WORLD TRADE
ORGANIZATIONG/SCM/N/38/KOR
16 July 1998
(98-2824)
Committee on Subsidies and
Countervailing MeasuresOriginal:  English
SUBSIDIES
New and Full Notifications Pursuant to Article XVI:1 of
the GATT 1994 and Article 25 of the SCM Agreement
KOREA
The following communication, dated 30 June 1998, has been received from the Permanent
Mission of Korea.
______________G/SCM/N/38/KOR
Page 2
TABLE OF CONTENTS
Page
I. AGRICULTURE ...................................................................................................................3
I.A. F OODGRAIN MANAGEMENT PROGRAMME .......................................................................3
I.B. LIVESTOCK SUPPO RT PROGR AMME......................................................................5
I.C. MARKETING IMPROVEMENT PROGRAMME FOR FRUITS AND FLOWERS ............................8
II. FORESTRY ...........................................................................................................................9
II.A. PLYWOOD & BOARD ASSISTANCE PROGRAMME ...........................................................9
II.B. FOREST PRODUCTS UTILIZATION ASSISTANCE PROGRAMME ......................................10
III. FISHERY .............................................................................................................................12
III.A SUPPORT FOR DEVELOPMENT OF DEEP -SEA FISHERY ..................................................12
III.B. S UPPORT FOR FISH PRODUCTS PROCESSING DEVELOPMENT .......................................13
III.C. FUND FOR SUPPORTING FISHING ACTIVITIES ...............................................................14
III.D. S UPPORT FOR DEVELOPING AQUACULTURE FISHERY .................................................16
III.E. R EDUCTION IN LOCAL TAXATION ON BUILDING AND ACQUISITION OF VESSELS
FOR DEEP -SEA FISHERY ...............................................................................................17
IV. COAL INDUSTRY .............................................................................................................18
IV.A. S UPPORT PROGRAMME FOR THE COAL INDUSTRY .....................................................18
V. MANUFACTURING INDUSTRY ....................................................................................20
V.A. SUPPORT FOR FOREIGN INVESTED ENTERPRISES .........................................................20
V.B. R EDUCTION IN CUSTOMS DUTY ON PARTS OF AIRCRAFTS ..........................................22
V.C. SUPPORT PROGRAMME FOR MAINTE NANCE OF FARM MACHINERY .............................23
V.D. SUPPORT FUND FOR THE STONE INDUSTRY .................................................................24
VI. RESEARCH AND DEVELOPMENT ..............................................................................25
VI.A. DIESEL VEHICLE LOW EMISSION TECHNOLOGY DEVELOPMENT ..................................25
VI.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 ) .........26
VI.C. ENVIRONMENTAL ENGINEERING AND TECHNOLOGY DEVELOPMENT PROGRAMME ...28
VI.D. SCIENCE AND TECHNOLOGY PROMOTION FUND ..........................................................28G/SCM/N/38/KOR
Page 3
I. AGRICULTURE
I.A. FOODGRAIN MANAGEMENT PROGRAMME
1. Title of subsidy programme
Foodgrain Management Programme
2. Period covered by the notification
1996-1997
3. Policy objective and/or purpose of the subsidy
To maintain a buffer stock of staple food for food security purposes.
4. Background and authority for the subsidy
-L a w s :
• Foodgrain Management Act
• Agro-Fisheries Marketing and Price Stabilization Act
• Special act for Rural Development
- Authority:  Ministry of Agriculture and Forestry (MAF)
5. Form of the subsidy
- Government purchase of selected items:  rice, barley, soyabean, red bean, green bean,
corn
- Financial Resource
• rice, barley: Government budget (Foodg rain Management Special Account).
• soya bean, red bean, green bean:  Fund for Agriculture & Fisheries Product
Price Stabilization.
• corn:  Government budget (Special Account for Structural Development of
Rural Areas)
6. To whom and how the subsidy is provided
(i) Rice and Barley
The Government purchases rice and barley  from farmers according to the quantities
and prices approved by the National Assembly.
(ii) Soya beans and Legumes (Red beans and Green beans)
The MAF sets the purchasing price and quantity every year before the planting of
soya beans and legumes.  Pursuant to the MAF guidelines the Agriculture and Fishery
Marketing Corporation (AFMC) purchases soya beans and legumes from farmers
during the harvest season and releases these items at market prices through public
auctions.G/SCM/N/38/KOR
Page 4
(iii) Corn
Pursuant to the guidelines determined by the MAF for purchasing price and quantity,
the National Agricultural Cooperatives Federation (NACF) purchases corn from
farmers during the harvest season and sells the commodity to feeding and processingindustries at the market price.
The MAF compensates the NACF for losses incurred as a result of the above
transaction.
7. Amount of the subsidy
(Expenditures of quantity for foodgrain purchases)
(Unit: W 100 million)
Item
Year1996 1997
Rice 12,894 12,703
Barley 643 595
Soya beans 24 88
Legumes (red beans, green beans) 1 0
Corn 34 26
Note: The purchasing of red bean and green bean from farmers has stopped since 1997.
8. Duration of the subsidy
- The Government purchase system for the above items existed before the beginning of
the UR negotiations, and it is being planned to be continued within the AMS
commitment as agreed upon by the WTO.
- Since the Government support expenditure for red beans and green beans is minimal
compared to their total value of production, reduction commitments for these itemsare exempted according to the de minimis  principle.
9. Trade effect of the subsidy
- There has been a decline in the self-sufficiency of Korea's grain production from
56 per cent in 1980 to 30.4 per cent in 1997.  the self-sufficiency rates for major
foodgrains in 1997 were 105 per cent for rice, 47 per cent for barley, 0.2 per cent forwheat, 0.9 per cent for corn and 8.6 per cent for beans respectively.
- As stated above, the motivation for government intervention in the grain market is
public stockholding and the accumulation of a buffer stock for food security.  The
effects of government purchases on trade are considered to be insignificant whentaken in the context of a declining self-sufficiency rate.G/SCM/N/38/KOR
Page 5
TABLE 1
Statistics of Foodgrain Production, Consumption and Trade
Commodity Classification Unit 1996 1997
Production 1,000 M/T 4,695 5,323
Imports 1,000 M/T 115 -
Exports 1,000 M/T - - Rice
Consumption 1,000 M/T 5,225 5,079
Production 1,000 M/T 149 84
Imports 1,000 M/T 1 29
Exports 1,000 M/T - - Barley
Consumption 1,000 M/T 151 160
Production 1,000 M/T 160 160
Imports 1,000 M/T 1,467 1,628
Exports 1,000 M/T - - Soya beans
Consumption 1,000 M/T 1,618 1,855
Production 1,000 M/T 19 19
Imports 1,000 M/T 20 12
Exports 1,000 M/T - - Red beans
Consumption 1,000 M/T 40 31
Production 1,000 M/T 3 3
Imports 1,000 M/T 8 3
Exports 1,000 M/T - - Green beans
Consumption 1,000 M/T 11 6
Production 1,000 M/T 74 72
Imports 1,000 M/T 8,428 8,634
Exports 1,000 M/T - - Corn
Consumption 1,000 M/T 9,265 8,348
Note: Years refer to the 12-month period from November to October.
I.B. LIVESTOCK SUPPORT PROGRAMME
GOVERNMENT PURCHASE OF BEEF
1. Title of the subsidy programme
Government Purchase of Beef
2. Period covered by the notification
1996-1997G/SCM/N/38/KOR
Page 6
3. Policy objective and/or purpose of the subsidy
To prevent the price of beef and the income of farmers from falling drastically through
government purchase of beef.
4. Background and authority for the subsidy
- Law:  Livestock Act
- Authority:  Ministry of Agriculture and Forestry
5. Form of the subsidy
Grant
* Financial Resource:  Fund (Livestock Development Fund)
6. To whom and how the subsidy is provided
(i) Beneficiaries:  National Livestock Cooperatives Federation, Korea Cold-Storage
Company Ltd.
(ii) Content of the support:  Government supports National Livestock Cooperatives
Federation and Korea Cold-Storage Company Ltd. for their purchase of beef.
(iii) Authority in charge:  Ministry of Agriculture and Forestry
7. Amount of the subsidy
(Expenditures of quantity for beef purchases)
(Unit:  W 100 million)
1996 1997
Amount of subsidy 289 2,582
8. Duration of the subsidy
1996-
9. Trade effect of the subsidy
Its effect on trade is insignificant.
Statistics of Beef Production, Consumption and Trade
(Unit:  1,000 M/T)
Classification 1996 1997
Production 248 339
Imports 210 217
Exports - -
Consumption 461 517G/SCM/N/38/KOR
Page 7
SUPPORT FOR PIGMEAT
1. Title of the subsidy Programme
Support for Pigmeat Production
2. Period covered by the notification
1996-1997
3. Policy objective and/or purpose of the subsidy
To improve the quality of meat produced.
4. Background and authority for the subsidy
- Law:  Livestock Act
- Authority:  Ministry of Agriculture and Forestry
5. Form of the subsidy
Grant and loan
* Financial Resource:  Fund (Livestock Development Fund)
6. To whom and how the subsidy is provided
(i) Beneficiaries:
Pig breeding farms that have supply contracts with pigmeat quality improvement
complexes or livestock cooperatives and meat processing companies.
(ii) Content of the support:
- Pig Breeding Farms:  Grants to partially cover the feed costs of pigmeat
production
- Meat Processing Companies:  One-year loans for marketing purposes at an
interest rate of 5 per cent.
(iii) Authority in charge:  National Livestock Cooperatives Federation
7. Amount of the subsidy
(Unit:  W 100 million)
Year 1996 1997
Grant (A)
(Support for pigmeat quality improvement)76 95
Loan
(Support for standard pigmeat purchase)156 343
Estimated subsidy (B) 9 25
Total subsidy (A+B) 85 120
* Estimate of the subsidy is calculated by using the difference between the average commercial
rate (1996:  11 per cent, 1997:  12.35 per cent) and the loan rate.G/SCM/N/38/KOR
Page 8
8. Duration of the subsidy
1996-
9. Trade effect of the subsidy
Since the amount of the subsidy is only a part of the total value of pigmeat production
(W 1,900 billion in 1996), it effects on trade are presumed to be insignificant.
Statistics of Pigmeat Production, Consumption and Trade
(Unit:  1,000 M/T)
Classification 1996 1997
Production 887 896
Imports 50 79
Exports 47 66
Consumption 894 895
I.C. MARKETING 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
1996-1997.
3. Policy objective and/or purpose of the subsidy
To improve the quality of fruits and flowers.
4. Background and authority for the subsidy
- Law:  Special Act for Rural development
- Authority:  Ministry of Agriculture and Forestry
5. Form of the subsidy
Grant
* Financial Resource:  Government budget (Special Account for Structural Development of
Rural areas)
6. To whom and how the subsidy is provided
- The Agriculture and Fishery Marketing Corporation subsidizes part of the processing
costs  and part of the internal and/or the international transportation costs of fruit and
flower exporters.
- Authority in charge:  Agriculture and Fishery Marketing CorporationG/SCM/N/38/KOR
Page 9
7. Amount of the subsidy
(Unit:  W 100 million)
1996 1997
Amount of the subsidy 24 30
(fruits) (21) (26)
(flowers) (3) (4)
8. Duration of the subsidy
1995-
9. Trade effect of the subsidy
- This subsidy has an effect of improving the quality of fruits and flowers and reducing
processing and transportation costs, but its effect on trade is rather insignificant.
Statistics of Fruits & Flowers Production, Consumption and Trade
- Fruits (Apples and Pears)
(Unit:  1,000 M/T)
Classification 1996 1997
Production 871 1,097
Imports - -
Exports 10 8
Consumption 861 1,089
-F l o w e r s
(Unit:  $US 1 million)
Classification 1996 1997
Production 687 639
Imports 30 30
Exports 4 5
Consumption 713 664
II. FORESTRY
II.A. PLYWOOD & BOARD ASSISTANCE PROGRAMME
1. Title of the subsidy programme
Plywood & Board Assistance Programme
2. Period covered by the notification
1996-1997.G/SCM/N/38/KOR
Page 10
3. Policy objective and/or purpose of the subsidy
With a view to conserve the global forest environment, the government assists any person
who wants to replace outworn plywood production facilities with coniferous plywood facilities and
assists these wood-based board production efforts which utilizes waste wood materials.
4. Background and authority for the subsidy
- Law:  Forestry Advance and Promotion Act
- Authority:  Forestry Administration
5. Form of the subsidy
Loan
6. To whom and how the subsidy is provided
- Qualification of recipient and choice criteria
• Any person who wants to replace outworn plywood production facilities with
coniferous plywood facilities.
• Any person who wants to establish wood-based board facilities.
- Condition of support
• Interest rate:  8 per cent
• The assistance covers not more than 70 per cent of the costs of requirement.
- Period of support:  Ten years (it will be repaid for seven years after a three-year
deferment).
7. Amount of the subsidy
(Unit:  W million)
1996 1997
277 300
8. Duration of the subsidy
There is no limitation on this programme
9. Trade effect of the subsidy
Its effect on trade is insignificant.
II.B. FOREST PRODUCTS UTILIZATION ASSISTANCE PROGRAMME
1. Title of the subsidy programme
Forest Products Utilization Assistance Programme
2. Period covered by the notification
1996-1997G/SCM/N/38/KOR
Page 11
3. Policy objective and/or purpose of the subsidy
With a view to conserving the global forest environment, the Government assists any person
who wants to replace outworn forest products manufacture facilities with new facilities.
4. Background and authority for the subsidy
- Law:  Forestry Advance and Promotion Act, Forestry Act
- Authority:  Forestry Administration
5. Form of the subsidy
Loan
6. To whom and how the subsidy is provided
- Qualification of recipient and choice criteria
• Any person who wants to replace outworn forest products manufacture facilities
with new equipment.
- Condition of assistance:
• Interest rates:  5-8 per cent;
• the assistance covers not more than 70 per cent of the costs of requirement.
- Period of assistance:  Ten years (it will be repaid for seven years after a three-year
deferment.
7. Amount of the subsidy
(Unit:  W 100 million)
1996 1997
8.9 9.8
8. Duration of the subsidy
There is no time-limit on this programme
9. Trade effect of the subsidy
Its effect on trade is insignificant.G/SCM/N/38/KOR
Page 12
III. FISHERY
III.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
1996-1997
3. Policy objective and/or purpose of the subsidy
- To reduce the financial burden of the deep-sea fishermen.
- To support the costs necessary for technical cooperation with foreign countries.
4. Background and authority for the subsidy
-L a w s :
• Article 87 of the Fisheries Act
• Operation Principle of the Support fund for Overseas Resources Production
• Implementation Guide for the Fishery Cooperation Project with Coastal
Countries
• Operation Guide for the Financial Fund of the Antartic Ocean Development
- Authority:  Ministry of Maritime Affairs Fisheries
5. Form of the subsidy
Loan
6. To whom and how the subsidy is provided
- Beneficiaries:  Deep-sea fishermen
- Content of the support:
Providing loans for deep-sea fishery and fishing equipment required for technical
cooperation with other countries.
- Period of the loan:
• Support for overseas resources production:  1 year
• Support for fishery cooperation project with coastal countries:  five years
(repayment within one year with a four-year grace period)
• Support for Antarctic ocean development:  1 yearG/SCM/N/38/KOR
Page 13
7. Amount of the subsidy
(a) Support for overseas resource production
(Unit:  W 100 million)
Year Amount of the loan Estimate of the subsidy
1996 1,550 47
1997 2,250 90
* Estimates of the subsidy can be calculated by using the difference between the average
commercial rate (12 per cent) and the loan rate (8 per cent).
(b) Support for Antarctic ocean development
(Unit:  W 100 million)
Year Amount of the loan Estimate of the subsidy
1996 6.60 0.17
1997 6.07 0.21
* Estimates of the subsidy can be calculated by using the difference between the average
commercial rate (12 per cent) and the loan rate (8.5 per cent).
8. Duration of the subsidy
There is no limitation on this programme.
9. Trade effect of the subsidy
It is difficult to estimate its trade effect.
III.B.  SUPPORT FOR FISH PRODUCTS PROCESSING DEVELOPMENT
1. Title of the subsidy
Support for Fish Products Processing Development
2. Period covered by the notification
1996-1997.
3. Policy objective and/or purpose of the subsidy
To develop new fishery food products, to enlarge and to modernize fish storage and
processing facilities.
4. Background and authority for the subsidy
-L a w s :
• Article 5 of the Law on the Support for Agriculture and Fish Processing Industry
and Controlling Quality
• Article 15 of the Special Act for Rural Development
- Authority:  Ministry of Maritime Affairs FisheriesG/SCM/N/38/KOR
Page 14
5. Form of the subsidy
Grants, Loan
6. To whom and how the subsidy is provided
- Beneficiaries:  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).
7. Amount of the subsidy
(a) Support for operations of fish processing
(Unit:  W 100 million)
1996 1997
Grants (A) 18.48 18.48
Loan 304.28 386.48
Estimated subsidy by loan (B) 7.93 11.59
Total amount of subsidy (A+B) 26.41 30.07
* Estimates of the subsidy can be calculated by using the difference between the average
commercial rate (12 per cent) and the loan rate (8 per cent)
8. Duration of the subsidy
There is no limitation on this programme.
9. Trade effect of the subsidy
- It is difficult to estimate its trade effect.
III.C.  FUND FOR SUPPORTING FISHING ACTIVITIES
1. Title of the subsidy
Fund for Supporting Fishing Activities
2. Period covered by the notification
1996-1997.G/SCM/N/38/KOR
Page 15
3. Policy objective and/or purpose of the subsidy
To maintain a stable fishing operation and to alleviate the financial burden of fishermen.
4. Background and authority for the subsidy
-L a w s :
• Article 87 of the Fisheries Act
• Operation Principle of the funds for Supporting Fishing Activities
- Authority:  Ministry of Maritime Affairs Fisheries.
5. Form of the subsidy
Loan
6. To whom and how the subsidy is provided
- Beneficiaries:  Coastal and off-shore fishermen, inland and deep-sea fisheries'
employers
- Content of the support:  Providing loans for 20-100 per cent of the amount necessary
for the support of fishing activities accordin g to the scale of the fisherman's business
activities.
- Period of the loan:  1 year- Interest rates:  5-5.5 per cent.
7. Amount of the subsidy
(Unit:  W 100 million)
Year Amount of the loan Estimate of the subsidy
1996 4,392 263.50
1997 5,018 301.09
* Estimates of the subsidy can be calculated by using the difference between the average
commercial rate (12 per cent) and the loan rate (5-6 per cent).
8. Duration of the subsidy
There is no limitation on this programme:
9. Trade effect of the subsidy
- It is difficult to estimate its trade effects.G/SCM/N/38/KOR
Page 16
III.D.  SUPPORT FOR DEVELOPING AQUACULTURE FISHERY
1. Title of the subsidy
Support for Developing Aquaculture Fishery
2. Period covered by the notification
1996-1997.
3. Policy objective and/or purpose of the subsidy
- To supply superior aquaculture products by improving aquaculture facilities.- To increase common benefits for producers and consumers through direct market
sales.
4. Background and authority for the subsidy
-L a w s :
• Article 4 of the Special Accounts Management Act for Rural Construction
- Authority:  Ministry of Maritime Affairs and Fisheries
5. Form of the subsidy
Grant and loan
6. To whom and how the subsidy is provided
- Beneficiaries:  Fishermen who raise and cultivate fish
- Content of the support:  Providing loans for the purchase of aquaculture facilities and
equipment, and for the establishment of distribution centres.
- Period of the loan:  8-10 years- Interest rates.  5 per cent
7. Amount of the subsidy
(a) Support for developing aquaculture farm and basic facilities
(Unit:  W 100 million)
Year Estimate of the subsidy
1996 46.64
1997 47.47
* Estimates of the subsidy can be calculated by using the difference between the average
commercial rate (12 per cent) and the loan rate (5 per cent).G/SCM/N/38/KOR
Page 17
(b) Support for inland fishery development facilities and aquaculture equipment purchase
(Unit:  W 100 million)
Year Estimate of the subsidy
1996 7.71
1997 9.05
* Estimates of the subsidy can be calculated by using the difference between the average
commercial rate (12 per cent) and the loan rate (5 per cent).
8. Duration of the subsidy
There is no limitation on this programme.
9. Trade effect of the subsidy
It is difficult to estimate its trade effect.
III.E.  REDUCTION IN LOCAL TAXATION ON BUILDING AND ACQUISITION OF VESSELS FOR DEEP -
SEA FISHERY
1. Title of the subsidy programme
Reduction in Local Taxation on Building and Acquisition of Vessels for Deep-Sea Fishery.
2. Period covered by the notification
1996-1997
3. Policy objective and/or purpose of the subsidy
To decrease transportation costs and to lower prices of importing and exporting goods.
4. Background and authority for the subsidy
- Law: Local Tax Act, section 289
- Authority: Ministry of Administration and Home Affairs
5. Form of the subsidy
Tax concession
6. To whom and how the subsidy is provided
- The subsidy is provided to builders or importers of the following ships:
(a) International line vessels run by maritime transportation or ship lease
corporations.
(b) Licensed ocean fishery vessels.G/SCM/N/38/KOR
Page 18
The subsidy is provided in the following manner:
(a) Built or imported ships:  50 per cent reduction in acquisition tax(b) Acquired ships:  50 per cent reduction in property tax
7. Duration of the subsidy
1995-2000
8. Trade effect of the subsidy
It is difficult to estimate its trade effect.
IV. COAL INDUSTRY
IV.A.  SUPPORT PROGRAMME FOR THE COAL INDUSTRY
1. Title of the subsidy programme
Support Programme for the Coal Industry
2. Period covered by the notification
1996-1997
3. Policy objective and/or purpose of the subsidy
- To restructure the coal industry, facilitate mechanization, and reduce coal production
levels in accordance with decline in demand.
- 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 briquette plants.
4. Background and authority for the subsidy
- Law: Article 26 of the Coal Industry Law and Article 22 of its Enforcement
Decree.
- Authority: Ministry of Commerce, Industry and Energy
5. Form of the subsidy
- Grants: Provided for stabilizing sales price of coal briquettes, mine closings,
economic development of coal mining areas, safety and productionfacilities, etc.G/SCM/N/38/KOR
Page 19
- Loans: Provided for the development of coal mining, facilities of briquette
plants, substitute business start-ups in areas affected by mine
closings.
6. To whom and how the subsidy is provided
- 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 when 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 during the "Demand and Supply Coordination Period"
(1995-99), and to provide support for its storage.
7. Duration of the subsidy
(Unit:  W million)
1996 1997
Support for stabilizing price of coal and briquette 3,498 3,514 no time-limit
Support for coal mine closings 293 184 no time-limit
Support for storing management of anthracite coal 142 145 no time-limit
Loans 26 34 no time-limit
Support for storing management of anthracite coal 625 482 until 1999
Total 4,584 4,359
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.G/SCM/N/38/KOR
Page 20
V. MANUFACTURING INDUSTRY
V.A. SUPPORT FOR FOREIGN INVESTED ENTERPRISES
1. Title of the subsidy programme
Support for Foreign Invested Enterprises.
2. Period covered by the notification
1996-1997
3. Policy objective and/or purpose of the subsidy
To induce foreign direct investment
4. Background and authority for the subsidy
-L a w :
Act on Foreign Direct Investment and Foreign Capital Inducement, The Enforcement
Decree of Act on Foreign Direct Investment and Foreign Capital Inducement, the
Working Rules for the Implementation of Act on Foreign Direct Investment and
Foreign Capital Inducement, Regulations on Foreign Direct Investment.
- Authority: Ministry of Finance and Economy, National Tax Administration (the
Executive Body)
5. Form of the subsidy
- Reduction and exemption of tax
- Reduction and exemption of rental fee on the use of government owned property.
6. To whom and how the subsidy is provided
- Provide the subsidy to businesses that use advanced technology.
- Provide the subsidy to businesses located in the Free Export Zone.
7. Duration of the subsidy
- Tax reduction and exemption on the foreign investors who use advanced technology
• Corporation tax, income tax of foreign invested enterprises
- for 5 years from the year when profit is first made:  exempted
- 3 years thereafter:  50 per cent reduction
• Corporation tax, income tax on dividends of foreign invested enterprises
- for 5 years from the year when profit is first made:  exempted
- 3 years thereafter:  50 per cent reduction
• Acquisition tax, property tax, aggregate land tax with respect to land, buildings,
etc., acquired or possessed by foreign invested enterprisesG/SCM/N/38/KOR
Page 21
- for 5 years from the year when profit is first made:  exempted
- 3 years thereafter:  50 per cent reduction.
• Customs duties, special excise tax, value added tax with respect to capital goods
induced for the purpose of operating a business of foreign invested enterprise
which is subject to a tax reduction or exemption:  exempted
- Tax reduction and exemption on foreign invested companies located in the Free Export
Zone.
• Corporation tax, income tax of foreign invested enterprises
- the year  when the business first opens, and 3 years thereafter:  exempted
- 2 years thereafter:  50 per cent reduction
• Corporation tax, income tax on dividends of foreign invested enterprises
- the year when the business first opens, and 5 years thereafter:  50 per cent
reduction.
• Acquisition tax, property tax, aggregate land tax with respect to land, buildings,
etc., acquired or possessed by foreign invested enterprises
- for 5 years from the date when the business opens:  50 per cent reduction.
• Customs duties, special excise tax, value added tax with respect to capital goods
induced for the purpose of operating a business of foreign invested enterprises
subject to a tax reduction or exemption:  50 per cent reduction.
- Reduction and exemption of rental fees for foreign investors
• Foreign investors, operating advanced technology related businesses, who invest
over US$20 million:  exemption (100 per cent) rental fee for 20 years.
• Foreign investors operating in the manufacturing industry, who invest over
US$100 million:  reduction 75 per cent of rental fee for 20 years.
• Foreign investors who contribute to enhance social overhead capital:  reduction
50 per cent of rental fee for 20 years.
8. Duration of the subsidy
There is no limitation on this programme.
* Tax reduction or exemption regime regarding foreign direct investment was first put into
place in January 1960, and the regime was revised on 1 April 1995.
9. Trade effect of the subsidy
The main purpose of this subsidy is to induce FDI, so it is hard to estimate its trade effects.G/SCM/N/38/KOR
Page 22
V.B. REDUCTION IN CUSTOMS DUTY ON PARTS OF AIRCRAFTS
1. Title of the subsidy programme
Reduction in Customs Duty on Parts of Aircrafts
2. Period covered by the notification
1996-1997
3. Policy objective and/or purpose of the subsidy
To encourage the importation of aircraft parts which are not produced domestically and to
facilitate production cost cutting for industries.
4. Background and authority for the subsidy
-L a w s :
• 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 concession
6. To whom the subsidy is provided
Those who manufacture or repair aircraft according to the Promotion Act for the development
of aircraft and space industries.
7. Amount of the subsidy
(Unit:  W 100 million)
1996 1997
Amount of duty reduction 20 18
8. Duration of the subsidy
1975-
9. Trade effect of the subsidy
Its effect on trade is insignificant.G/SCM/N/38/KOR
Page 23
V.C. SUPPORT PROGRAMME FOR MAINTENANCE OF FARM MACHINERY
1. Title of the subsidy programme
Support Programme for Maintenance of Farm Machinery
2. Period covered by the notification
1996-1997
3. Policy objective and/or purpose of the subsidy
Due to the characteristics of rice farming in the Asian Monsoon climate, Korean farmers'
demand for farm machinery is concentrated in the rice farming season.  Government support for this
programme is intended to encourage the off-season production of farm machinery and maintain
manufacturers' stock for the purpose of meeting the high demand for farm machinery in the rice
farming season.
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
* Financial Resource:  Government budget (Special Account for Structural Development of
Rural Areas).
6. To whom the subsidy is provided
(i) Beneficiaries:  Farm machinery manufacturers(ii) Product coverage of support:  farm tractors, power tillers, rice transplanters, cultivators,
sprayers (for fertilizers, pesticides, etc.), planters, weeders, seeders and combine
harvesters, etc.
(iii) Content of the support:  a short term loan to support the maintenance of farm
machinery stock.
(iv) Conditions of support:  one year loan with an annual interest rate of 6.5 per cent.
7. Amount of the subsidy
(Unit:  W 100 million)
Year Amount of the loan Estimate of the subsidy
1996
1997450
60022.5
45.0
* Estimates of the subsidy is calculated by using the difference between the average
commercial rate (12.5 per cent) and the loan rate.G/SCM/N/38/KOR
Page 24
8. Duration of the subsidy
1982-
9. Trade effect of the subsidy
This subsidy amount is very insignificant compared to the annual turnover of the farm
machinery industry.  Therefore, its effect on trade is hardly noticeable.
Statistics of Production, Consumption and Trade
Classification 1996 1997
Production (W 100 million) 10,535 11,000
Imports ($1,000) 48,556 43,926
Exports ($1,000) 51,005 68,926
1. Production is based on the sales price.
2. Imports/Exports amount is based on customs clearance.
V.D. SUPPORT FUND FOR THE STONE INDUSTRY
1. Title of the subsidy programme
Support for the Stone Industry
2. Period covered by the notification
1996-1997
3. Policy objective and/or purpose of the subsidy
To prevent the destruction of forests and natural ecosystems as a result of reckless quarrying
by poorly equipped small-scale businesses.
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 7.0 per cent to 8.5 per cent.
6. To whom the subsidy is provided
- The loans are provided to enterprises that are licensed and are registered as stone
fabricators.G/SCM/N/38/KOR
Page 25
- Conditions of the loans
Period of loans Limit of the Amount Interest Rate
Facility Fund repayment in 5 years with a
3 year grace periodModernization, prevention
of air pollution:  100%
Others:  90%Special Account for
Financial Investmentand Loan:  8.5%
Operating Fund repayment in 2 years with a
1 year grade periodUp to 80% of the cost Special Account for
Financial Loan:  8.5%
- The grants are provided to enterprises that develop a stony mountain.  The grants are
provided up to 100 per cent of the necessary drilling costs.
7. Amount of the subsidy
(Unit:  W 100 million)
Year 1996 1997
Loan
(Support for standard pig meat purchase)70.0 90.0
Estimate of subsidy 3.5 4.5
* The Estimate of subsidy is calculated by using the difference between the open-market
interest rate (13 per cent) and the special loan rate.
8. Duration of the subsidy
There is no limitation on this programme
9. Trade effect of the subsidy
Its effect on trade is insignificant.
VI. RESEARCH AND DEVELOPMENT
VI.A.  DIESEL VEHICLE LOW EMISSION TECHNOLOGY DEVELOPMENT
1. Title of the subsidy programme
Diesel Vehicle Low Emissi on Technology Development
2. Period covered by the notification
1996-1997
3. Policy objective and/or purpose of the subsidy
To decrease exhaust gas from large diesel vehicles, the Ministry of Environment provides a
grant for technological development.G/SCM/N/38/KOR
Page 26
4. Background and authority for the subsidy
- Law:  The Air Quality Preservation Act (Article 31)
- Authority:  Ministry of Environment
5. Form of the subsidy
Grant
6. To whom the subsidy is provided
The enterprise which makes use of diesel exhaust gas reduction technology including high
press fuel injection instruments and electronic control system of exhaust gas reduction.
7. Amount of the subsidy
(Unit:  W 100 million)
Year 1996 1997
Amount of the subsidy 10 -
8. Duration of the subsidy
1996-2000
9. Trade effect of the subsidy
Its effect on trade is insignificant.
VI.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 the Basic Act on Informatization
Promotion
2. Period covered by the notification
1996-1997
3. Policy objective and/or purpose of the subsidy
Assistance for research and development activity on information and communication.
4. Background and authority for the subsidy
- Law:  Basic Act on Informatization Promotion
- Authority:  Ministry of Information and CommunicationG/SCM/N/38/KOR
Page 27
5. Form of the subsidy
Loan (Source:  Informatization Promotion Fund)
6. To whom the subsidy is provided
- Object of support:  Private firms in the field of information and communication- Content of support:  Assistance for research and development activities on information
and communication:
• only "industrial research" and "pre-competitive development activities" can be
assisted;
• any assistance for "commercial development activities" is not allowed.
- Conditions of the loan:  6.5 per cent a year.
- Benefit of rent:  5.5 per cent a year derived from the difference between the open
market interest rate (12 per cent) and the fund rent (6.5 per cent)
- Duration of the support:  less than 5 years (with a 2 years' grace period)
- Benefit object/how determined:
• Firms which desire to develop techniques in the field of information and
telecommunications like Multi-media etc;
• Only "industrial research" and "pre-competitive development activities" can be
assisted.
- Executive organ:  IITA (Institute of In formation Technology Assessment) attached to
the ETRI.
7. Amount of the subsidy
(Unit:  W 100 million)
Year 1996 1997
Loan 2,120.0 2,143.0
Amount of the subsidy 117.0 118.0
* The Estimate of subsidy is calculated by using the difference between the average commercial
rate (12 per cent) and the special loan rate.
8. Duration of the subsidy
1993-
9. Trade effect of the subsidy
Its effect on trade is insignificant.G/SCM/N/38/KOR
Page 28
VI.C.  ENVIRONMENTAL ENGINEERING AND TECHNOLOGY DEVELOPMENT PROGRAMME
1. Title of the subsidy programme
Environmental Engineering and Technology Development Programme
2. Period covered by the notification
1996-1997
3. Policy objective and/or purpose of the subsidy
To solve environmental problems and to promote the advancement of environmental
technology.
4. Background and authority for the subsidy
- Law:  Act on Environmental Technology Development and Assistance (Article 4)
- Authority:  Ministry of Environment
5. Form of the subsidy
Grant
6. To whom the subsidy is provided
Support for universities, research institutions and private enterprises that are capable of
conducting their own research.
7. Amount of the subsidy
(Unit:  W 100 million)
Year 1996 1997
Amount of the subsidy 246 225
8. Duration of the subsidy
1992-2001
9. Trade effect of the subsidy
It is very difficult to estimate trade effect of the subsidy, since this subsidy supports basic
environmental technology.
VI.D.  SCIENCE AND TECHNOLOGY PROMOTION FUND
1. Title of the subsidy programme
Science and Technology Promotion Fund
2. Period covered by the notification
1996-1997G/SCM/N/38/KOR
Page 29
3. Policy objective and/or purpose of the subsidy
To assist R&D institutes or individuals who carry out research and development activities that
promote nationally recognized important science and technology.
4. Background and authority for the subsidy
-L a w s :
• Science and Technology Promotion Act
• Section 14 Science and Technology Promotion Fund
• 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 Technology Banking Co., a private
organization, entrusted by the Government.
5. Form of the subsidy
Loan
6. To whom the subsidy is provided
- Beneficiaries:  Organizations that carry out research and development on nationally
recognized important science and technology.
- Conditions of support
• Financing instrument:  Conventional loan s whose principal and interest must be
repaid.
• Lending period:  7 years which is inclusive of a maximum 3 year grace period.
• Interest rate:  7-8 per cent per year
• Limits on subsidy amount:
- W 1 billion per project- W 3 billion per company
- 80 per cent of the total amount required by a company for a project.
7. Amount of the subsidy
(Unit:  W 100 million)
1996 1997
Loan 1,123 1,098
Estimate of subsidy 51 49
* The estimate of subsidy is calculated by using the difference between the open-market interest
rate (12 per cent) and the special loan rate.
8. Duration of the subsidy
1993-
9. Trade effect of the subsidy
Its effect on trade is insignificant.
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