WORLD TRADE
ORGANIZATIONG/SCM/N/60/KOR
13 July 2000
(00-2864)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Updating 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 30 June 2000, has been received from the Permanent
Mission of Korea.
_______________
TABLE OF CONTENTS
Page
I. AGRICU LTURE.................................................................................................................. .....3
A. FOODGRAIN MANAGEME NT PROGR AMME ....................................................................3
B. L IVESTOCK SUPPORT PROGRAMME ............................................................................................6
1. Government Purchase of Beef .................................................................................................6
2. Support for Pigmeat Production .............................................................................................7
C. M ARKETING IMPROVEMENT PROGRAMME FOR FRUITS AND FLOWERS .....................................9
II. FORESTRY.................................................................................................................... .........11
A. P LYWOOD & B OARD ASSISTANCE PROGRAMME ......................................................................11
B. F OREST PRODUCTS UTILIZATION ASSISTANCE PROGRAMME ..................................................13
III. FISHERY.................................................................................................................... .............14
A. S UPPORT FOR DEVELOPMENT OF DEEP-SEA FISHERY ..............................................................14
B. S UPPORT FOR FISH PRODUCTS PROCESSING DEVELOPMENT ...................................................15
C. S UPPORT FOR FISHING ACTIVITIES ...........................................................................................17
D. S UPPORT FOR AQUACULTURE FISHERY DEVELOPMENT ..........................................................18
E. L OCAL TAX REDUCTION FOR BUILDING AND ACQUISITION OF DEEP-SEA FISHING
VESSELS ............................................................................................................................... .....19
IV. COAL I NDUSTR Y ............................................................................................................... ..20
A. S UPPORT PROGRAM ME FOR THE COAL INDUSTRY ..................................................................20G/SCM/N/60/KOR
Page 2
V. MANUFACTURING INDUSTRY ........................................................................................22
A. S UPPORT FOR FOREIGN INVESTED ENTERPRISES ......................................................................22
B. T ARIFF REDUCTION ON AIRCRAFT PARTS ................................................................................24
C. R ESERVE FOR FARM MACHINERY PRODUCTION ......................................................................24
D. S UPPORT FUND FOR THE STONE INDUSTRY ..............................................................................26
VI. RESEARCH AND DE VELOPMENT ..................................................................................28
A. D IESEL VEHICLE LOW EMISSION TECHNOLOGY DEVELOPMENT .............................................28
B. A SSISTANCE FOR RESEARCH AND DEVELOPMENT ACTIVITIES FROM BASIC ACT ON
INFORMATION PROMOTION (RESEARCH AND DEVELOPMENT  ACTIVITIES SUPPORTED
BY THE INFORMATION AND COMMUNICATION PROMOTING FUND) .........................................30
C. E NVIRONMENTAL ENGINEERING & T ECHNOLOGY DEVELOPMENT PROGRAMME ...................31
D. S CIENCE AND TECHNOLOGY PROMOTION FUND ......................................................................32G/SCM/N/60/KOR
Page 3
I. AGRICULTURE
A. FOODGRAIN MANAGEMENT PROGRAMME
1. Title of the subsidy programme
Foodgrain Management Programme
2. Period covered by the notification
1998- 1999
3. Policy objective and/or purpose of the subsidy
To maintain an adequate level of stock of basic grains for food security purposes.
4. Background and authority for the subsidy
Law:
- Foodgrain Management Act (Article 4)
- Act on Distribution and Price Stabilizat ion of Agricultural and Fishery Products
(Article 10)
- Special Act for Rural Development (Article 14)
Authority:  Ministry of Agriculture and Forestry (MAF)
5. Form of the subsidy
Government purchase of selected items:  rice, barley, soy bean, cornSource of fund:
- rice, barley:  Government budget (Special Account for Foodgrain Management )
- soy bean:  Fund for Agriculture & Fisheries Product Price Stabilization
- corn:  Government budget (Special Account for Structural Improvement of Rural Areas)
6. Recipient and criteria
(1) Rice and barley
The government purchases rice and barley from farmers.  The quantities and prices are
approved by the National Assembly within the AMS under the WTO Agreement on
Agriculture.
(2) Soy beans
The MAF determines the purchasing price and quantity every year before the planting
of soy beans within the AMS of the WTO Agreement on Agriculture.  Pursuant to the
MAF decision, the Agriculture and Fishery Marketing Corporation (AFMC)
purchases soy beans from farmers during the harvest season.G/SCM/N/60/KOR
Page 4
(3) Corn
Pursuant to the guidelines for purchasing price and quantity set by the MAF within
the AMS of the WTO Agreement on Agriculture, the National Agricultural
Cooperatives Federation (NACF) purchases corns from farmers during the harvestseason and sells the commodity at market price.  The MAF compensates the NACF
for losses incurred as a result of the above transaction.
7. Amount of the subsidy (Government expenditures for foodgrain purchases)
  (Unit: W billion )
 Item /Year 1998 1999
 Rice 1,019.2 958.2
 Barley    56.8 58.4
 Soy Beans   10.1 5.4
 Corn    2.0 3.6
8. Duration of the subsidy
The government purchase system for the above items was introduced before the beginning of
the UR negotiations, and will be implemented within the AMS commitments as agreed upon with theWTO.
9. Trade effects of the subsidy
- The self-sufficiency level of Korea's grain production has been declining considerably
from 56 per cent in 1980 to 31.7 per cent in 1998.
- As stated above, the government 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.
- The subsidy programme is subject to the WTO Agriculture Agreement.G/SCM/N/60/KOR
Page 5
TABLE 1
Statistics on foodgrain production, consumption and trade
Commodity Unit 1998 1999
Rice Production 1,000 M/T 5,450 5,097
Imports "    75     97
Exports "     0      0
Consumption " 5,217 5,278
Barley Production "    94  138
Imports "    25  25
Exports "    0    0
Consumption "  176  147
Soya Beans Production "  154  140
Imports " 1,261 1,423
Exports "      0      0
Consumption " 1,544 1,540
Corn Production "    87    80
Imports " 6,990 7,679
Exports "     0     0
Consumption " 7,401 7,740
Note:  Years refer to the 12-month period from November to October.G/SCM/N/60/KOR
Page 6
B. L IVESTOCK SUPPORT PROGRAMME
1. Government Purchase of Beef
1.1. Title of the subsidy programme
Government Purchase of Beef
1.2. Period covered by the notification
1998-1999
1.3. Policy objective and/or purpose of the subsidy
This programme had been introduced provisionally in 1997 in order to prevent a drastic fall in
beef price and support farmers' income, but it was suspended from January 1999 as beef prices
increased at the end of 1998.
1.4. Background and authority for the subsidy
Law:  Livestock Act (Article 3)Authority:  Ministry of Agriculture and Forestry
1.5. Form of the subsidy
Government purchase (Source of fund:  Livestock Development Fund)
1.6. Recipient and criteria
(1) Recipient:  National Livestock Cooperatives Federation, Korea Cold-Storage
Company Ltd.
(2) Content of the support: the government provides financial assistance to National
Livestock Cooperatives Federation and Korea Cold-Storage Company Ltd. for their
beef purchase.
1.7. Amount of the subsidy (Government expenditures for beef purchase)
(Unit:  W billion)
1998 1999
 Amount of subsidy 247.1 -
1.8. Duration of the subsidy
Due to the increase in beef prices at the end of 1998, this programme was suspended from
January 1999G/SCM/N/60/KOR
Page 7
1.9. Trade effects of the subsidy
- The government purchase is not directly related to beef production but to boost the
demand for beef and support farmers by stabilizing beef price.  Therefore, the direct
effect on trade is insignificant.
<Beef production, consumption and trade>
(Unit:  1,000 M/T)
Classification 1997 1998 1999
Production 329 376 324
Imports 217 125 239
Exports 0 0 0
Consumption 517 517 561
2. Support for Pigmeat Production
2.1. Title of the subsidy program
Support for Pigmeat Production
2.2. Period covered by the notification
1998-1999
2.3. Policy objective and/or purpose of the subsidy
To support the production and supply of high-quality pigmeat.
2.4. Background and authority for the subsidy
Law: Livestock Act
Authority: Ministry of Agriculture and Forestry
2.5. Form of the subsidy
Grant or loanSource of fund:  Livestock Development FundG/SCM/N/60/KOR
Page 8
2.6. Recipient and criteria
(1) Recipient:
Pig breeding farms and meat processing companies that have supply contracts with
pigmeat quality improvement complexes or livestock cooperatives.
(2) Content of the subsidy:- Pig Breeding Farms:  Grants to farmers producing pigmeat that meets the quality
standards
- Meat Processing Companies:  One-year loans to support purchase of standard
pigmeat at an annual interest rate of 5 per cent.
2.7. Amount of the subsidy
(Unit:  W million)
  Year 1998 1999
Grant (A)
    (Support for pigmeat quality improvement)
Loan
    (Support for standard pigmeat purchase)
 Estimated subsidy (B)9,056
34,861
3,612 6,297
25,057
 2,037
 Total subsidy (A+B) 12,668 8,334
* The subsidy effect is estimated based on the difference between theaverage market interest
rate and the loan rate.
2.8. Duration of the subsidy
No fixed time periodG/SCM/N/60/KOR
Page 9
2.9. Trade effects of the subsidy
The programme is not directly related to pigmeat production, but to produce and supply safe
and high-quality pigmeat to consumers.  Since the amount of the subsidy accounts only for 0.35 per
cent of the total value of pigmeat production in 1998, its effect on trade is presumed to beinsignificant.
<Pigmeat production, consumption and trade>
(Unit:  1,000 M/T)
  Classification 1997   1998 1999
Production 896 940 899
Imports 79 71 160
Exports 66 113 103
Consumption 895 898 968
C. M ARKETING IMPROVEMENT PROGRAMME FOR FRUITS AND FLOWERS
1. Title of the subsidy programme
Marketing Improvement Programme for Fruits and Flowers
2. Period covered by the notification
1998-1999
3. Policy objective and/or purpose of the subsidy
To improve quality of fruits and flowers.
4. Background and authority for the subsidy
Law:  Special Act for Rural Development (Article 16)Authority:  Ministry of Agriculture and Forestry
5. Form of the subsidy
Financial assistance
Source of fund:  Government budget (Special Account for Structural Improvement of Rural
Areas)G/SCM/N/60/KOR
Page 10
6. Recipient and criteria
Recipients:  Exporters of fruits and flowers
- Content of the subsidy:  provide financial assistance for selection, packaging,
transportation, etc.
7. Amount of the subsidy
(Unit:  W billion)
1998  1999
 Total amount of the subsidy
 (Fruits)
 (flowers)5.3
3.0
2.37.4
3.0
4.3
8. Duration of the subsidy
The subsidy is classified as Export Subsidy permitted for Developing Countries and will be
provided until 2004 pursuant to Article 9 (1) (d), (e) and (4) of the WTO Agreement on Agriculture.
9. Trade effects of the subsidy
This programme provides financial assistance to support packaging, transportation etc. to
improve quality of fruits and flowers, but the trade effect is presumed to be insignificant.G/SCM/N/60/KOR
Page 11
<Fruits & flowers production, consumption and trade>
Fruits(Apples and pears)
(Unit:  M/T)
1996 1997 1998 1999
Production 870,728 911,946 718,800 749,300
Import           0           0           0           0
Export   9,622   7,775   7,459   6,683
Consumption 861,106 904,171 711,341 742,617
 Flowers
(Unit:  $US million )
1996 1997  1998 1999
Production 687 639 431 502
I m p o r t3 03 01 3 1 7
Export 4 5 12 20
Consumption per
person($)15.2 13.7     9.7    10.7
II. FORESTRY
A. PLYWOOD & B OARD ASSISTANCE PROGRAMME
1. Title of the subsidy programme
Plywood & Board Assistance Programme
2. Period covered by the notification
1998-1999
3. Policy objective and/or purpose of the subsidy
- To support the replacement of plywood production facilities designed for broad-leaf trees
with ones that can also use coniferous trees.
- To promote the use of domestic wood by providing support for board production facilities,
using culled-out trees, small unmarketable trees and waste wood materials.G/SCM/N/60/KOR
Page 12
4. Background and authority for the subsidy
Law:  Forestry Development and Promotion Act (Article 10)
Authority:  Forestry Administration
5. Form of the subsidy
Loan
Source of fund: Special Account for Financial Investment and Loan
6. Recipient and term
- Recipient: plywood and board producers- Conditions:  Interest  rate ( 7.5 per cent)
- Term of loan:  10 years(7-year repayment period with a 3 year grace period)
7. Amount of the subsidy
(Unit:  W billion)
    Year 1998      1999
Subsidy effect 0.3      0.26
* The subsidy effect is estimated, based on the difference between the interest rate on the loan
and market interest rate(13.13 per cent).
8. Duration of the subsidy
There is no fixed time period for the subsidy.  The support will be provided as long as it is
necessary to promote the domestic industry.
9. Trade effect of the subsidy
Most of board and plywood production is used to meet the domestic demand.  Therefore, the
trade effect is presumed to be insignificant.
< Production, Consumption and Trade>
Unit 1998 1999
Production  1000 m3 1,731 2,249
Imports 1000 m3  701  1,277
Exports 1000 m3 273 225
Consumption 1000 m3 2,159 3,301G/SCM/N/60/KOR
Page 13
B. FOREST PRODUCTS UTILIZATION ASSISTANCE PROGRAMME
1. Title of the subsidy programme
Forest Products Utilization Assistance Programme
2. Period covered by the notification
1998-1999
3. Policy objective and/or purpose of the subsidy
- To foster domestic wood industry by providing financial assistance for modernization
of forestry machinery and facilities and thereby promote the use of domestic wood
materials by providing financial assistance for the purchase of domestic wood.
4. Background and authority for the subsidy
Law:  Forestry Development and Promotion Act (Article 10), Forestry Act (Article 109)Authority:  Forestry Administration
5. Form of the subsidy
LoanSource 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:  5.0-8.0 per cent (7-year repayment period
with a 3-year grace period)
- Purchase of materials raw:  Interest rates 5.5 per cent (2-year repayment period with a
3-year grace period)
7. Amount of the subsidy
(Unit:  W billion)
    Year 1998 1999
 Subsidy effect 1.2   1.1
* The subsidy effect is estimated, based on the difference between the loan rate on the loan and
market interest rate (13.13 per cent).G/SCM/N/60/KOR
Page 14
8. Duration of the subsidy
There is no fixed time period.  The subsidy will be provided as long as it is necessary to
promote the domestic industry.
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 1998 1999
Production 1000 m3 2,200 4,626
Import 1000 m3  480  697
Export 1000 m3     7     7
Consumption 1000 m3 2,673 5,316
* The statistics for the production is estimated figures.
III. FISHERY
A. SUPPORT FOR DEVELOPMENT OF DEEP-SEA FISHERY
1. Title of the subsidy
Support for Development of Deep-Sea Fishery
2. Period covered by the notification
1998-1999
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
- Operation Principle of the Support for Overseas Resources Production
- Operation Guide for the Support of the Antarctic Ocean Development
Authority:  Ministry of Maritime Affairs and Fisheries
5. Form of the subsidy
LoanG/SCM/N/60/KOR
Page 15
6. Recipient and term
- Recipient:  deep-sea fishermen
- Content of the support:  Providing loans for fishing in distant waters- Term of loan:  One-year loan at the interest rate from 7.0-11.0 per cent.
- Duration of the subsidy:  One year
7. Amount of the subsidy
(a) Support for Overseas Resource Development
(Unit: W million)
   Year     Amount of the loan  Estimated subsidy amount
   1998
   1999      301,000
      352,000 17,669
              17,600
* The subsidy amount is estimated based on the difference between the loan rate and the market
rate.
(b) Support for Antarctic Ocean Development
(Unit: W million)
Year     Amount of the loan   Estimated subsidy amount
 1998      544      46
* The subsidy amount is estimated based on the difference between the interest rate on the loan
and the market rate.
8. Duration of the subsidy
There is no fixed time period.
9. Trade effect of the subsidy
It is difficult to estimate the trade effects.
B. SUPPORT FOR FISH PRODUCTS PROCESSING DEVELOPMENT
1. Title of the subsidy
Support for Fish Products Processing Development
2. Period covered by the notification
1998-1999
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.G/SCM/N/60/KOR
Page 16
4. Background and authority for the subsidy
Laws :
- Article 5 of the Law on the Support for Agriculture and Fish Processing Industry
- Article 15 of the Special Act for Rural Development
- Authority:  Ministry of Maritime Affairs and Fisheries
5. Form of the subsidy
Grants, Loan
6. Recipient and criteria
- Recipient:  Companies engaged in constructing facilities for handling, storing and
processing fish.
- Content of the support:  Supporting the cost necessary for fish processing facilities.
- Period 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:  W million)
1998 1999
 Grants(A)
 Loan
 Estimated subsidy by loan(B)
amount of  Total subsidy (A+B)1,925
28,300
      849
  2,774  2 355
16,763
    942
  3,927
¨
* The subsidy effect is estimated based on the difference between the market interest rate and
the loan rate.
8. Duration of the subsidy
There is no limitation on this programme.
9. Trade effect of the subsidy:
It is difficult to estimate the trade effect.G/SCM/N/60/KOR
Page 17
C. SUPPORT FOR FISHING ACTIVITIES
1. Title of the subsidy
Support for Fishing Activities
2. Period covered by the notification
1998-1999
3. Policy objective and/or purpose of the subsidy
To support stable fishing business operation by providing loans
4. Background and authority for the subsidy
Laws:
- Article 87 of the Fisheries Act
- Operation Principle of the Funds for Supporting Fishing Activities
Authority:  Ministry of Maritime Affairs and Fisheries
5. Form of the subsidy
Loan
6. Recipient and criteria:
- Coastal and off-shore fishermen as well as inland fishermen
- Content of the support:  Provide loans that cover more than 20 per cent of the
business operation costs according to the business scale
- Period of the loan:  1 year
- Interest rates:  5.0 -7.0 per cent
7. Amount of the subsidy
(Unit  W billion)
Year 1998 1999
Loan amount 566.6 581.4
Subsidy effect* 45.7 46.9
* The subsidy effect is estimated based on the difference between the market interest rate and the
loan rate.
8. Duration of the subsidy
There is no fixed time period.
9. Trade effect of the subsidy
It is difficult to estimate the trade effect.G/SCM/N/60/KOR
Page 18
D. SUPPORT FOR AQUACULTURE FISHERY DEVELOPMENT
1. Title of the subsidy
Support for Developing Aquaculture Fishery
2. Period covered by the notification
1998-1999
3. Policy objective and/or purpose of subsidy
- To promote the development of aquaculture fishing to ensure stable supply of fishery
products and develop income sources of fishermen
4. Background and authority for the subsidy
Law:  Special Account for Infrastructure Improvement of Rural AreasAuthority:  Ministry of Maritime Affairs and Fisheries
5. Form of the subsidy
Grants, Loan
6. Recipient and criteria
- Recipient: fishermen engaged in aquaculture- Content of the subsidy:  Provide loans that cover 80 per cent of the cost (in case of
common aquafarm development, 40 per cent covered by government grant, 40 per
cent by loan and 20 per cent financed by the developer)
- Term of loan:  a 7-year repayment period with a 3-year grace period
- Interest rates:  5 per centG/SCM/N/60/KOR
Page 19
7. Amount of the subsidy
(Unit:  W billion
Year 1993 1994 1995 199 6 1997 1998 1999
Amount of
subsidy(A)0.3  1.2 3.5 3.5 3.5 2.8 2.0
Loan 4.0 2.1 5.6 6.0 6.7 7.2 24.1
Subsidy effect
of loan(B)0.3 0.2 0.4 0.4 0.5 0.3 1.6
Total
(A+B)0.6 1.4 3.9 3.9 4.0 3.1 3.6
* The subsidy effect is estimated based on the difference between the loan rate and the market
rate.
8. Duration of the subsidy
There is no fixed time period.
9. Trade effect of the subsidy
It is difficult to estimate the trade effect.
E. LOCAL TAX REDUCTION FOR BUILDING AND ACQUISITION OF DEEP-SEA FISHING VESSELS
1. Title of the subsidy programme
Local Tax Reduction for Building and Acquisition of International Line Vessels
2. Period covered by the notification
1998-1999
3. Policy objective and/or purpose of the subsidy
To reduce the tax burden on building and acquisition of international line vessels.
4. Background and authority for the subsidy
Law:  Paragraph 1&2, Article 289 of Local Tax ActAuthority:  Ministry of Administration and Home Affairs
5. Form of the subsidy
Tax reductionG/SCM/N/60/KOR
Page 20
6. Recipient and term
- 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 will be levied.
Acquisition tax and Property tax shall be reduced by 50 per cent for Vessel which is acquired
for coastal line and not registered under the International Vessel Registration Law
7. Amount of subsidy
(Unit:  W billion )
Year 1998 1999 Total
Amount 11.4 13.9 2 5.4
8. Duration of the subsidy
Until 31 December, 2000
9. Trade effect
The subsidy is to promote the shipping industry by relieving tax burden on international ships
and it is not related to trade.
IV. COAL INDUSTRY
A. SUPPORT PROGRAM ME FOR THE COAL INDUSTRY
1. Title of the subsidy programme
Support Programme for the Coal Industry
2. Period covered by the notification
1998 1999G/SCM/N/60/KOR
Page 21
3. Policy objectives and /or purpose of the subsidy
- To support the restructuring of the coal industry resulted from drastic decline in the
demand for briquette and subsequent reduction of production.
- To activate regional economy that is being shrinking as a result of the restructuring.
- To stabilize sales prices of coal and briquettes, and subsidize the difference between
sales prices and production costs.
- To support local economies that have been adversely affected by the restructuring of
the industry.
- To promote pollution control in coal mines and support  briquette industry
4 Background and authority for the subsidy
Law:  Coal Industry Law (Article 26) and the Enforcement Decree (Article 22)Authority:  Ministry of Commerce, Industry and Energy
5. Form of the subsidy
- Grants:  Provided to stabilize the price of coal briquettes, support mine closings,
promote economic development of coal mining areas, to install safety and production
facilities, etc.
- Loans : Provided for the development of coal mining, facilities of briquette plants,
substitute business start-ups in areas affected by mine closings.
6. Recipient and term
- Support for stabilizing sales prices of coal and briquettes:
Set maximum sales price levels, and subsidize the difference between sales price and
production cost to mine owners, mine employees and briquette manufacturers.
- Support for coal mine closings:
Provide grants for miners and workers in case that mines are closed.
- Support for safety and production facilities:
Provide grants for pollution control and coal mining mechanization.Loans:Provide loans to briquette manufacturers to support improvement of facilities, and to
substitute business enterprises in areas where coal mines have been closed.
- Support for storage of anthracite coal:
Purchase surplus anthracite coal durin g the "Demand and Supply Coordination
Period" (1995-99), and to provide support for its storage.G/SCM/N/60/KOR
Page 22
7. Amount and duration of the subsidy
(Unit:  W million )
  Year 1998 1999 Duration
 Support for stabilizing price of coal and
 Briquette 3,238  3,230 No time limit
 Support for coal mine closings  61  12 No time limit
 Support for mining area 724 626 Until 2005
 Support for storing management of
 Anthracite coal145 18 Until 2000
 Loans 155 30 Until 2005
 Support for storing management of
 Anthracite coal500 428 Until 2000
 Total 4,823 4,344
8. Trade effect of the subsidy
Due to decline in demand for domestically mined anthracite coal, the government has
implemented a policy for reducing coal production and closing coal mines.  As a result of this policy,
demand for such imported energy resources as bituminous coal is increasing.
V. MANUFACTURING INDUSTRY
A. SUPPORT FOR FOREIGN INVESTED ENTERPRISES
1. Title of the subsidy
Support for Foreign Invested Enterprises-
2. Period covered by the notification
1998-1999
3. Policy objective and /or purpose of the subsidy
To induce foreign direct investment.
4. Background and authority for the subsidy
Law:  Article 121 of Special Tax Benefit Lim itation Law, Foreign Investment Promotion Act
Authority:  Ministry of Finance and Economy,  Ministry of  Commerce, Industry and EnergyG/SCM/N/60/KOR
Page 23
5. Form of the subsidy
Tax reduction
Reduction in government land rental fee
6. Recipient and term
- Foreign invested enterprises which engaged in service sector supporting other
industries or which use advanced technology.
- Foreign invested enterprises that operate in Foreign Investment Zones including Free
Export 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% 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 afterincome is generated and 50% 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.
- Reduction and exemption of land-use fees for foreign invested enterprises
- 100 per cent exemption for foreign invested enterprises located in Foreign
Investment Zones or Industrial Parks for Foreign Invested Enterprise which
make  an investment of  more than one million dollar in high technology
businesses or businesses supporting other domestic industries.
- 75 per cent reduction for foreign invested enterprises operating in Industrial
Parks for Foreign Invested Enterprise making an investment of more than 10
million dollars in manufacturing industry.
- 50 per cent reduction for foreign invested enterprises contribute to increasing
social overhead capital.
8. Duration of the subsidy
There is no fixed time period
* Tax reduction or exemption regime regarding foreign direct investment was first introduced
in January 1960, and the current tax system was put into effect on 17 November 1998.
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/60/KOR
Page 24
B. TARIFF REDUCTION ON AIRCRAFT PARTS
1. Title of the subsidy program
Tariff Reduction on Aircraft Parts
2. Period covered by the notification
1998-1999
3. Policy objective and/or purpose of the subsidy
To encourage the importation of aircraft parts which are not produced domestically and to
reduce production cost.
4 Background and authority for the subsidy
Law :
- Customs Act (Article 28-4)
- Enforcement Decree of Customs Act (Article 16-2)
- Enforcement Ordinance of the Customs Act (Article 14, 14-2, 15)
Authority:  Ministry of Finance and Economy
5. Form of the subsidy
Tax reduction
6. Recipient and criteria
Those who manufacture or repair aircrafts according to the Promotion Act for the
development of aircrafts and space industries.
7. Amount of the subsidy
  (Unit:  W billion)
   Year    1998 1999
 Amount of Duty
 Reduction  8 .2  9.2
8 Duration of the subsidy
No fixed time period
9. Trade effect of the subsidy
None
C. RESERVE FOR FARM MACHINERY PRODUCTION
1. Title of the subsidy programme
Reserve for Farm Machinery ProductionG/SCM/N/60/KOR
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2. Period covered by the notification
1998-1999
3. Policy objective and/or purpose of the subsidy
- To assist off-season production of farm machinery and meet the high demand for
farm machinery in busy seasons.
- To provide financial support to promote development, production and use of new
technology farm machinery.
4. Background and authority for the subsidy
Laws:  The Farm Mechanization Promotion Law
Authority:  Ministry of Agriculture and Forestry
5. Form of the subsidy
Loan
* Source of fund: Government budget ( Special Account for Structural Development of Rural
Areas)
6. Recipient and criteria
(1)  Recipient:  Farm machinery manufacturers, new machinery technology developers(2) Content of the support: 1 year loan for farm machinery production and new
technology development at 5 per cent annual interest rate .
7. Amount of the subsidy
(Unit:  W billion)
Year     Amount of the loan  Estimate of the subsidy
1997
1998
199960.0
44.3
45.74 .5
3.9
3.7
* The subsidy amount is estimated based on the di fference between the average market rate and
the loan rate
8 Duration of the subsidy
No fixed time periodG/SCM/N/60/KOR
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9. Trade effect of subsidy
This subsidy amount accounts only for 0.3 to 0.4 per cent of the total value of farm
machinery production. Therefore, its effect on trade is almost non-existent.
<Statistics of  sales and trade>
  Classification 1998 1999
Sales (W billion) 956.7 930.2
 Imports  (U$ million)  113.7 94.2
Exports  (U$  million)   82.3 92.7
D.  SUPPORT FUND FOR THE STONE INDUSTRY
1. Title of the subsidy
Support Fund for the Stone Industry
2. Period covered by the notification
1998-1999
3. Policy objective and/or purpose of the subsidy
- To develop domestic stone resources and stabilize its supply
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
Loans at an annual interest rate of 7.5 per cent to 8.5 per centG/SCM/N/60/KOR
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6. Recipient and criteria
- Quarrying industry, stone processing industry
Terms of the loans
 Term  Maximum Amount Interest Rate
Facility
Fund5-year repayment
period with a three-
year grace
period100 per cent of the facility
investmentSpecial Account for Financial
Loan: 8.5 per cent
Special Account for Energy
Management: 7.5 per cent
Working
capital2.5-year repayment
with a 1.5-year grace
periodUp to 80 per cent of the
costSpecial Account
for Financial Loan
: 8.5 per cent
Special Account for Energy
Management: 7.5 per cent
7. Amount of the subsidy
(Unit:  W million)
  Year 1998 1999
Direct Loan
Subsidy Effect  632
  402632
173
Total 1,034 805
* The subsidy effect is estimated based on the difference between the market interest rate and
the loan rate.
8. Duration of  the subsidy
No fixed time period
9. Trade effects of the subsidy
The effect on trade is insignificant.G/SCM/N/60/KOR
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VI. RESEARCH AND DEVELOPMENT
A. DIESEL VEHICLE LOW EMISSION TECHNOLOGY DEVELOPMENT
1. Title of the subsidy program
Diesel Vehicle Low Emissi on Technology Development
2. Period covered by the notification
1998-1999
3. Policy objective and/or purpose of the subsidy
Though large-sized diesel vehicles account only for 4.3 per cent, the pollutants they emit is 47
per cent of the total pollutants generated by all vehicles. 85.3 per cent of air pollutants in Seoul was
caused by vehicles in 1997 and this calls for urgent measure to reduce pollution by large-sized diesel
vehicles.
As an anti-pollution measure, the government further limited the gas emission (specified in
Enforcement Decree for Air Preservation Law) and anti-pollution technology needs to be developed
to meet the strengthened gas emission standards effective from 2000.
In addition to the limit on gas emission, anti-pollution technology development project has
been launched to reduce air pollution.  In this regard, the government support is provided to promote
such development.
<NOx Reduction Plan>
Type of vehicle 1997 Long-term emission
levelProject objective
Large-sized vehicle 11.0 g/kwh 5.0 g/kwh 4.0 g/kwh
Medium/small
vehicle1.43 g/km 0.64-0.71 g/km 0.5-0.6 g/km
4. Background and authority for the subsidy
Law: Air Preservation Law (Article 31), Support  for Technology Development (Article 31.2),
Environment Improvement Fund (Article 11) and En forcement Decree (Article 18).  Law on Special
Account for Environment Improvement (Artic le 4), Air Preservation Law (Article 32)
Authority:  Ministry of EnvironmentG/SCM/N/60/KOR
Page 29
5. Form of the subsidy : Government contribution
6. Recipient and criteria
- Recipient:  research institutions developing the following 3 technologies:
- high pressure injection pumps
- cold ERG technology
- combustion chamber design and engine mapping
- Amount: government contribution amounting to 50 per cent of R&D costs, 20 per
cent of which will be repaid to the government after the technology is developed (in case of 1996,
50 per cent of the financial contribution to be repaid).  The actual government contribution will cover30 per cent of the costs.
- Criteria: research institutions that have research facilities, equipments and human
resources to carry out the project and have accepted the financial responsibility of the
project.
- Selection process: public notice in newspaper or official gazette
- Institutions are required to submit a proposal to the Deliberation
Committee on Low Emission Technology for deliberation and final
decision.
7. Amount of the subsidy
 (Unit:  W billion)
     Year 1996 1997 1998 1999 (preliminary
figures)
High pressure
injection0.8 0 0.3 0.3
Cold ERG
technology0 0 0.5 0.5
Combustion
chamber design
and engine
mapping0.2 0 0.2 0.2
Total 1 0 1 1
8. Duration of subsidy
Until 2001 because the gas emission standards will be strengthened gradually from 2000 to
2002.G/SCM/N/60/KOR
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9. Trade effect of the subsidy
This project is to protect environment through reduction of green house effect generated by
air pollution and protection of ozone layer by reducing pollutants such as NOx emitted by diesel
vehicles, using anti-pollution technology.  The purpose of the project is to relieve air pollution causedby large-sized diesel vehicles.  Therefore, no effect on trade is expected.
<Gas Emission Reduction Objective for Large-Sized Vehicles>
Type of gas Hydrocarbon Carbon monoxide NOx
Reduction
objective(g/kwh)1.20.9 6.84.0 11.04.0
B. ASSISTANCE FOR RESEARCH AND DEVELOPMENT ACTIVITIES FROM BASIC ACT ON
INFORMATION PROMOTION (RESEARCH AND DEVELOPMENT  ACTIVITIES SUPPORTED BY THE
INFORMATION AND COMMUNICATION PROMOTING FUND)
1. Title of the subsidy programme
Assistance for Research and Development activities from Basic Act on Information
Promotion
2. Period covered by the notification
1998-1999
3. Policy objective and/or purpose of the subsidy
Assistance for research an d development activity on information and communication.
4. Background and authority for the subsidy
Law: Article 34 of Basic Act on Information Promotion, Article 31 of the Enforcement
Decree.
Authority:  Ministry of Information and Communication
5. Form of the subsidy
Loan (Source:  Information Promotion Fund)G/SCM/N/60/KOR
Page 31
6. Recipient and Criteria
- Recipient of support:  Private firms in the field of information and communication
- Content of support: Assistance for research and development activities on
information and communication:
- the subsidy is limited to research activities for industrial purposes and pre-
competitive development activities
- R&D for commercial purposes is excluded from the subsidy.
- Conditions of the loan:  6.5 per cent a year
- Duration of the support:  less than five years (with a two-years' grace period)- Recipient or selection criteria
- Firms which desire to develop technology in the field of information and
telecommunications like Multi-media etc;
- Only “industrial research” and  “pre-competitive development activities” can
be assisted.
Authority in charge:  IITA (Institute of Information Technology Assessment)
7. Amount of the subsidy
Unit:  W billion)
    Year 1998  1999
          Loan
  Amount of  the subsidy 261.1
  14.4   211.0
      5.8
* The subsidy effect is estimated based on difference between the market interest rate and the
loan rate.
8. Duration of the subsidy
1993 (no fixed time period)
9. Trade effect of the subsidy
This subsidy is for R&D and commercial development activities are excluded from the
subsidy.  Therefore, the effect on trade is non-existent.
C. ENVIRONMENTAL ENGINEERING & T ECHNOLOGY DEVELOPMENT PROGRAMME
1. Title of the subsidy programme
Environmental Engineering & Technology Development ProgrammeG/SCM/N/60/KOR
Page 32
2. Period covered by the notification
1998-1999
3. Policy objective and/or purpose of the subsidy
- To obtain internationally-competitive environmental technology and promote
environment industry to raise the national competitiveness
- To provide financial support to research institutes invested both by private investors
and the government which are dedicated to R&D on high technology in the field of
environment.
4. Background and authority for the subsidy
Law: Act on Environmental Technology Development and Assistance (Article 4),
Technology Development Promotion Act (Article 8.3)
Authority:  Ministry of Environment
5. Form of the subsidy
Grant (source of fund: Special Account for Environment Improvement)
6. Recipient and criteria
Government invested research institutions, universities, research institutions and private
enterprises that participate in the G-7 Environmental Engineering Technology Project.
7. Amount of the subsidy
 (Unit: W billion)
          Year        1998        1999
 Amount of  the subsidy         23.4         21.4
8. Duration of the subsidy
First introduced in 1992 and continue to be provided to promote environmental technology
development.
9. Trade effect of the subsidy
It is very difficult to estimate trade effect of  the subsidy, since this subsidy is an indirect
support for basic environmental technology.
D. SCIENCE AND TECHNOLOGY PROMOTION FUND
1. Title of the subsidy programme
Science and Technology Promotion FundG/SCM/N/60/KOR
Page 33
2. Period covered by the notification
1998-1999
3. Policy objective and/or purpose of subsidy
To assist R&D activities of private enterprises
4. Background and authority for the subsidy
Law :
- Science and Technology Promotion Act 14- The Enforcement Decree of Science and Technology Promotion Act.
- The Enforcement Regulation of Science and Technology Promotion Fund
Authority:  The fund is managed by the Korea Science Foundation, a private organization,
entrusted by the government.
5. Form of the subsidy
Loan
6. Recipient and criteria
- Beneficiaries:  Organizations that carry out research and development on science and
technology which is important to national interests.
- Conditions of support
- Lending period:  7 years, including of a maximum 3- year grace period.- Interest rate: 6.0-6.5 per cent per year:- Limits on subsidy amounts: W 1 billion per project
W 3 billion per company
W 100 per cent of the total amount required
by a company for a project (a large
enterprise:  80%)
- Scope of activities eligible for the subsidy: R&D on high technology industry
and pre-competitive R&D activities.
7. Amount of the subsidy
(Unit : billion won)
       1998        1999
      Loan       109.3       54.3G/SCM/N/60/KOR
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8. Duration of the subsidy
1993 (no fixed time period)
9. Trade effect of the subsidy
Its effect on trade is insignificant.
__________