The self-employed in South Korea borrowed a whopping 120 trillion won to maintain their business last year. This shows that the continued restriction and ban on operation led to a drastic decrease in sales and many self-employed people are barely holding their business together with loans to cover losses. As the compensation for loss act pursued by both the ruling and opposition parties to compensate for damage on business operation due to the government measures was not passed by the National Assembly in April, only more discontent has grown among the self-employed.
According to the Bank of Korea, the loans taken out by 2,384,000 self-employed people across the nation amounted to 803.5 trillion won as of the end of last year, up 118.6 trillion won compared to a year earlier. The increase is almost double the previous year’s increase of 60.6 trillion won, which means 44 percent of 5.42 million self-employed people have an average debt of 337 million won. The self-employed people who were granted loans for the first time last year borrowed 125.8 trillion won. The actual debt burden should be bigger than the statistics, as those especially marginalized and having difficulties paying rent and electricity bills often turn to illegal lenders.
Amid the situation, the act for compensation for self-employed people’s loss, which garnered expectations from the self-employed, failed to be passed at the provisional session of the National Assembly in April and was postponed to the next month. There were controversies about the legislation of compensation for loss as a result of COVID-19 and other matters of similar nature, but both the ruling and opposition parties showed their determination for legislation, heightening self-employed people’s expectations. However, as there were disagreements among the two parties and the government right before the bill’s passage, it did not get past the Standing Committee of the National Assembly. The self-employed got their hopes up only to be disappointed later.
The parties are blaming each other for the failed passage of the bill. The Democratic Party of Korea blamed the opposition party, saying that the opposition refused to pass the bill while the People Power Party criticized the ruling party’s determination for enactment saying that the Democratic Party was passive to pass the bill.
Most public agree that appropriate compensation should be given to the self-employed who suffered loss from the government’s enforcement actions during the pandemic. Additionally, as the political circles got people’s expectations high as if the bill were to be introduced any time soon, the ruling and opposition parties should pass the compensation for the loss act based on bipartisan agreement. However, there should be sufficient examination about whether all compensations will be provided in accordance with the law, rather than grants, and if there are enough safety measures to prevent adverse effects, such as high government deficit. In particular, the retroactive application of the act, which is demanded by the newly-elected members of the ruling and opposition parties, should not be enforced as it has the issue of duplicate payment and incurs a huge fiscal burden.