Gov`t to Implement Supplementary Budget to Boost Domestic Demand

The government decided to implement a 2-trillion-won supplementary budget to boost the domestic demand by allotting 700 billion won to 800 billion won to the construction investment including social overhead capital (SOC) facilities.

The government also decided to establish the `project finance: investment company law` within this year, which bestows various financial tax benefits, to enable the financial organizations and construction companies to do housing construction business by building a joint company with special purpose.

The government held a meeting of economy-related ministers presided over by Deputy Prime Minister and Minister of Finance and Economy Jin Nyum in the bank hall in Myong-dong, Seoul, yesterday, and decided to push forward with the `comprehensive countermeasures to boost the domestic demand`.

First of all, following the principle that the government will implement the supplementary budget to the fields that have great effectiveness of economic activation, the government decided to allot 700 billion to 800 billion won to the construction investment including SOC, 400 billion won to 500 billion won to the small and medium sized export companies, 200 billion won to 300 billion won for the stabilization of rice prices, and 400 billion won to 500 billion won for the terrorist attacks related aids.

The government also decided to push forward with the `project financing` to boost the construction economy. `Project financing` is to be promoted through a special purpose company, which is invested by both financial organization and company by separating a special business from the respective company to boost the construction economy. The government plans to establish `project finance: investment company law` at the National Assembly, and to grant financial tax benefits in the process of establishing a special purpose company.

Along with this, the government decided to lower the loan interests to the multi-generation and the multi-household housing, and to lift the seven construction regulations, such as landscape, construction line, coverage ratio, floor area ratio, and the height of the building, when a minimum 20-year-old building is remodeled.

Meanwhile, export-import bank announced at an `urgent meeting of officials of the general trading company`, attended by the officials of the Ministry of Commerce, Industry, and Energy, the government investment organizations, and 7 general trading companies, that it would make a special loan to the domestic companies, which export goods to the U.S. and the Middle East, within 50 percent of the original loan limit apart from their export results, export contract and the contract amount.

The Korea Export Insurance Corporation also decided to expand the limit of companies, which are eligible to the increase of the amount of the export trust special guarantee, to the all export areas, and to increase the guarantee rate of the short-term export insurance from 95 percent to 97.55 percent.

`Project financing` is an advanced financial technique, which makes profit by purchasing the property after finishing the construction business. A special purpose company , a joint company of a construction company and financial organization, does the construction business by supplying the funds from general investors. This advanced financial technique is often used to boost the construction investment and to support the joint venture with a foreign company.

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