12th Meeting of Central Economic Response Headquarters
30th Ministerial Meeting on the Economy
Government to Allow CVC Owned by
Nonfinancial Holding Companies
Deputy Prime Minister Hong Nam-ki presided over the 12th Meeting of the Central Economic Response Headquarters held on July 30, that is the 30th Ministerial Meeting on the Economy. Deputy Prime Minister Hong talked about the measures to boost domestic demand, including plans to allow nonfinancial holding companies to own CVC. Financial support for 1,000 tech companies and ventures was also one of the main topics of discussion at the meeting, as well as plans to develop local cities where government agencies have relocated. DPM Hong mentioned at the beginning of the meeting the currency swap agreement extension between Korea and the US, announced very early this morning.
The following is a summary of DPM Hong’s keynote address.
Extension of Korea-US currency swap agreement
The Bank of Korea and Fed have agreed to extend the US $60 billion worth of Korea-US currency swap agreement, scheduled to end in September, by six months to the end of March next year. The extension will help the market avoid anxiety and continue to improve.
Boost domestic demand: Stimulate consumption
Although the CSI and BSI continue to improve in July, it seems hard for the economy to turn around given weak exports and faltering retail sales. We will help domestic consumption gain recovery momentum by doing the following.
- Start issuing the consumption stimulating coupons from the end of July: The coupons to be given out to 18 million Koreans and a total of 1 trillion won worth of consumption expected to be made in the eight areas, including tourism, hotels & restaurants, leisure & sport services and fresh food sales
- Promote local market gift certificates: A total of 13 trillion won in 2020 and work to make them over 15 trillion won in 2021
Boost domestic demand: Allow nonfinancial holding companies to own CVC
In order to promote private sector investment, the government will allow nonfinancial holding companies to own CVC. For nonfinancial holding companies to own CVC, they are required to do the following.
- A nonfinancial holding company required to hold 100 percent of shares in its CVC
- The CVC required to be either an SME venture capital company, or a new technology venture capital company
- The CVC allowed to owe debt within 200 percent of its equity, and 40 percent of funds allowed to be raised outside the company
- The CVC not allowed to be engaged in financial businesses other than venture investment
- Not allow investment from any associates, including associate financial institutions
The government will work on law revision and fast legislation for the CVC to take off this year.
Topics of discussion
1) Boost domestic demand: Stimulate consumption
2) Boost domestic demand: Allow nonfinancial holding companies to own CVC
3) Support 1,000 high tech ventures
- Select 1,000 innovative ventures among those working on the digital and green New Deal sectors, new growth engines, high tech supplies and equipment, and new services
- Provide them with a total of 40 trillion won worth of financial support over the next three years
- Expand loans and guarantees offered by state-run financial institutions, and lower loan interest rates
- Promote private investment in those companies
4) Develop local cities where government agencies have relocated
As of the end of last year, a total of 153 government agencies have relocated to local cities, which have seen population growing, tax revenues increasing and local talents being hired. To help those cities develop into dynamic and prosperous ones, the government have drawn up 10 projects, including the following.
- Develop Busan into a young startup hub: Korea Asset Management Corporation (KAMCO) to remodel the old government complex into startup spaces affordable at 50 -70 percent of ordinary rent
- Build a green energy campus in Daegu: Build a hydrogen R&D center, in which Korea Gas Corporation (KOGAS), universities and corporations work together
- Develop an energy valley in the Gwangju and Naju area: Help attract more than 500 energy companies, in addition to Korea Electric Power Corporation (KEPCO) in Naju, grow local talents and build an energy ecosystem in the area
- Develop the elderly medical equipment industry in Wonju: Build R&D and testing centers, as well as support R&D activities