WORLD TRADE
ORGANIZATIONG/SCM/N/48/KOR
20 July 1999
 (99-2990)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Updating Notification Pursuant to Article XVI:1 of
the GATT 1994 and Article 25 of the SCM Agreement
KOREA
The following communication was received on 12 July 1999 from the Permanent Mission of
Korea.
______________
TABLE OF CONTENTS
Page
I. AGRICU LTURE.................................................................................................................. .3
A. F OODGRAIN MANAGEMENT PROGRAMME ..............................................................................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 .................................8
II. FORESTRY.................................................................................................................... .....10
A. P LYWOOD & B OARD ASSISTANCE PROGRAMME ..................................................................10
B. F OREST PRODUCTS UTILIZATION ASSISTANCE PROGRAMME ..............................................12
III. FISHERY.................................................................................................................... .........13
A. S UPPORT FOR DEVELOPMENT OF DEEP-SEA FISHERY ..........................................................13
B. S UPPORT FOR FISH PRODUCTS PROCESSING DEVELOPMENT ...............................................14
C. F UND FOR SUPPORTING FISHING ACTIVITIES .......................................................................15
D. S UPPORT FOR AQUACULTURE FISHERY DEVELOPMENT ......................................................16G/SCM/N/48/KOR
Page 2
E. L OCAL TAX REDUCTION FOR BUILDING AND ACQUISITION OF
DEEP-SEA FISHING VESSELS .................................................................................................18
IV. COAL I NDUSTRY .............................................................................................................18
A. S UPPORT PROGRAMME FOR THE COAL INDUSTRY ...............................................................18
V. MANUFACTURING INDUSTRY ....................................................................................20
A. S UPPORT FOR FOREIGN INVESTED ENTERPRISES ..................................................................20
B. T ARIFF REDUCTION ON AIRCRAFT PARTS ............................................................................21
C. R ESERVE FOR FARM MACHINERY PRODUCTION ..................................................................22
D. S UPPORT FUND FOR THE STONE INDUSTRY ..........................................................................24
VI. RESEARCH AND DE VELOPMENT ..............................................................................25
A. D IESEL VEHICLE LOW EMISSION TECHNOLOGY DEVELOPMENT .........................................25
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) ...............................................................................................................27
C. E NVIRONMENTAL ENGINEERING & T ECHNOLOGY DEVELOPMENT PROGRAMME ...............28
D. S CIENCE AND TECHNOLOGY PROMOTION FUND ..................................................................29G/SCM/N/48/KOR
Page 3
I. AGRICULTURE
A. FOODGRAIN MANAGEMENT PROGRAMME
1. Title of the subsidy programme:  Foodgrain Management Programme
2. Period covered by the notification:  1997-19983. 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
Authority:  Ministry of Agriculture and Forestry (MAF)
5. Form of the subsidy
Government purchase of selected items:  rice, barley, soy bean, corn
Source of fund:- rice, barley:  Government budget (Special Account for Foodgrain Management )
- soy bean:  Fund for Agriculture & Fisheries Product Price Stabilization
- corn:  Government budget (Special Acc ount for Structural Improvement of Rural
Areas)
6. Recipient and criteria
(1) Rice and barley
The government purchases rice and barley from farmers according to the quantities
and prices approved by the National Assembly within the AMS of the WTO
Agreement on Agriculture
(2) Soy beans and legumes (red beans and green beans)
The MAF determines the purchasing price and quantity every year before the planting
of soy beans and legumes.  Pursuant to the MAF guidelines, the Agriculture and
Fishery Marketing Corporation (AFMC) purchases soy beans and legumes fromfarmers during the harvest season within the AMS of the WTO Agreement on
Agriculture.
(3) Corn
Pursuant to the guidelines set by the MAF for purchasing price and quantity, the
National Agricultural Cooperatives Federation (NACF) purchases corns from farmersG/SCM/N/48/KOR
Page 4
during the harvest season within the AMS of the WTO Agreement on Agriculture 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 100 million)
Item /Year 1997 1998
Rice 12,703 10,192
Barley 595 568
Soy Beans 88 101
Corn 26 20
8. Duration of the subsidy
The government purchase system for the above items existed before the beginning of the UR
negotiations, and will continue within the AMS commitments as agreed upon with the WTO.
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 30.1 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/48/KOR
Page 5
TABLE 1
Statistics on foodgrain production, consumption and trade
Commodity Unit 1997 1998
Production 1,000 M/T 5,323 5,450
Imports " 0 75
Exports " 0 0Rice
Consumption " 5,079 5,217
Production " 84 94
Imports " 30 25
Exports " 0 0Barley
Consumption " 160 176
Production " 165 154
Imports " 1,628 1,261
Exports " 0 0Soya Beans
Consumption " 1,855 1,544
Production " 75 87
Imports " 8,778 6,990
Exports " 0 0Corn
Consumption " 8,497 7,401
Note:  Years refer to the 12-month period from November to October.G/SCM/N/48/KOR
Page 6
B. LIVESTOCK 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:  1997-19981.3. Policy objective and/or purpose of the subsidy
To prevent a drastic fall in beef price and support farmers' income as beef consumption
sharply decreases while the cost increases.
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 million)
1997 1998
Amount of subsidy 258,222 247,999
1.8. Duration of the subsidy:  no fixed time period.
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 effect
on trade is indirect and insignificant.G/SCM/N/48/KOR
Page 7
<Beef production, consumption and trade>
 (Unit:  1,000 M/T)
Classification 1996 1997 1998
Production 248 329 376
Imports 210 217 125
Exports 0 0 0
Consumption 461 517 517
2. Support for Pigmeat Production
2.1. Title of the subsidy programme:  Support for Pigmeat Production
2.2. Period covered by the notification:  1997-19982.3. 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 ActAuthority:  Ministry of Agriculture and Forestry
2.5. Form of the subsidy
Grant and loan
Source of fund:  Livestock Development Fund
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.G/SCM/N/48/KOR
Page 8
2.7. Amount of the subsidy
 (Unit:  W million)
Year 1997 1998
Grant (A)
 (Support for pigmeat quality improvement)
Loan
 (Support for standard pigmeat purchase)
Estimated subsidy (B)9,517
34,293
2,5219,056
34,861
3,612
Total subsidy (A+B) 12,038 12,668
* The subsidy effect is estimated based on the difference between the average market interest
rate and the loan rate.
2.8. Duration of the subsidy:  no fixed time period
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 0.64 per
cent of the total value of pigmeat production in 1997, its effect on trade is presumed to beinsignificant.
<Pigmeat production, consumption and trade>
 (Unit:  1,000 M/T)
Classification 1996 1997 1998
Production 887 896 940
Imports 50 79 71
Exports 47 66 113
Consumption 894 895 898
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:  1997-1998
3. Policy objective and/or purpose of the subsidy
To improve quality of fruits and flowers.G/SCM/N/48/KOR
Page 9
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 assistanceSource of fund:  Government budget (Special Account for Structural Improvement of Rural
Areas)
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 million)
1997 1998
Total amount of the subsidy 3,037 5,367
(fruits) 2,669 3,045
(flowers) 368 2,322
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 Agriculture Agreement of WTO.
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/48/KOR
Page 10
<Fruits & flowers production, consumption and trade>
- Fruits (apples and pears)
(Unit:  M/T)
1995 1996 1997 1998
Production 894,303 870,728 911,946 718,800
Import 0 0 0 0
Export 8,103 9,622 7,775 7,459
Consumption 886,200 861,106 904,171 711,341
-F l o w e r s
 (Unit:  million US$)
1995 1996 1997 1998
Production 660 687 639 431
I m p o r t 2 73 03 01 3
Export 6 4 5 12
Consumption per person ($) 14.9 15.2 13.7 9.7
II. FORESTRY
A. PLYWOOD & B OARD ASSISTANCE PROGRAMME
1. Title of the subsidy programme:  Plywood & Board Assistance Programme
2. Period covered by the notification:  1997-1998
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.
4. Background and authority for the subsidy
Law:  Forestry Development and Promotion Act (Article 10)
Authority:  Forestry AdministrationG/SCM/N/48/KOR
Page 11
5. Form of the subsidy
LoanSource of fund: Special Account for Financial Investment and Loan
6. Recipient and term
- Recipient: plywood and board producers- Conditions:
- Interest rate:  8 per cent- The assistance covers up to 70 per cent of the costs
- Term of loan:  10 years (seven-year repayment period with a three-year grace period)
7. Amount of the subsidy
 (Unit:  W 100 million)
Year 1997 1998
Subsidy effect 3 4
* The subsidy effect is estimated, based on the difference between the loan  rate on the loan and
market interest rate.
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 1997 1998
Production 1,000 m32,485 1,731
Imports 1,000 m31,323 701
Exports 1,000 m3124 273
Consumption 1,000 m33,684 2,159G/SCM/N/48/KOR
Page 12
B. FOREST PRODUCTS UTILIZATION ASSISTANCE PROGRAMME
1. Title of the subsidy programme:  Forest Products Utilization Assistance Programme
2. Period covered by the notification:  1997-1998
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
- Interest rates:  5-8 per cent
- The assistance covers up to 70 per cent of the costs.
- Five-year loan with a two-year repayment period and a three-year grace period
7. Amount of the subsidy
 (Unit:  W 100 million)
Year 1997 1998
Subsidy effect 10 13
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.G/SCM/N/48/KOR
Page 13
<Production, Consumption and Trade>
Unit 1997 1998
Production 1,000 m34,100 2,200
Import 1,000 m3985 480
Export 1,000 m320 7
Consumption 1,000 m35,065 2,673
* 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:  1997-19983. Policy objective and/or purpose of the subsidy
- To support the management of deep-sea fishery business
- To provided financial assistance for fishery negotiations such as technical
cooperation with foreign countries.
4. Background and authority for the subsidy
Law:
- 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 Antarctic Ocean Development
Authority:  Ministry of Maritime Affairs and Fisheries
5. Form of the subsidy
Loan
6. Recipient and term
- Recipient:  Deep-sea fishermen- Content of the support:  Providing loans for fishing in foreign territorial waters- Term of loan:  One-year loan at the interest rate from 8-10.5 per cent.G/SCM/N/48/KOR
Page 14
7. Amount of the subsidy
(a) Support for Overseas Resource Development
 (Unit: W million)
Year Amount of the loan Estimated subsidy amount
1997 225,000 9,000
1998 301,000 17,669
* The subsidy amount is estimated based on the difference between the interest rate on the loan
and the market rate.
(b) Support for Antarctic Ocean Development
 (Unit: W million)
Year Amount of the loan Estimated subsidy amount
1997 607 21
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:  1997-19983. Policy objective and/or purpose of the subsidy
To develop new fishery products, increase the production of fishery products and modernize
the storage and processing facilities.
4. Background and authority for the subsidy
Laws :
- 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/48/KOR
Page 15
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 seven years with a three-year grace period)
- Interest rate:  8 per cent
7. Amount of the subsidy
 (Unit:  W million)
1997 1998
Grants (A) 1,848 1,925
Loan 38,648 28,300
Estimated subsidy by loan (B) 1,159 849
Total amount of subsidy (A+B)  3,007 2,774
* 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 its trade effect.
C. F
UND FOR SUPPORTING FISHING ACTIVITIES
1. Title of the subsidy:  Fund for Supporting Fishing Activities
2. Period covered by the notification:  1997-19983. Policy objective and/or purpose of the subsidy
To support stable fishing business operation by providing loans at low interest rates as the
financial need arises.G/SCM/N/48/KOR
Page 16
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, inland and deep-sea fishing business owners.
- Content of the support:  Provide loans that cover 20 to 100 per cent of the business
operation costs according to the business scale
- Period of the loan: 1 year
- Interest rates:  6.5 -7.0 per cent
7. Amount of the subsidy
 (Unit:  W million)
Year 1997 1998
Loan amount 501,822 540,565
Subsidy effect* 30,109 48,304
* 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 its trade effect.
D. S
UPPORT FOR AQUACULTURE FISHERY DEVELOPMENT
1. Title of the subsidy:  Support for Developing Aquaculture Fishery
2. Period covered by the notification:  1997-19983. 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 in response to changes in fishingenvironment such as the fishery agreement between Japan and Korea.
- To develop near-sea fisheries into aquafarms of high productivity and thus increase
fishermen' income.G/SCM/N/48/KOR
Page 17
4. Background and authority for the subsidy
Law:  Special Account for Structural Improvement of Rural AreasAuthority:  Ministry of Maritime Affairs and Fisheries
5. Form of the subsidy
Develop aquafarms and provide financial assistance for aquaculture facilitiesSource of fund: Government budget (Special Account for Structural Improvement of Rural
Areas)
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, 50 per cent covered by government grant, 40 per
cent by loan and 20 per cent financed by the developer)
- Term of loan: a seven-year repayment period with a three-year grace period- Interest rates:  5 per cent
7. Amount of  the subsidy
(a) Support for developing aquaculture farm and basic facilities
 (Unit:  W 100 million)
Year 1992 1993 1994 1995 1996 1997 1998
Amount of
subsidy (A)3 3 12 35 35 35 28
Loan 57 40 21 56 60 67 72
Subsidy effect
of loan (B)4324453
T o t a l  ( A + B ) 7 61 43 93 94 03 1
* 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 its trade effect.G/SCM/N/48/KOR
Page 18
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:  1997-19983. 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, Article 289 of Local Tax Act
Authority:  Ministry of Administration and Home Affairs
5. Form of the subsidy
Tax reduction
6. Recipient and term
- Exemption of acquisition tax on vessels acquired for the purpose of registering as
international ship according to 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, acquisition tax that is exempted will be levied.
7. Amount of subsidy
(Unit:  W million)
Year 1997 1998 Total
Amount 11,047 11,445 22,492
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 PROGRAMME FOR THE COAL INDUSTRY
1. Title of the subsidy programme:  Support Programme for the Coal Industry
2. Period covered by the notification:  1997-1998G/SCM/N/48/KOR
Page 19
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 (the restructuring isscheduled to be completed by 1999)
- 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 productionfacilities, 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.G/SCM/N/48/KOR
Page 20
- 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.
7. Amount and duration of the subsidy
 (Unit:  W million)
Year 1997 1998 Duration
Support for stabilizing price of coal and briquette 3,514 3,238  No time limit
Support for coal mine closings 184  61  No time limit
Support for mining area 459 724  Until 2005
Support for storing management of  anthracite coal 145 145  No time limit
Loans 34 155  Until 2005
Support for storing management of  anthracite coal 482 500  Until 2000
Total 4,818 4,823
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:  1997-19983. 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 Energy
5. Form of the subsidy
Tax reductionReduction in government land rental feeG/SCM/N/48/KOR
Page 21
6. Recipient and term
- Foreign invested enterprises that support the international competitiveness of
domestic industry or that operate advanced technology businesses.
- 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 seven years after income is generated and 50 per cent reduction for thefollowing three 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 five years after
income is generated and 50 per cent reduction for the following three years.
- Full exemption of customs duty, special excise tax and value-added tax on capital
goods brought into Korea by foreign invested enterprises within three 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 a million dollar in high technologybusinesses and businesses that support the international competitiveness of
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 hard to estimate its trade effects.
B. T
ARIFF REDUCTION ON AIRCRAFT PARTS
1. Title of the subsidy programme:  Tariff Reduction on Aircraft Parts
2. Period covered by the notification:  1997-1998G/SCM/N/48/KOR
Page 22
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 100 million)
Year 1997 1998
Amount of Duty Reduction 18 82
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 Production
2. Period covered by the notification:  1997-19983. 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.G/SCM/N/48/KOR
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4. Background and authority for the subsidy
Laws:  The Farm Mechanization Promotion LawAuthority:  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 and at 6.5 per cent after 15 April 1998.
7. Amount of the subsidy
 (Unit:  W million)
Year Amount of the loan Estimate of the subsidy
1997
199860,000
44,2604,500
3,921
* 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 period9. 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 production, consumption and trade>
Classification 1997 1998
Production (W 100 million) 11,000 9,567
Imports ($1,000) 68,926 113,723
Exports ($1,000) 43,926 82,288G/SCM/N/48/KOR
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D. SUPPORT FUND FOR THE STONE INDUSTRY
1. Title of the subsidy:  Support Fund for the Stone Industry
2. Period covered by the notification:  1997-1998
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 th e 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 9.0 per cent
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-yeargrace period100% of the facility
investmentSpecial Account for Financial
Loan: 8.5%
Special Account for Energy
Management: 7-9%
Workingcapital2-year repayment with
a 1-year grace periodUp to 80% of the cost Special Account for Financial
Loan:  8.5%
Special Account for Energy
Management: 9%
7. Amount of the subsidy
 (Unit:  W million)
Year 1997 1998
Direct Loan
Subsidy Effect632
415632
402
Total 1,047 1,034
* The subsidy effect is estimated based on the difference between the market interest rate and
the loan rate.G/SCM/N/48/KOR
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8. Duration of  the subsidy:  no fixed time period
9. Trade effects of the subsidy
The effect on trade is insignificant.
VI. RESEARCH AND DEVELOPMENT
A. DIESEL VEHICLE LOW EMISSION TECHNOLOGY DEVELOPMENT
1. Title of the subsidy programme:  Diesel Vehicle Low Emission Technology Development
2. Period covered by the notification:  1997-1998
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 dieselvehicles.
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 level Project objective
Large-sized vehicle 11.0 g/kwh 5.0 g/kwh 4.0 g/kwh
Medium/small vehicle 1.43 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 (Art icle 11) and Enforcement Decree (Article 18).
Law on Special Account for Environment Improvement (Article 4), Air Preservation Law (Article 32)
Authority:  Ministry of Environment
5. Form of the subsidy
Government contributionG/SCM/N/48/KOR
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6. Recipient and criteria
- Recipient: research institutions developing the 3 following 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 cover 30 per cent of the costs.
- Criteria:  research institutions that have research facilities, equipment 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 100 million)
Year 1996 1997 1998 1999
(preliminary figures)
High pressure injection 8 0 3 3
Combustion chamberdesign and enginemapping2 022
Cold ERG technology 0 0 5 5
Total 10 0 10 10
8. Duration of subsidy:  until 2001 because the gas emission standards will be strengthened
gradually from 2000 to 2002.
9. Trade effect of the subsidy
This project is to protect environment including reduction of green house effect generated by
air pollution and protection of ozone layer by reducing pollutants such as NOx emitted by dieselvehicles, using anti-pollution technology. The purpose of the project is to relieve air pollution caused
by large-sized diesel vehicles. Therefore, no effect on trade is expected.G/SCM/N/48/KOR
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<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 Informatization Promotion
2. Period covered by the notification:  1997-19983. 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: Article 33 of Basic Act on Informatizat ion Promotion, Article 31 of the Enforcement
Decree.
Authority:  Ministry of Information and Communication
5. Form of the subsidy
Loan (Source:  Informatization Promotion Fund)
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 techniques in the field of information and
telecommunications like Multi-media etc;G/SCM/N/48/KOR
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- 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 100 million)
Year 1997 1998
Loan 2,562 2,611
Amount of  the subsidy 141 144
* 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 almost non-existent.
C. ENVIRONMENTAL ENGINEERING & T ECHNOLOGY DEVELOPMENT PROGRAMME
1. Title of the subsidy programme:  Environmental Engineering & Technology Development
Programme
2. Period covered by the notification:  1997- 1998
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)G/SCM/N/48/KOR
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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 100 million)
Year 1997 1998
Amount of  the subsidy 185 225
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 Fund
2. Period covered by the notification:  1997-1998
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
- 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. Recipient and criteria
- Beneficiaries:  Organizations that carry out research and development on science and
technology which is important to national interests.G/SCM/N/48/KOR
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- Conditions of support
- Lending period:  7 years which is  inclusive of a maximum three- year grace
period.
- Interest rate:  7-8 per cent per year
- Limits on subsidy amounts: W 1 billion per project
W 3 billion per company
80 per cent of the total amount required by a
company for a project
- 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:  W million)
1997 1998
Loan 109,751 109,317
8. Duration of the subsidy:  1993 - (no fixed time period)
9. Trade effect of the subsidy
Its effect on trade is insignificant.
__________