WORLD TRADE  
ORGANIZATION  G/SCM/N/123/KOR 
24 January 2006 
 
 (06-0312) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
 
 
SUBSIDIES 
 
New and Full 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 18 January 2 006, is being circulated at the request of the 
Delegation of Korea.  
_______________ 
  
  G/SCM/N/123/KOR 
Page 2  
 
   
TABLE OF CONTENTS 
Page
 
I. AGRICULTURE .................................................................................................................... ..3 
A. FOODGRAIN MANAGEMENT PROGRAMME ..................................................................................3  
B. SUPPORT FOR MARKETING AND PROMOTION OF AGRICULTURAL AND LIVESTOCK 
PRODUCTS ............................................................................................................................... ....5 
C. SUPPORT FOR LIVESTOCK PRODUCTS .........................................................................................7  
II. FORESTRY....................................................................................................................... ........9  
A. PLYWOOD AND BOARD ASSISTANCE PROGRAMME ....................................................................9  
B. FOREST PRODUCTS UTILIZATION ASSISTANCE PROGRAMME ..................................................10  
III. FISHERY........................................................................................................................ .........12  
A. SUPPORT FOR DEVELOPMENT OF DEEP-SEA FISHERY ..............................................................12  
B. SUPPORT FOR FISH PRODUCTS PROCESSING DEVELOPMENT ...................................................13  
C. SUPPORT FOR FISHING ACTIVITIES ...........................................................................................14  
D. SUPPORT FOR AQUACULTURE FISHERY DEVELOPMENT ..........................................................15  
E. SUPPORT FOR OLD FISHING VESSEL AND EQUIPMENTS REPLACEMENT ..................................16  
F. SUPPORT FOR VESSEL DECOMMISSIONING ...............................................................................17  
IV. COAL INDUSTRY .................................................................................................................1 8 
A. SUPPORT FOR THE COAL INDUSTRY THROUGH THE SPECIAL ACCOUNT FOR ENERGY 
AND RESOURCES .......................................................................................................................18  
V. MANUFACTURING INDUSTRY ........................................................................................19  
A.  SUPPORT FOR FOREIGN INVESTED ENTERPRISES ......................................................................19  
B. TARIFF REDUCTION ON AIRCRAFT PARTS ................................................................................21  
C. SUPPORT FOR FARM MACHINERY MANUFACTURING ...............................................................22  
VI. ENVIRONMENT, RESEARCH AND DEVELOPMENT..................................................23  
A. ENVIRONMENTAL IMPROVEMENT LOAN PROGRAMME ............................................................23  
B. SUPPORT FOR R&D  OF ENVIRONMENTAL TECHNOLOGY DEVELOPMENT PROJECTS ...............24  
C.  PROJECT ON THE EMISSION REDUCTION DEVICE INSTALLATION AND “CLEANER ” 
ENGINE RETROFIT FOR DIESEL VEHICLES ................................................................................25  
D.   NATURAL GAS BUS SUPPLY PROJECT ......................................................................................26  
E. SUPPORT FOR RECYCLING EQUIPMENT AND TECHNOLOGY DEVELOPMENT ............................27  
F.  PROGRAMME FOR R&D  OF INFORMATION AND COMMUNICATION ..........................................29  
G. SCIENCE AND TECHNOLOGY PROMOTION FUND ......................................................................30  
VII. OTHERS......................................................................................................................... .........31  
A. LOCAL TAX REDUCTION FOR BUILDING AND ACQUISITION OF  INTERNATIONAL LINE 
VESSELS AND DEEP SEA FISHING .............................................................................................31  G/SCM/N/123/KOR 
 Page 3 
 
 
   
I. AGRICULTURE  
 
A. FOODGRAIN MANAGEMENT PROGRAMME  
1. Title of the subsidy programme  
 Foodgrain Management Programme 
 
2. Period covered by the notification : 2003 -2004 
3. Policy objective and/or purpose of the subsidy  
 To maintain buffering stocks of staple foods for food security 
 
4. Background and authority for the subsidy  
• Law:  
  - Foodgrain Management Act (Article 4)   - Agro-Fisheries Marketing and Price Stabilization Act(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 beans, corn 
 
 • Financial Resource    
  - Rice, barley: Government budget (F oodgrain Management Special Account)  
  - Soy beans, Corn: Fund for Agricultu re & Fisheries Product Price Stabilization 
 6. Recipients and terms
 
 (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 (Aggregate Measurement of 
Support) commitments under the WTO Agreement on Agriculture. 
 
 (2)  Soy beans 
 - The government determines the purchasing price and quantity every year before the 
planting of soy beans within the AMS commitments under the WTO Agreement on 
Agriculture.  Pursuant to the government  decision, the Agriculture and Fishery 
Marketing Corporation (AFMC) purchases soy beans from farmers during the harvest season. 
 
 (3)  Corn 
 - The Ministry of Agriculture and Forestry determines the purchasing price and quantity 
every year within the AMS commitments under the WTO Agreement on Agriculture.  
Pursuant to the Ministry’s decision, the Agriculture and Fishery Marketing Corporation 
(AFMC) purchases corn during the harvest season on behalf of the Ministry  
 G/SCM/N/123/KOR 
Page 4  
 
  7. Amount of the subsidy (Government expenditures for foodgrain purchases) 
 
(Unit: million KRW) 
 
8. Duration of the subsidy  
 - The governmental purchase system for the a bove items was introduced before beginning 
of the UR negotiations, and will be implemented within the AMS commitments as 
agreed upon under the WTO Agreement on Agriculture. 
 
 - Yet, as for rice, the government purchase system will not be applied for the rice produced 
in and after year 2005.  Instead, public stock scheme for the purpose of food security 
which belongs to Green Box will be used. 
 
9. Trade effects of the subsidy  
 - The self-sufficiency ratio of Korea's grain production has been declining sharply from 56 
percent in 1980 and 43.1 percent in 1990 to 25.7 percent in 2004 
 
 - As stated above, the governmental intervention in the grain market is to secure the stable 
food supply and the adequate stock of basi c grains for food security.  Therefore, the 
effects of government purchases on trade are considered to be insignificant.  The subsidy programme is subjected to the WTO Agreement on Agriculture.  
 
 Item Type 2003 2004 
Rice Direct subsidy 985,218 1,013,827 
Barley Direct subsidy 54,175 48,000 
Direct subsidy (A) 23,958 46,636 
Loan  28,721 23,882 
Real support amount from loan(B) 675 363 Soy Bean 
total(A+B) 24,633 46,999 
Corn Direct subsidy  2,039 1,303 
Direct subsidy (A) 1,065,390 1,109,766 
Loan 28,721 23,882 
Real support amount from loan(B)  675 363 Total 
Total(A+B) 1,066,065 1,110,129  G/SCM/N/123/KOR 
 Page 5 
 
 
  <Statistics on foodgrain production, consumption and trade>  
 
Commodity Type unit 2003 2004 
Production 1000M/T 4,927 4,451 
Import " 180 205 
Export " - - Rice 
Consumption " 5,055 4,628 
Production 1000M/T 159 186 
Import " 146 206 
Export " - - Barley 
Consumption " 319 366 
Production 1000M/T 115 105 
Import " 1,511 1,693 
Export " - - Soy Bean 
Consumption " 1,582 1,710 
Production 1000M/T 73 70 
Import " 8,588 9,063 
Export " - - Corn 
Consumption " 8,704 9,027 
 Note:  Years refer to the 12-month peri od from November to October next year 
 
 * 400,000 and 105,000 tons of food aid provided to North Korea in 2003 and 2004 
respectively were excluded 
 
B. SUPPORT FOR MARKETING AND PROMOTION OF AGRICULTURAL AND LIVESTOCK PRODUCTS  
1. Title of the subsidy programme  
 Support for Marketing and Promotion of Agricultural & Livestock Products 
 2. Period covered by the notification
:  2003-2004 
3. Policy objective and/or purpose of the subsidy  
 To improve quality and reduce the marketing co sts of agricultural products (fruits, flowers, 
kimchi, vegetables, ginseng, livestock products)  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
 
 Grants 
 •  Source of fund:  Special Account for Structural Improvement of Rural Areas 
 G/SCM/N/123/KOR 
Page 6  
 
  6. Recipients and terms
 
 •   Recipients:  Exporters of fruits, fl owers, kimchi, vegetables, livestock products 
 •   Terms:  financial assistance for selection, packaging, transportation, etc 
 7. Amount of the subsidy
 
(Unit: million KRW) 
Type 2003 2004 
Direct subsidy(A) 24,667 25,571 
Loan - - 
Real support amount  from loan(B) - - 
Total(A+B) 24,667 25,571 
 
8. Duration of the subsidy  
 No fixed time period 
 
9. Trade effects of the subsidy  
 This programme provides financial assistance to support packaging, transportation, etc and to 
improve quality and reduce distribution cost of agri cultural and livestock products (only packaging for 
livestock products), but the trade effect is presumed to be insignificant.  
 
<Statistics on Production, Consumption and Trade> 
 
 - Fruit (Apples and Pears) 
(Unit: M/T) 
year production import export consumption 
‘03 681,922 - 20,895 661,027 
‘04 809,041 - 19,555 789,486 
   - Flower 
          (Unit: million US$) 
year production import export Consumption 
(billion Won) 
‘03 667 22 45 644 
‘04 764 23 49 738 
 
  G/SCM/N/123/KOR 
 Page 7 
 
 
   - Kimchi 
           (Unit: M/T) 
 
 - Vegetable 
(Unit: 1,000 M/T) 
 
- Gingseng 
          ( U n i t  :  M / T )  
year production import export Consumption 
‘03 15,172 206 1,949 13,429 
‘04 14,668 179 2,168 12,679 
 
- Livestock products 
           ( U n i t  :  M / T )  
year production import export Consumption 
‘03 1,070,000 218,275 29,198 1,259,077 
‘04 1,061,587 218,531 16,525 1,263,593 
 C. S
UPPORT FOR LIVESTOCK PRODUCTS  
1. Title of the subsidy programme  
 Supports for Quality improvement a nd Promotion Stabilization of Hanwoo 
 
2. Period covered by the notification : 2003-2004 
3. Policy objective and/or purpose of the subsidy  
 To maintain Hanwoo (Korean native cow) prod uction base against the continuous decline of 
the number of cattle and calf  
4. Background and authority for the subsidy
 
 • Law: Livestock Act (Article 3 and Article 26) 
• Authority: Ministry of Agriculture and Forestry 
 year production import export Consumption 
‘03 668,798 28,707 33,064 1,455,000 
‘04 568,203 72,605 34,827 1,525,000 
year production import export Consumption 
‘03 10,068 452 36 10,484 
‘04 10,468 502 56 10,914 G/SCM/N/123/KOR 
Page 8  
 
  5. Form of the subsidy
 
Grants 
•  Source of fund:  Livestock Development Fund 
 6. Recipients and terms
 
 Castration Subsidy 
 
• Recipients 
 - Hanwoo-raising farmers enrolled in Ca lf Production Stabilization Programme and 
  farmers who raise dairy cattle, bull, and hybrid cattle of Korean origin. 
 
• Contents of the Subsidy 
 -  To provide 100,000~20 0,000 won per castrated bull to the eligible farmer 
 -  To provide 200,000~300, 000 won per head if shipped Hanwoo (cattle) are graded 
  above 1  
  
  Support for Calf Production Infrastructure 
  
• Recipients 
 -  Recipients include members of the National Agricultural Cooperative Federation, 
  Hanwoo-raising incorporated associations , and full-time Hanwoo-raising farmers who 
  own at least 10 ha of grassland. 
 
• Contents of the Subsidy 
 -  Supports are provided to create infrastructure of a cattle production including building 
  livestock barns, cultivation of feed with  creation of grasslands, purchase of facilities 
  and equipment 
 
  Subsidy for Hanwoo(Korean native cow) Productivity 
  
• Recipients 
 - Subsidy is provided to Hanwoo-raising farmers enrolled in Calf Stabilization 
Programme 
 
• Contents of the Subsidy 
 - Supports are provided to eligible farmers when their calf gives birth more than 3 
times. 
 
 Calf Breeding Stabilization Schedule 
 
• Recipients 
 - Cow raisers who join Calf Breeding Stabilization Schedule. 
 
• Contents of the Subsidy 
 - To compensate for the loss in case the average market pri ce of calf is lower than the 
  standard prize of the schedule.  G/SCM/N/123/KOR 
 Page 9 
 
 
   
7. Amount of the subsidy   
    (Unit: million KRW) 
  ‘03 ‘04 
 Castration Subsidy (direct support) 22,466 8,002 
 Support for Calf Production infrastructure (direct support) 900 1,390 
 Subsidy for Hanwoo productivity (direct support)  34,651 - 
Calf breeding stabilization schedule (direct support) 4,284 4,284 
 
8. Duration of the subsidy  
  No fixed time period. 
 9. Trade effects of the subsidy
 
 As the number of domestic cattle head decrea sed, Korea’s self-sufficiency rate of beef has 
been in decline. 
- The number of Hanwoo raised:  (1998.12) 2,383,000  → (2004.12) 1,666,000 
- The self-sufficiency rate of beef :  (1998) 75.4 % → (2004) 44.2 % 
 The programme’s impact on trade is exp ected to be minimal, because it has been 
established to secure the domestic beef suppl y infrastructure under the declining beef 
self-sufficiency rate.  
 
<Beef production, consumption and trade> 
                         (Unit : 1,000 M/T) 
year production import Export Consumption 
‘03 142 294 - 390 
‘04 145 134 - 328 
 
II. FORESTRY 
 A. P
LYWOOD AND BOARD ASSISTANCE PROGRAMME  
1. Title of the subsidy programme    
Plywood and Board Assistance Programme 
 
2. Period covered by the notification :  2003-2004 
3. Policy objectives and /or purpose of the subsidy  
  To facilitate using culled-out trees, small unmarketable trees and recycling waste wood 
materials.  G/SCM/N/123/KOR 
Page 10  
 
  4. Background and authority for the subsidy 
 
 • Law:  Forestry Development and Promotion Act (Article 10) 
• Authority: Korea Forest Service 
 5. Form of the subsidy
  
 Loan 
 6. Recipient and terms
 
 • Recipient:  plywood and board producers, 
 • Conditions:  Interest rate of 5.5 percent 
 • Terms of loan:  10 years (7-year repayment period with a 3-year grace period) 
 
7. Amount of the subsidy   
                                                                                                                        (Unit:  million KRW) 
 2003 2004 
Lump sum transfer (A) - - 
Loan 4,605 8,204 
Benefit of loan*(B) 34 33 
Total (A+B) 34 33 
 
* The subsidy effect is estimated based on the di fference between the loan rate and the market 
rate. 
 8. Duration of the subsidy
  
  No fixed time period 
 9. Trade effects of the subsidy 
 
 Most of board and plywood production is used to meet the domestic demand and the export of 
these products has been declining . Therefore, the trade effect is presumed to be insignificant. 
 
Production, Consumption and Trade  
                                (Unit: 1,000m3) 
 2003 2004 
Production 2,946 2,879 
Imports 2,708 2,413 
Exports 106 145 
Consumption 5,548 5,147 
 
 B. F
OREST PRODUCTS UTILIZATION ASSISTANCE PROGRAMME  
1. Title of the subsidy programme :  
 Forest Products Utilization Assistance Programme  
  G/SCM/N/123/KOR 
 Page 11 
 
 
  2. Period covered by the notification :  2003-2004 
3. Policy objectives and /or purpose of the subsidy  
  To provide financial assistance for modernization of forestry machinery and facilities 
 
4. Background and authority for the subsidy   
 • Laws:  Forestry Development and Promotion Act (Article 10) 
 • Authority:  Korea Forest Service  
 5. Form of the subsidy
  
 Loan  
 •  Source of fund:  Special Account for Structural Improvement of Rural Areas 
 6. Recipient and terms
 
 • Recipient:  individuals or corporati ons that operate wood processing facilities 
 • Terms of loan:  
 - Utility processing facilities: Interest rates of 4.0 percent (7-year repayment period with 
  a 3-year grace period) 
  - Purchase of raw materials: Interest rate of 5.5 percent (2-year repayment period with a 
  3-year grace period)  
 
7. Amount of the subsidy   
                                                                                                                    (Unit:  mil lion KRW) 
 2003 2004 
Lump sum transfer (A) - - 
Loan 27,680 35,976 
Benefit of loan*(B) 372 335 
Total (A+B) 372 335 
 
* The subsidy effect is estimated based on the di fference between the loan rate and the market 
rate. 
 8. Duration of the subsidy
 
  No fixed time period 
 G/SCM/N/123/KOR 
Page 12  
 
  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. 
 
Export and Import  
                                       (Unit: 1,000m3) 
  2003 2004 
Round wood - 1 
Sawn wood 13 17 
Fibreboard  52 83 Export 
Particleboard 5 2 
Round wood 7,165 6,541 
Sawn wood 763 834 
Fibreboard 582 343 Import 
Particleboard 681 867 
 
 
III. FISHERY  
 A. S
UPPORT FOR DEVELOPMENT OF DEEP-SEA FISHERY  
1. Title of the subsidy programme :  
 Support for development of deep-sea fishery 
 
2. Period covered by the notification :  2003-2004 
3. Policy objectives and /or purpose of the subsidy  
 To support and stable production and management of deep-sea fishery 
 
4. Background and authority for the subsidy  
 • Law:  Article 87 of the Fisheries Act  
• Authority: Ministry of Maritime Affairs and Fisheries 
 5. Form of the subsidy
 
Loan 
 
6. Recipient and terms  
 • Recipient:  Deep-sea fishing companies, overseas resource development companies 
 • Terms of loan:  One-year loan at the a nnual interest rate of 4.5 percent in 2003 and 
3 percent in 2004 
  G/SCM/N/123/KOR 
 Page 13 
 
 
  7. Amount of the subsidy  
                                                                                                                      (Unit:  m illion KRW) 
 2003 2004 
Lump sum transfer (A) - - 
Loan 11,130 11,080 
Benefit of loan*(B) 103.5 189.5 
Total (A+B) 103.5 189.5 
 
* The subsidy effect is estimated based on the di fference between the loan rate and the market 
rate. 
 
8. Duration of the subsidy : 
 No fixed time period 
 
9. Trade effects of the subsidy  
 It is difficult to estimate the trade effect 
 
B. SUPPORT FOR FISH PRODUCTS PROCESSING DEVELOPMENT  
1. Title of the subsidy programme :  
 Support for fishery products processing development 
  2. Period covered by the notification
: 2003-2004 
3. Policy objectives and /or purpose of the subsidy  
 To ensure food safety of fishery products and provide high quality products to the consumers 
 4. Background and authority for the subsidy 
 
 • Law:  Article 15 and 16 of the Fisheries Products Quality Control Act 
 • Authority: Ministry of Maritime Affairs and Fisheries 
 
5. Form of the subsidy   
Grants and loan 
 6. Recipient and terms
 
 • Recipient: Companies and people engaged in  handling, storing and processing of fishery 
 products 
 • Terms of grants: 20 to 70 percent of the expenses  • Terms of loan:  10 to 15 years’ loan at the annual interest rate of 4 percent 
 G/SCM/N/123/KOR 
Page 14  
 
  7. Amount of the subsidy 
 
                                                                                                                     (Unit:  mi llion KRW) 
 2003 2004 
Lump sum transfer (A) 7,830 10,159 
Loan 13,032 24,776 
Benefit of loan*(B) 186 176 
Total (A+B) 8,016 10,335 
 
* The subsidy effect is estimated based on the difference between the loan rate and the 
market rate. 
 8. Duration of the subsidy 
 
No fixed time period 
 9. Trade effects of the subsidy
 
It is difficult to estimate the trade effect 
 C. S
UPPORT FOR FISHING ACTIVITIES  
1. Title of the subsidy programme:  
Support for fishing activities 
  2. Period covered by the notification
:  2003-2004 
3. Policy objectives and /or purpose of the subsidy  
 To relieve financial burden and support stable  fishing business operation by providing lower 
rate loans  4. Background and authority for the subsidy
  
 • Law:  Article 87 of the Fisheries Act  
 • Authority: Ministry of Maritime Affairs and Fisheries 
 
5. Form of the subsidy  
 Loan 
 
6. Recipient and terms  
 • Recipient:  Fishermen duly licensed under the relevant domestic fisheries legislation 
 • Terms:  One year loan with the annual inter est rate of 4 percent for coastal and offshore 
fishery and 4.5 percent for deep-sea fishery in 2003 and 3 percent for both fisheries in 
2004 
  G/SCM/N/123/KOR 
 Page 15 
 
 
  7. Amount of the subsidy   
                                                                                                  (Unit:  million KRW) 
 2003 2004 
Lump sum transfer (A) - - 
Loan 1,094,269 1,125,056 
Benefit of loan*(B) 15,396 17,382 
Total (A+B) 15,396 17,382 
 
* The subsidy effect is estimated based on the di fference between the loan rate and the market 
rate. 
 8. Duration of the subsidy:
 
No fixed time period 
 9. Trade effects of the subsidy  
 
The trade effect is minimal, if any, because the loan is provided to more than 72,000 
fishermen mostly in small amounts 
 
D. SUPPORT FOR AQUACULTURE FISHERY DEVELOPMENT  
1. Title of the subsidy programme  
 Support for Aquaculture Fishery Development  
  
2. Period covered by the notification :  2003-2004 
3. Policy objectives and /or purpose of the subsidy  
 To have stable supply of fishery products by supporting the development of aquaculture 
fishery under the changing circumstances of domest ic and overseas fisheries production environment. 
 
4. Background and authority for the subsidy   
• Law: Article 87 of the Fisheries Act, Article 6 of the Cultivation Fishery Promotion Act 
  Article 19 of the Special Act for the Su pport of the Fishermen According to the  
  Conclusion of the Fisheries Agreements 
 • Authority: Ministry of Maritime Affairs and Fisheries 
 5. Form of the subsidy
 
Grants and loan 
 G/SCM/N/123/KOR 
Page 16  
 
  6. Recipient and terms
 
• Recipient: Aquaculture fishermen 
• Terms of grants: 40 to 100 percent of the expenses 
• Terms of loan:  Ten years’ loan at the annual interest rate of 4% 
 
7. Amount of the subsidy  
                                                                                                                     (Unit:  mi llion KRW) 
 2003 2004 
Lump sum transfer (A) 5,176 8,908 
Loan 26,872 18,550 
Benefit of loan*(B) 384 132 
Total (A+B) 5,560 9,040 
 
* The subsidy effect is estimated based on the di fference between the loan rate and the market 
rate. 
 8. Duration of the subsidy
 
 No fixed time period 
 
9. Trade effects of the subsidy  
 It is difficult to estimate the trade effect 
 
E. SUPPORT FOR OLD FISHING VESSEL AND EQUIPMENTS REPLACEMENT  
1. Title of the subsidy programme  
 Support for Old Fishing Vessel and Equipment Replacement 
 
2. Period covered by the notification : 2003-2004 
3. Policy objectives and /or purpose of the subsidy  
To ensure navigational safety through replace ment of old vessels and vessel equipments 
 4. Background and authority for the subsidy
  
 • Law: Article 87 of the Fisheries Act, Article 11 of the Special Act for the Development 
  of Agricultural and Rural Communities  
 • Authority: Ministry of Maritime Affairs and Fisheries  5. Form of the subsidy
 
 Grants and loan 
  G/SCM/N/123/KOR 
 Page 17 
 
 
  6. Recipient and terms  
• Recipient:  Fishermen 
• Terms of grant: 20 to 50 percent of the expenses 
• Terms of loan:  15 years’ loan at the annual interest rate of 4 percent 
 
7. Amount of the subsidy  
                                                                                                                      (Unit:  m illion KRW) 
 2003 2004 
Lump sum transfer (A) 1,010 811 
Loan 3,228 5,449 
Benefit of loan*(B) 46 39 
Total (A+B) 1,056 850 
 
*  The subsidy effect is estimated based on the difference between the loan rate and the 
market rate. 
 
8. Duration of the subsidy  
 For coastal and offshore fishing vessels, the s ubsidization is continued until 2011.  For deep-
sea fishing vessels, the subsidization is continued until 2007.  
9. Trade effects of the subsidy
  
It is difficult to estimate the trade effect 
 F. S
UPPORT FOR VESSEL DECOMMISSIONING  
1. Title of the subsidy programme :  
Support for Vessel Decommissioning 
  2. Period covered by the notification
:  2003-2004 
3. Policy objectives and /or purpose of the subsidy  
To support the vessel decommissioning to maintain  fleet size at sustai nable level, especially 
for those vessels affected by the conclusion of bilateral or multilateral fisheries agreements 
 4. Background and authority for the subsidy
  
 • Law:   
  - Article 11 of the Special Act for the De velopment of the Agricultural and Fishing  
  Communities 
 - Article 19 of the Special Act for the Su pport of the Fishermen According to the  
 Conclusion of the Fisheries Agreements 
 
 • Authority: Ministry of Maritime Affairs and Fisheries G/SCM/N/123/KOR 
Page 18  
 
   
5. Form of the subsidy
 
  Grants and loan 
 6. Recipient and terms
 
• Recipient: Coastal and deep-sea fishermen 
 • Terms of grant: 100 percent of the expenses for purchasing vessel 
 • Terms of loan: 15 years’ loan with the annua l interest rate of 4 percent for coastal and 
  offshore fishermen, and 5 percent for deep-sea fishermen 
 
7. Amount of the subsidy  
           (Unit:  million KRW) 
 2003 2004 
Lump sum transfer (A) 20,420 30,873 
Loan 2,604 2,149 
Benefit of loan*(B) 29 15 
Total (A+B) 20,449 30,888 
 
* The subsidy effect is estimated based on the di fference between the loan rate and the market 
rate. 
 8. Duration of the subsidy
 
 For coastal and offshore fishery, the subsid ization is continued until 2008.  For deep-sea 
fishery, the subsidization period is not fixed. 
  
9. Trade effects of the subsidy   
It is difficult to estimate the trade effect 
 
IV. COAL INDUSTRY  
 
A. SUPPORT FOR THE COAL INDUSTRY THROUGH THE SPECIAL ACCOUNT FOR ENERGY AND 
RESOURCES  
1. Title of the subsidy programme   
  Support for the Coal Industry through the Special Account for Energy and Resources 
 2. Period covered by the notification:
 2003-2004 
3. Policy objectives and /or purpose of the subsidy  
- To support the restructuring of the coal industry, such as the shutdown of uneconomical 
 coal mines and reduction in coal production. 
- To compensate for the difference between production cost and retail price of coal and 
 briquettes.  (The difference was due to the controlling of the retail price coal and 
 briquettes to secure the demand for domestically-produced hard coal) 
  G/SCM/N/123/KOR 
 Page 19 
 
 
  4. Background and authority for the subsidy   
• Law: Article 26 of the Coal Industry Act  
 • Authority: Ministry of Commerce, Industry and Energy 
 5. Form of the subsidy 
 
Grants 
 6. Recipient and terms
 
- Briquette producers and coal miners are gr anted the subsidy in the form of direct 
 payment and premium for industrial accident compensation insurance and education fees. 
 
7. Amount and duration of the subsidy  
                                                                                                                      (Unit:  m illion KRW) 
 2003 2004 
Lump sum transfer (A) 299,027 235,895 
Loan - - 
Benefit from loan(B) - - 
Total(A+B) 299,027 235,895 
 
8. Duration of the subsidy  
 No fixed time period.  
 9. Trade effects of the subsidy
 
 None 
 
V. MANUFACTURING INDUSTRY  
 
A.  S UPPORT FOR FOREIGN INVESTED ENTERPRISES  
1. Title of the subsidy programme  
  Support for Foreign Invested Enterprises 
 2. Period covered by the notification
: 2003-2004 
3. Policy objective and /or purpose of the subsidy  
 To stimulate the attraction of foreign direct investment(FDI) 
 
 - Tax reduction: to promote foreign investment by reducing the tax burden   - Cash Grants: to support the economic de velopment in the areas of special hardship 
 G/SCM/N/123/KOR 
Page 20  
 
  4. Background and authority for the subsidy
 
(a)  Tax reduction 
 • Laws: Article 121-2 and 121-3 of Special Tax Treatment Control Law, Article 9 and 
  13 of Foreign Investment Promotion Act     • Authority:  Ministry of Finance and Economy, Ministry of Commerce, Industry and 
   Energy, Ministry of Administration and Home Affairs 
 
  (b)  Cash Grant 
 • Laws:  The Foreign Investment Promotion Act  • Authority:  Ministry of Commerce, Industry and Energy 
 
5. Form of the subsidy
 
(a)  Tax reduction: tax reduc tion and reduction in the rental fee of government land.  
 
(b)  Cash Grant: grants 
 
6. Recipient and terms  
(a)  Tax reduction: 
 • Recipients 
  - Foreign-invested enterprises which ar e engaged in the service sector supporting 
   other industries or which are involved in businesses related to advanced  
   technologies 
 
  - Foreign-invested enterprises that opera te in the Foreign Investment Zone, Free 
  Economic Zone, Free Trade Zone and Jeju Investment Promotion Zone 
 
 • Terms 
  - Corporate tax and income tax on foreign-invested companies:         - A full exemption is granted for the first 5 years after income is generated  
 following the commencement of operation and a 50 percent reduction for the  next 2 years. (for advanced technologies or the Foreign Investment Zone) 
 
  - A full exemption is given for the first 3 years after income is generated 
 following the initiation of operation a nd a 50 percent reduction for the next 
 2 years. (for Free  Economic Zone, Free Trade Zone and Jeju Investment  Promotion Zone) 
 
  - Acquisition tax, registration tax, a nd property tax on land a nd buildings acquired 
 or owned by foreign-invested companies:  
 
  - A full exemption is granted for the first 5 years after the commencement of 
  operation and a 50 percent reduction for the following 2 years. (for advanced 
  technologies or the Foreign Investment Zone) 
 
  -  A full exemption is given for the first 3 years after the initiation of operation 
  and a 50 percent reduction for the next 2 years. (for Free Economic Zone, Free   Trade Zone and  Jeju Investment Promotion Zone) 
  G/SCM/N/123/KOR 
 Page 21 
 
 
    - Customs duty, special excise tax, value- added tax(VAT) on capital goods 
 introduced into Korea by foreign-invested  enterprises within 3 years for operation 
 of businesses eligible for tax exemption or reduction 
 
 - A full exemption is granted 
 
  - Tax reduction in the rental fee of st ate-owned properties for foreign-invested 
 companies 
 
(b)  Cash Grant:  
 
 -  Cash grants are awarded to projects w ith investments above the minimum investment 
requirement and can be made in installments on a performance basis. 
 7. Amount of the subsidy
 
  (a)  Tax reduction: No statistics available.  
    (b)  Cash Grant: None  8. Duration of the subsidy
 
  No fixed time period 
 
9. Trade effect of the subsidy  
(a)  Tax reduction: The tax reduction system is  aimed at promoting foreign investment, and 
thus it has neither export requirements nor a trade impact. 
 
 (b)  Cash Grants: Cash Grants  aim to support regions that ar e at a disadvantage in relation 
  to more advantaged regions. 
 B. T
ARIFF REDUCTION ON AIRCRAFT PARTS  
1. Title of the subsidy programme  
Tariff Reduction on Aircraft Parts 
 2. Period covered by the notification
: 2003-2004 
3. Policy objective and/or purpose of the subsidy  
 To encourage the importation of aircraft parts not domestically produced and to reduce 
production cost. 
 4. Background and authority for the subsidy
 
 • Laws:  Article 89 of Customs Act 
• Authority:  Ministry of Finance and Economy 
 
5. Form of the subsidy  
  Tariff reduction  G/SCM/N/123/KOR 
Page 22  
 
   
6. Recipient and terms
 
Those who are authorised as manufacturing or repairing aircraft in accordance with the 
Promotion Act for the Development of Aircrafts and Space Industries.  
7. Amount of the subsidy 
 
                                             (Unit:  billion KRW) 
  2003 2004 
 Amount of Duty Reduction 22.8 25.9 
 
8. Duration of the subsidy  
  No fixed time period 
 9. Trade effect of the subsidy
 
  None 
 
C. SUPPORT FOR FARM MACHINERY MANUFACTURING  
1. Title of the subsidy programme  
  Support for Farm Machinery Manufacturing 
 
2. Period covered by the notification :  2003-2004 
3. Policy objective and/or purpose of the subsidy  
 - To assist off-season manufacturing of farm machinery and to help machinery 
manufactures to meet the high demand for farm machinery in the farming seasons.  
  - To promote manufacturing and supply of high-quality Agricultural machinery of Korean-
made by providing financial resources for pr oduction facility establishment of machinery 
required for automatization and modernizati on of Agricultural facilities and machinery. 
 
4. Background and authority for the subsidy
 
 • Law: Farm Mechanization Promotion Law(Article 4) 
 • Authority: Ministry of Agriculture and Forestry 
 
5. Form of the subsidy  
 Loan 
   Source of fund: Special Account for Structural Development of Rural Areas 
 
6. Recipients and terms  
 • Recipients 
   farm machinery manufacturers and developers of new-tech machinery 
  G/SCM/N/123/KOR 
 Page 23 
 
 
   • Contents of the Subsidy 
    To provide financial assistance for Agri cultural machinery production and the cost of 
 establishing as well as constructing Agricultural machinery production facilities. 
 
7.  Amount of the subsidy  
                                                (Unit: million KRW) 
Type 2003 2004 
Direct subsidy(A) - - 
Loan 10,000 10,000 
Real support amount from loan(B)   246  166 
Total(A+B)   246  166 
 
8. Duration of the subsidy  
 
 No fixed time period  9. Trade effects of the subsidy
 
 
 Its effect on trade is expected to be almo st non-existent since the amount of the subsidy 
accounts only for 0.1 to 0.2 percent of the total value of farm machinery production.  
 
<Statistics on farm machinery pr oduction, consumption and trade > 
(Unit: 1000 US$) 
year Total sales amount(billion KRW) export import 
2003 539 225,217 153,243 
2004 650 279,231 221,403 
 
 
VI. ENVIRONMENT, RESEARCH AND DEVELOPMENT 
 
A. E NVIRONMENTAL IMPROVEMENT LOAN PROGRAMME  
1. Title of the subsidy programme  
 Environmental Improvement Loan Programme 
 
2. Period covered by the notification : 2003-2004 
 3. Policy objectives and /or purpose of the subsidy
 
 
  To encourage and promote private sector investment in environmental facilities 
 
4. Background and authority for the subsidy   
  
 • Laws:  Article 34 of Framew ork Act on Environmental Policy 
 • Authority:  Ministry of Environment 
  5. Form of the subsidy
 G/SCM/N/123/KOR 
Page 24  
 
   
   Loan 
 Source of Fund:  Special Account for Financial Loan 
 
6. Recipient and terms
 
 
  • Recipient: firms that installs and ope rates pollution preventi on devices and facilities 
 •  Terms of loan: 7-year equal repayment pe riod with a 3-year grace period at the annual 
   interest rate of 4.34-4.63 percent (floating interest rate)  
7. Amount of the subsidy
  
                                                                                                                    (Unit:  mil lion KRW) 
 2003 2004 
Lump sum transfer (A) - - 
Loan 60,000 70,000 
Benefit of loan(B)* 480 1,820 
Total (A+B) 480 1,820 
 
* The subsidy effect is estimated based on the di fference between the loan rate and the market 
rate. 
 8. Duration of the subsidy
:  No fixed time period 
 
9.  Trade effects of the subsidy   
  Trade effect of this programme is expected to be insignificant since its purpose is to support the installation or improvement of po llution prevention devices and facilities. 
 
B. S
UPPORT FOR R&D  OF ENVIRONMENTAL TECHNOLOGY DEVELOPMENT PROJECTS  
1. Title of the subsidy programme  
 Support for R&D of Environmental Technology Development Projects 
 2. Period covered by the notification
:  2003-2004 
3. Policy objectives and /or purpose of the subsidy  
 To improve the domestic environment by  developing cutting-edge environmental 
 technologies  4. Background and authority for the subsidy
  
 • Laws: Development of and Support for Environmental Technology Act(Article 5)  
 • Authority:  Ministry of Environment 
 5. Form of the subsidy
 
   Grants 
   Source of Fund:  Special Account for Environmental Improvement  G/SCM/N/123/KOR 
 Page 25 
 
 
   
6. Recipient and terms  
 •  Recipient: Government-invested research in stitutions, universities, research institutions 
   and private enterprises that participate in the Environmental Technology Development 
   Project 
 
7. Amount of the subsidy   
 (Unit:  million KRW) 
 2003 2004 
Lump sum transfer (A) 75,000 85,000 
Loan - - 
Benefit of loan(B) - - 
Total (A+B) 75,000 85,000 
 
8. Duration of the subsidy  
  No fixed time period 
 
9. Trade effects of the subsidy   
 Trade effect of this subsidy is expected  to be insignificant since it focuses on basic 
environmental technologies. 
 
C.  P ROJECT ON THE EMISSION REDUCTION DEVICE INSTALLATION AND “CLEANER ” ENGINE 
RETROFIT FOR DIESEL VEHICLES  
1. Title of the subsidy programme  
 
Subsidy for the emission reduction device (DPF, DOC) installation and “cleaner” engine 
retrofit 
 2. Period covered by the notification
: 2003-2004 
 
3. Policy objectives and /or purpose of the subsidy  
   To reduce emissions from operating diesel vehicles in metropolitan areas  
4. Background and authority for the subsidy 
 
  • Laws:  Special Act on Metropolitan Air Quality  Improvement (Paragraph 6 of Article 25)  
 • Authority:  Ministry of Environment  
5. Form of the subsidy
 
 
Grants 
   Source of Fund:  Special Account for Environmental Improvement 
 G/SCM/N/123/KOR 
Page 26  
 
  6. Recipient and terms
 
  • Recipient:  A diesel vehicle owner who in stalls emission reduction device or retrofits 
 with “cleaner” engines if the vehicle fails the emission testing under the Special Act on 
 Metropolitan Air Quality Improvement 
 
• Terms: to provide total costs for installing emission reduction devices or retrofitting 
 with “cleaner” engines (50 percent each from central government and local government expenditure). 
 
7. Amount of the subsidy 
 
                                                                                                                   (Unit:  mill ion KRW) 
 2003 2004 
Lump sum transfer (A) - 7,900 
Loan - - 
Benefit of loan*(B) - - 
Total (A+B) - 7,900 
 
8. Duration of the subsidy :  2004-2014 
 
9. Trade effects of the subsidy  
 
 This subsidy provides total costs for a diesel  vehicle owner who installs emission reduction 
devices or retrofits with “cleaner” engines.  Therefor e, it does not differentiate a domestic or imported 
device, which means that there exists no discriminatory trade barrier. 
 
D.   N ATURAL GAS BUS SUPPLY PROJECT  
1. Title of the subsidy programme  
 
Subsidy for the natural gas bus procurement and fuel expenses 
 2. Period covered by the notification
:  2003-2004 
 
3. Policy objectives and /or purpose of the subsidy  
  To replace diesel engine buses with frequent ope ration and higher exhaus t and garbage trucks 
into low-emission and cleaner vehicles to expedite air quality amelioration in metropolitan areas  
4. Background and authority for the subsidy 
 
 
 • Laws:  Clean Air Conservation Act (Article 36.2) 
 • Authority:  Ministry of Environment  
5. Form of the subsidy
 
 
 Grants   Source of Fund:  Special Account for Environmental Improvement 
  G/SCM/N/123/KOR 
 Page 27 
 
 
  6. Recipient and terms  
   • Recipient:   -  Grants for natural gas vehicle procur ement are provided to a person that purchases 
 natural gas vehicles in accordance w ith the Clean Air Conservation Act. 
 -  Grants for fuel expenses are provided to a person that intends to supply natural gas for 
 vehicles that use natural gas as fuel in acco rdance with the Clean Air Conservation  Act. 
 
7. Amount of the subsidy 
 
 
                                                                                                                    (Unit:  mil lion KRW) 
 2003 2004 
Lump sum transfer (A) 31,500 36,200 
Loan - - 
Benefit of loan*(B) - - 
Total (A+B) 31,500 36,200 
 
8. Duration of the subsidy :  2000-2007 
 
9. Trade effects of the subsidy  
  Trade effect of this subsidy is expected to be insignificant since it is intended to support a 
purchaser of natural gas bus and garbage trucks and a natural gas supplier to those vehicles. 
 
E. S
UPPORT FOR RECYCLING EQUIPMENT AND TECHNOLOGY DEVELOPMENT  
1. Title of the subsidy programme  
 
 Loan Programme for Recycling Industry Promotion  
2. Period covered by the notification
: 2003-2004 
 3. Policy objectives and /or purpose of the subsidy
 
 
 To promote and encourage recycling and recycling industry by offering long-term, low 
interest loan to private firms engaged in recy cling business for the development in recycling 
equipment and related technology, management of distribution and sales  4. Background and authority for the subsidy 
 
 
 • Laws:   
 -  Article 31 of Act on the Promoti on of Saving and Recycling of Resources 
 -  Article 4 of Act Relating to Special  Accounting for Environmental Improvement 
  • Authority:  Ministry of Environment 
 G/SCM/N/123/KOR 
Page 28  
 
  5. Form of the subsidy
 
   Loan 
  Source of Fund:  Special Account for Environmental Improvement 
 
6. Recipient and terms
 
   •  Recipient :  
 (a) Equipment:  A person or business organiza tions engaged in recycling business under the 
Act on the Promotion of Saving and Recycling of Resources that intends to install 
recycling equipment 
 
 (b)  Technology development:  A person that in tends to be engaged in R&D activities related 
to resource recycling under the Act on the Promotion of Saving and Recycling of 
Resources 
 
 (c)  Waste reduction equipment:  A person that  intends to install waste reduction equipments 
  under the Waste Control Act 
 
 (d)  Management stabilization:  A person, under the Act on the Promotion of Saving and 
Recycling of Resources, engaged in recy cling, repairing and sales business of second-
hand electric appliances, furniture, etc. 
 
 (e)  Distribution and sales support: A person, under the Act on the Promotion of Saving and 
Recycling of Resources, engaged in recycled products sales handling a volume of 
general manufactures no more than 30% in monetary units  and a person engaged 
in repair and sales of second-hand electric appliances, furniture, etc. 
  • Terms:  
  (a)  Equipment, (b) Technology devel opment & (c) Waste reduction equipment:  
 7-year repayment period with a 3-year gr ace period at the annual interest rate of 
 4.49 percent (average loaning rate during the year of '03 and '04, floating interest rate) 
 (d) Management stabilization & (e) Distribution & sales support:   
 3-year repayment period with a 2-year gr ace period at the annual interest rate of 
 4.49 percent (average loaning rate during the year of '03 and '04, floating interest rate) 
 
7. Amount of the subsidy  
                                                                                                                      (Unit:  m illion KRW) 
 2003 2004 
Lump sum transfer (A) - - 
Loan 60,000 60,000 
Benefit of loan*(B) 948 978 
Total (A+B) 948 978 
* The subsidy effect is estimated based on the di fference between the loan rate and the market 
rate. 
  G/SCM/N/123/KOR 
 Page 29 
 
 
  8. Duration of the subsidy  
 
No fixed time period 
 
9. Trade effects of the subsidy  
 
  Trade effect of this subsidy is expected  to be insignificant for the following reasons:  
 - First, rather than being a direct subsidy to  the recycling industry, it is a loan programme 
  that does not restrict foreign investment or foreign participation;  
 - Second, considering inferior quality of recy cled products in general, they would hardly 
have consequential competitive edge against general products. 
 
F.  P ROGRAMME FOR R&D  OF INFORMATION AND COMMUNICATION  
1. Title of the subsidy programme  : Loan Programme for R&D of Information and 
 Communication  
 2. Period covered by the notification
:  2003-2004  
 
3. Policy objective and/or purpose of the subsidy   
 
 To provide loan to research and develop the information and communication project that is 
large size and involves high risks.  
4. Background and authority for the subsidy 
 
 
 • Laws: Article 34 of Basic Act on Information Promotion 
 • Authority: Ministry of Information and Communication  
 5. Form of the subsidy 
 
 
 Loan  
6. Recipient and terms
 
 
 • Loan is provided for private firms in the field of information and communication 
including domestic corpora tions owned by foreigners. 
 • Conditions of the loan: changeable depending on market interest rates.  
 7. Amount of the subsidy 
 
  (Unit: billion KRW)  
 2003 2004 
 Amount of loan 193 218 
 
8. Duration of the subsidy  
 
 No fixed time period  
 G/SCM/N/123/KOR 
Page 30  
 
  9. Trade effect of the subsidy 
 
  This support programme provides no special benef its in terms of interest rates and loan period 
compared to those provided by private financial institu tions. Therefore, trade effect is expected to be 
insignificant.   
G. S
CIENCE AND TECHNOLOGY PROMOTION FUND 
1. Title of the subsidy programme  
 
  Science and Technology Promotion Fund  
 2. Period covered by the notification
: 2003-2004 
 
3. Policy objectives and /or purpose of the subsidy  
 
To assist R&D activities of private enterprises  
 
4. Background and authority for the subsidy  
  • Law:  Article 22 of Scien ce and Technology Framework Law  
 • Authority: Ministry of Science and Technology  
 5. Form of the subsidy
 
 
  Loan  
 6. Recipient and terms
 
 
Loan of 7-year repayment period with a 3-year grace period at the annual interest rate of 4.75-
5.25 percent is provided for organizations that carry out R&D on high technology industry and pre-
competitive R&D activities.  
 
7. Amount of the subsidy  
                     (Unit:  million KRW)  
  2003 2004 
Lump sum transfer (A) -  - 
Loan 115,000 105,000 
Benefit of loan*(B) 2,300~3,450 2,100~3,150 
Total (A+B) 2,300~3,450 2,100~3,150 
 
* The subsidy effect is estimated based on th e difference between the loan rate and the 
market rate.  
 
8. Duration of the subsidy  
   No fixed time period  
  G/SCM/N/123/KOR 
 Page 31 
 
 
  9. Trade effects of the subsidy  
   Difficult to estimate.  
 
VII. OTHERS  
 
A. L
OCAL TAX REDUCTION FOR BUILDING AND ACQUISITION OF  INTERNATIONAL LINE 
VESSELS AND DEEP SEA FISHING  
1. Title of the subsidy programme    
  
Local Tax Reduction for Building and Acquisition of International Line Vessels and Deep 
Sea Fishing Vessels  
2. Period covered by the notification
: 2003-2004 
 3. Policy objectives and /or purpose of the subsidy
 
  
To contribute to the promotion of shipping industry by reducing the tax burden on acquiring 
international line vessels and deep-sea fishing vessels. 
  4. Background and authority for the subsidy
  
 
 • Law:  Article 284 of Local Tax Act  • Authority: Ministry of Administration and Home affairs. 
 
5. Form of the subsidy
  
   Tax Reduction  
6. Recipient and term
 
  • Local Tax Reduction for International Line Vessels     -  Exemption of acquisition tax on vessels acquired for the purpose of registering as 
 international ship according to the In ternational Vessel Registration Law. 
  -  Exemption of Common Facility Tax and 50 percent reduction in property tax. on 
vessels registered as international ship as of the date of taxation. 
  -  If the vessel is not registered as interna tional ship within 6 months from the date of 
 acquisition, the exempted acquisition tax be levied. 
 
 • Local Tax Reduction for Deep-sea Fishing Vessels 
    - Acquisition tax and Property tax be re duced by 50 percent for freight vessels and  
   international vessels on the coastal service.  G/SCM/N/123/KOR 
Page 32  
 
  7. Amount of the subsidy
  
         (Unit:  million KRW) 
 2003 2004 
Lump sum transfer (A)* 20,763  14,870  
Loan - - 
Benefit of loan(B) - - 
Total (A+B) 20,763 14,870 
 
* Tax reduction is considered  as Lump sum transfer (A) 
 
8. Duration of the subsidy   
   Until 31 December 2006  
9. Trade effects of the subsidy 
 
  
The subsidy is to promote the shipping industr y by relieving tax burde n on international line 
vessels, deep-sea fishing vessels and co astal line vessels. Therefore it is not directly related to trade. 
 
 
__________