofSMEs by
promoting export-related investments infacilities.
(c) laws, regulations andauthority
(i) laws: Article 3oftheOperation Regulations forSMEs Foundation Formation
Loans
(ii) authority: Ministry ofFinance andEconomy andMinistry ofTrade, Industry
andEnergy
(d) incidence andqualification
(i) interest rate: 9.0percentperannum
(ii) qualification: theSMEs 'thatneedfacilities fundinorder toproduce export
goods ormaterials andparts
(e) duration ofthesubsidy and/or anyother time-limits attached toit:None
2. Amount ofsubsidy
(a) subsidy perunit: Notavailable
(b) totalamount orannual amount budgeted forthesubsidy
(Unit: 100million Won)
1994 1995
Facility investment loans 5,345 4,593
Estimate ofsubsidy 176 152
* Estimate ofsubsidy canbecalculated byusing thedifference between anaverage commercial
rate(12.3 percent) andtheloanrate(9percent).G/SCM/N/3/KOR/Rev.1
Page25
3. Trade effect ofsubsidy
Itwould beextremely difficult toestimate thetrade effect ofthisprogramme because it
doesnotsubsidize aspecific industry.
V.D. TaxCredit forInvestment inFacilities
1. Nature andextent ofsubsidy
(a) form ofsubsidy: taxconcession
(b) policy objective and/or purpose ofasubsidy:
toencourage investment infacilities soastodevelop technology andmanpower or
toincrease productivity.
(c) laws, regulations andauthority
(i) law
- TaxExemption andReduction Control Law
- Enforcement Decree ofTaxExemption andReduction Control Law
- EnforcementOrdinanceofTaxExemptionandReductionControlLaw
(ii) authority: Ministry ofFinance andEconomy
(d) incidence
(i) Taxcredit forinvestments infacilities fortechnology andmanpower inthe
casewhere aresident oradomestic corporation invests capital infacilities
which develop technology orenhance manpower, anamount equivalent
to3percentoftheinvestment (10percentinthecaseofinvestments using
domestically produced materials) isdeducted from theincome orcorporation
taxforthebusiness year, oranamount equivalent to30percentofthe
value ofbusiness assets (50percent inthecaseofinvestments using
domestically produced materials) iscounted asalosswhen calculating the
income forthebusiness yearregardless oftheordinary depreciation.
(ii) Taxcredit forinvestment infacilities forincreasing productivity andspecial
equipment :Inthecasewhere aresident oradomestic corporation invests
infacilities forincreasing productivity orspecial equipment (energy saving
facilities etc.), taxcredit isapplied inthesame manner asdescribed above
inV-D. (d),(i).
(iii) Tax credit forinvestment infacilities forsmall andmedium enterprises
(SMEs): IfSMEs acquire business assets suchasmachinery andequipment,
5percentoftheacquisition amount (3percentforforeign-made assets) is
deducted from theincome orcorporation tax.
(iv) Taxcredit forinvestment inhousing foremployees: When aresident orG/SCM/N/3/KOR/Rev.1
Page26
adomestic corporation constructs orpurchases newhouses (thegross area
notexceeding 85square meter) using domestically produced materials for
thepurpose ofleasing ittotheirhomeless employees, anamount equivalent
to10percentofitsacquisition value isdeducted from theincome or
corporation taxofthatbusiness year.
(v) Taxcredit forbusinesses moving toaprovincial area: When aresident or
adomestic corporation moves toaprovincial areaandacquires newplant
facilities, anamount equivalent to3percent(5percentinthecaseof
investments using domestically produced material) oftheinvestment inthe
business assets isdeducted from theincome orcorporation taxofthatbusiness
year.
(vi) Taxcredit forbusiness conversion andreorganization: When anenterprise
designated inneedofrationalization bythegovernment transfers superfluous
installations andinvests inthebusiness inwhich theenterprise intends to
engage, oralienates itsassociated enterprise orsecondary business which
belongs tothefirst-mentioned enterprise andinvests initsprimary businesses,
thefirst-mentioned enterprise mayhaveataxcredit of10percent(3percent
forforeign-made machinery orinstallation) oftheinvestment amount.
(e) duration ofthesubsidy and/or anyother time-limits attached toit:31December 1998
* 31December 1996 incaseof(d)(ii)
2. Amount ofsubsidy
(Unit: 100Million Won)
Year Taxconcession*
1992 351
1993 563
1994 1,026
* Taxconcessions canbecalculated byusing thevariable difference taxcredit ratesbetween
investment using domestically produced materials (5-10 percent)andinvestment using foreign
made ones(0-3percent).
3. Trade effect ofasubsidy
Itisextremely difficult tomeasure thetrade effect ofthissubsidy.
V.E. TaxReduction andExemption forForeign Invested Enterprises
1. Nature andextent ofsubsidy
(a) form ofsubsidy: taxconcession
(b) policy objective and/or purpose ofasubsidy: facilitation offoreign investmentsG/SCM/N/3/KOR/Rev.1
Page27
(c) laws, regulations andauthority
(i) laws: Article 14through 16oftheForeign Capital Inducement Act,
Article 13andArticle 15through 18oftheEnforcement Decree, Article 11
oftheWorking Rules, andArticle 26through 29oftheRegulations onForeign
Investment.
(ii) authority: Ministry ofFinance andEconomy
(d) incidence
(i) Foreign invested enterprises accompanied byhightechnology
- Income taxorCorporation tax: 100percenttaxexemption for
5years from thefirstprofit making year, anda50percenttax
reduction forthefollowing 3years
- Acquisition tax,Property tax,andAggregated Land tax:100percent
taxexemption for5years from thedayofcommencing business,
and50percentreduction forthefollowing 3years
- Customs Duties, Special Excise tax,andValue added tax:100per
centexemption
(ii) Foreign invested enterprises entering freeexport zones
- Income taxorCorporation tax:100percenttaxexemption forthe
taxyearincluding thedayofcommencing business andthenext
3years, and50percentreduction forthe2years thereafter
- Acquisition tax,Property taxandAggregate Land tax:50percent
reduction forthesame period asincome taxorcorporation tax
- Customs Duties, Special Excise andValue added taxinpurchasing
capital goods: 50percentreduction
(e) duration ofthesubsidy and/or anyother time-limits attached toit:None
2. Amount ofsubsidy (Actual figures forreductions andexemptions)
(a) Foreign invested enterprise accompanied byhightechnology
- Reduction andexemption ofcorporation tax:8.8billion wonin1992,
13.4billion wonin1993, 1.4billion wonin1994
- Reduction andexemption oftariff: 0.3billion wonin1992, 0.2billion won
in1993, 0.2billion wonin1994
(b) Foreign invested enterprise entering freeexport zones
- Sufficient information isnotavailable.G/SCM/N/3/KOR/Rev.1
Page28
3. Trade effect ofasubsidy
Above subsidies areusedtopromote foreign investments, andassuch, itisdifficult to
statistically estimate thetrade effects ofthese subsidies.
V.F. Reduction inCustoms Duty onParts ofAircraft andVessel
1. Nature andextent ofsubsidy
(a) form ofsubsidy: taxconcession
(b) policy objective and/or purpose ofsubsidy
toencourage theimportation oftheparts ofaircraft andvessel which arenotprovided
domestically andtomake industries available tocuttheproduction cost.
(c) laws, regulations andauthority
(i) laws: Customs Act(Article 28-4),
EnforcementDecreeofCustomsAct(Article16-2)andEnforcementOrdinance
ofCustoms Act(Articles 14,14-2, 15)
(ii) authority: Ministry ofFinance andEconomy
(d) incidence
- customs duties reduction isallowed forimported parts which areusedto
produce aircrafts andvessels.
- ratesofcustoms dutyreduction byyear
1995 1996 1997 1998
40% 30% 20% 0%
(e) duration ofthesubsidy and/or anyother time-limits attached toit:Thisprogramme
willbemaintained until1997.
2. Amount ofsubsidy
(Unit: 100Million Won)
1992 1993 1994
aircraft 135 143 50
vessel 23 8 1
Total 158 151 51G/SCM/N/3/KOR/Rev.1
Page29
3. Trade effect ofasubsidy
None.
V.G. Support Programme forMaintenance ofFarm Machinery
1. Nature andextent ofsubsidy
(a) form ofsubsidy: loan
(b) policy objective and/or purpose ofsubsidy
Duetothecharacteristics ofricefarming intheAsian Monsoon climate, Korean
farmers 'demand forfarmmachinery isconcentrated inthericefarming season. The
government support fortheprogramme isintended tomeetthisdemand byencouraging
theoff-seasonproductionoffarmmachineryandmaintainingthemanufacturers'stock.
(c) laws, regulations andauthority
- laws: TheFarm Mechanization Promotion Law
- authority: Ministry ofAgriculture, Forestry andFisheries
(d) incidence
(i) beneficiaries: farmmachinery manufacturers
(ii) product coverage ofsupport: farmtractors, power tillers, ricetransplanters,
cultivators, sprayers (for fertilizers, pesticides, etc.), planters, weeders,
seeders andcombine harvesters, etc.
(iii) contents ofsupport: ashort termloantosupport themaintenance offarm
machinery stock.
(iv) conditions ofsupport: aoneyearloanwithaninterest rateof8percent.
2. Amount ofsubsidy
(Unit: 100Million won)
Year Amounts ofLoan Estimates ofSubsidy*
1992 349 10.5
1993 350 10.5
1994 450 13.5
* Estimates ofsubsides canbecalculated byusing thedifference between anaverage commercial
rate(11percent) andtheloanrate(8percent).G/SCM/N/3/KOR/Rev.1
Page30
3. Trade effect ofsubsidy
Theestimates ofthesubsidy ranges from1,047 Million Won to1,350 Million Wonasshown
above. They areequivalent toonlyabout 0.13percentoftheaverage totalvalue offarm machinery
production asshown inthetable below. Inother words, their effect oninternational trade is
insignificant.
Year Total value ofproduction Imports Exports
Million won $1,000 $1,000
1992 680,200 230,190 22,973
1993 726,100 210,356 16,417
1994 1,050,600 165,849 17,884
V.H. Assistance Programme toPromote theSpread ofDomestically Produced Mini-Computer
1. Nature andextent ofsubsidy
(a) form ofsubsidy: loan
(b) policy objective and/or purpose ofsubsidy:
topromote theuseofthedomestically manufactured mini-computer.
(c) laws, regulations andauthority
(i) lawsandregulations
- TheActontheResearch andDevelopment ofInformation and
Communication.
- ThePublic Notice oftheMinistry ofInformation andCommunication
(No.1995-8)
(ii) authority
- Ministry ofInformation andCommunication
(d) incidence
(i) content ofassistance: providing long-term loans inorder topromote thespread
ofdomestically produced mini-computers.
(ii) object ofassistance: public organizations, private firms etc.wishing touse
themini-computer.
(iii) interest rate: 6.5percentayear
(iv) duration ofassistance: foramaximum 5yearsG/SCM/N/3/KOR/Rev.1
Page31
(e) duration ofthesubsidy and/or anyothertime-limits attached toit:thereisnotime-limits
attached tothisprogramme.
2. Amount ofsubsidy
(Unit: 100Million won)
Year 1992 1993 1994
Total amount offund - 240 240
Benefit (4.5percent) - 11 11
* Estimate ofsubsidy canbecalculated byusing thedifference between theopenmarket interest
rate(11percent) andtheloanrent(6.5percent).
3. Trade effect ofsubsidy
- 70mini-computers in1993and77mini-computers in1994wererented through this
subsidy programme.
- Trade effect ofthisprogramme isverysmall because theinterest onthebenefit isonly
4.5percentayear.
V.I. Supporting Fund forStone Industry
1. Nature andextent ofsubsidy
(a) form ofsubsidy: loan
(b) policy objective and/or purpose ofsubsidy
toprevent thedestruction offorests andnatural environments asaresult ofreckless
quarrying bypoorly equipped small-scale businesses
(c) laws, regulations andauthority
- laws: TheLawConcerning theSpecial Account fortheEnergy andResources
Industry (Article 6)
- authority: Ministry ofTrade, Industry andEnergy, TheKorea Mining
Promotion Corporation.
(d) incidence
Thesubsidy isgiven tostone enterprises thatarelicensed andareregistered asstone
fabricators atanannual interest rateof7.0-8.5 percent.
(e) duration ofthesubsidy andanyother time-limits:
There arenotimelimits tothisprogramme.G/SCM/N/3/KOR/Rev.1
Page32
2. Amount ofsubsidy
o Total amount orannual amount budgeted forthissubsidy
(Unit: 100Million Won)
Year 1992 1993 1994
Total amount offund 167 116 203
Estimate ofsubsidy* 7.5 5.2 9.1
* Estimate ofsubsidy canbecalculated byusing thedifference between theopenmarket interest
rate(12.3 percent) andtheloanrate(7.8percent).
3. Trade effect ofasubsidy
Itwould bedifficult toestimate thetrade effect ofthisprogramme. However, thebenefit
thattheborrowers derive from thisprogramme canbeconsidered asinsignificant incomparison to
thetotalannual amount ofloans which goes tostone fabricators (covering only0.009 percentof
thetotalexports ofstone).
VI. RESEARCH AND DEVELOPMENT
VI.A. Research andDevelopment Activities forLowEmission Autovehicle
1. Nature andextent ofsubsidy
(a) form ofsubsidy: loan
(b) policy objective and/or purpose ofsubsidy
toassist inafirm'svoluntary research anddevelopment activities inthedevelopment
ofparts toalowemission autovehicle.
(c) laws, regulations andauthority
(i) law: Liability forEnvironmental Improvement Expenses Act
(ii) authority: Ministry ofEnvironment (MOE)
(d) incidence
(i) qualification: firms related toR&D ofparts toalowemission autovehicle
(ii) condition
- interest rate:5percentayear
- repayment within 5yearwitha3-year grace period.
(e) duration ofthesubsidy and/or anyother time-limits attached toit:NoneG/SCM/N/3/KOR/Rev.1
Page33
2. Amount ofsubsidy
(Unit: 100Million Won)
1992 1993 1994
amount ofsubsidy - - 10
3. Trade effect ofasubsidy
Itisextremely difficult toquantify thetrade effect ofthisprogramme onworld trade.
IV.B. Research andDevelopment Activities Supported bytheInformation andCommunication
Promoting Fund
1. Nature andextent ofsubsidy
(a) form ofsubsidy: loan
(b) policy objective and/or purpose ofasubsidy toassist research anddevelopment
activities inthefieldofinformation andcommunication
(c) laws, regulations and/or authority
(i) lawsandregulations
- TheActontheResearch andDevelopment ofInformation andCommunication
- ThePublic Notice oftheMinistry ofInformation andCommunication
(Nos. 1995-8, 1995-79)
(ii) authority: Ministry ofInformation andCommunication
(d) incidence
(i) content ofassistance: assistance forresearch anddevelopment activities in
information andcommunication industries.
- Only "industrial research" and"pre-competitive development
activities" willbeconsidered foreligibility asof1995. Assistance
cannot beprovided for"commercial development activities".
(ii) beneficiary ofassistance: private firms engaged intheinformation and
communication industry.
(iii) interest rateofassistance: 6.5percentayear
(iv) duration ofassistance: for5years witha2-year grace period
(e) duration ofthesubsidy and/or anyother time-limits attached toit:Thissubsidy will
continue without anytime-limits setupon it.G/SCM/N/3/KOR/Rev.1
Page34
2. Amount ofsubsidy
(Unit: 100Million won)
Year 1992 1993 1994
Total amount offund - 678 1,507
Benefit (4.5%) - 30 68
* Estimate ofsubsidy canbecalculated byusing thedifference between theaverage commercial
interest rate(11percent) andthefundrentrate(6.5percent).
3. Trade effect ofsubsidy
Tradeeffectisverysmallbecausethissubsidyassists"industrialresearch"and"pre-competitive
development activities" excluding those "commercial development activities" withaninterest rate
of6.5percentayear.
VI.C. Environmental Engineering andTechnology Development Programme
1. Nature andextent ofsubsidy
(a) form ofsubsidy: grant
(b) policy objective and/or purpose ofsubsidy
toresolve bothdomestic andglobal environmental problems through adevelopment
oftechnologies
(c) laws, regulations andauthority
(i) lawsandregulations
- Environmental Technology Development andSupport Act
- Joint Management Regulation ontheAdvanced Technology
Development Project
(ii) authority: Ministry ofEnvironment (with Ministry ofScience and
Technology)
(d) incidence
(i) qualification: anyresearch institution oruniversity which isselected toperform
unitresearch project through opencompetition.
(ii) condition: about 100million wonperunitproject
(e) duration ofthesubsidy: 1992-2001.G/SCM/N/3/KOR/Rev.1
Page35
2. Amount ofsubsidy
(Unit: 100Million Won)
1992 1993 1994
amount ofsubsidy 39 87 129
3. Trade effect ofasubsidy
Itisextremely difficult toquantify thetrade effect ofthisprogramme onworld trade.
IV.D. Promotion Fund forScience andTechnology
1. Nature andextent ofsubsidy
(a) form ofsubsidy: loan
(b) policy objective and/or purpose ofsubsidy
toassist corporate orR&D institutes orindividuals tocarry outresearch and
development activities inorder topromote nationally recognized S&T
(c) laws, regulations andauthority
(i) laws
- TheScience andTechnology Promotion Act
- TheEnforcement Decree ofScience andTechnology Promotion Act
(ii) authority
Thefund ismanaged bytheprivate organization (KTB) entrusted bythe
government.
(d) incidence
(i) lending period: within 7years withamaximum 3-year grace period
(ii) interest rate: 6-7percentperyear
(iii) limitofsubsidies amount
- 1billion wonperproject
- 3billion wonpercompany
- 80percentoftotalamount required foraproject
(e) duration ofthesubsidy and/or anyother time-limits attached toit:NoneG/SCM/N/3/KOR/Rev.1
Page36
2. Amount ofsubsidy
(Unit: 100Million Won)
1993 1994
amount oftheloan 593 1,125
3. Trade effect ofasubsidy: None