WORLD TRADE  
ORGANIZATION  G/SCM/N/155/KOR 
4 May 2009 
 
 (09-2156) 
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  
 
REPUBLIC OF KOREA 
  
 The following communication, dated 27 April 2009,  is being circulated at the request of the 
Delegation of the Republic of Korea.  
_______________  
 
 
 The following notification is submitted fo r the purposes of transparency and without 
prejudice to the legal status and nature including sp ecificity, or effects of the notified programmes or 
measures under the ASCM and GATT 1994. G/SCM/N/155/KOR 
Page 2  
 
  TABLE OF CONTENTS 
 
Page
 
I. AGRICULTURE .................................................................................................................... ..3 
A. FOODGRAIN MANAGEMENT PROGRAMME ..................................................................................3  
B. VARIABLE  DIRECT PAYMENT FOR RICE.....................................................................................4  
C. SUPPORT FOR MARKETING AND PROMOTION OF AGRICULTURAL AND LIVESTOCK 
PRODUCTS ............................................................................................................................... ....5 
D. SUPPORT FOR LIVESTOCK PRODUCTS .........................................................................................6  
II. FORESTRY....................................................................................................................... ........7  
A. PLYWOOD AND BOARD ASSISTANCE PROGRAMME ....................................................................7  
B. FOREST PRODUCTS UTILIZATION ASSISTANCE PROGRAMME ....................................................9  
III. FISHERY........................................................................................................................ .........10  
A. SUPPORT FOR DEVELOPMENT OF DEEP-SEA FISHERY ..............................................................10  
B. SUPPORT FOR FISH PRODUCTS PROCESSING DEVELOPMENT ...................................................11  
C. SUPPORT FOR FISHING ACTIVITIES ...........................................................................................12  
D. SUPPORT FOR AQUACULTURE FISHERY DEVELOPMENT ..........................................................13  
E. SUPPORT FOR OLD FISHING VESSEL AND EQUIPMENTS REPLACEMENT ..................................14  
F. SUPPORT FOR VESSEL DECOMMISSIONING ...............................................................................15  
IV. COAL INDUSTRY .................................................................................................................1 6 
A. SUPPORT FOR THE COAL INDUSTRY THROUGH THE SPECIAL ACCOUNT FOR ENERGY 
AND RESOURCES .......................................................................................................................16  
V. MANUFACTURING INDUSTRY ........................................................................................17  
A. SUPPORT FOR FOREIGN INVESTED ENTERPRISES ......................................................................17  
B. TARIFF REDUCTION ON AIRCRAFT PARTS ................................................................................19  
C. SUPPORT FOR FARM MACHINERY MANUFACTURING ...............................................................20  
VI. ENVIRONMENT, RESEARCH AND DEVELOPMENT..................................................21  
A. ENVIRONMENTAL IMPROVEMENT LOAN PROGRAMME ............................................................21  
B. SUPPORT FOR R&D  OF ENVIRONMENTAL TECHNOLOGY DEVELOPMENT PROJECTS ...............22  
C. PROJECT ON THE EMISSION REDUCTION DEVICE INSTALLATION AND "CLEANER " 
ENGINE RETROFIT FOR DIESEL VEHICLES ................................................................................23  
D. NATURAL GAS BUS SUPPLY PROJECT ......................................................................................24  
E. SUPPORT FOR RECYCLING EQUIPMENT AND TECHNOLOGY DEVELOPMENT ............................25  
F. PROGRAMME FOR R&D  OF INFORMATION AND COMMUNICATION ..........................................27  
G. SCIENCE AND TECHNOLOGY PROMOTION FUND ......................................................................27  
  G/SCM/N/155/KOR 
 Page 3 
 
 
  I. AGRICULTURE  
A. FOODGRAIN MANAGEMENT PROGRAMME  
1. Title of the subsidy programme  
 Foodgrain Management Programme 
 
2. Period covered by the notification :  2005-2006 
3. Policy objective and/or purpose of the subsidy  
To maintain and manage adequate food stock of basic agro products 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)  
 • Authority:  Ministry Agriculture and Forestry 
 
5. Form of the subsidy
 
 Grant and loan 
 6. Recipients and terms
 
a. Grant 
- Recipients:  The farms that produce barley, bean and corn    
- Content of subsidy:  The government purchases a certain volume from the 
producing farms.  
  
b. Loan 
- Recipients:  The ente rprises that purchase beans 
- Content of subsidy:  The government  provides the enterprises with loans so 
that they can purchase beans from producing farms.  
- Loan interests and duration:  3% and 11 months 
7. Amount of the subsidy   
(Unit:  million KRW) 
 
 * The subsidy effect is estimated based on th e difference between loan rate and the market 
rate.  (2005:  6.07%,  2006:  6.55%)  Item Type 2005 2006 
Barley Direct subsidy 32,554 28,280 
Direct subsidy (A) 44,875 43,706 
Loan  28,138 30,690 
Benefit of  loan * (B) 792 999 Soy Bean 
Total(A+B) 45,667 44,705 
Corn Direct subsidy 898 336 G/SCM/N/155/KOR 
Page 4  
 
  8. Duration of the subsidy
 
 No fixed duration 
 9. Trade effects of the subsidy
 
The government is implementing the purchase system of foodgrain with a view to achieving 
the food security of basic agro products.  It is estimated that the support of foodgrain purchase has a 
minimal effect on trade because of Korea's low food self-sufficiency.   B. V
ARIABLE  DIRECT PAYMENT FOR RICE 
1. Title of the subsidy programme  
Variable Direct Payment for Rice 
 
2. Period covered by the notification :  2005-2006 
3. Policy objective and/or purpose of the subsidy  
To stabilize the income of rice producing farmers against the price fall of rice. 
 
4. Background and authority for the subsidy  
• Law:  the Act on Payment Programme for Rice Income, Etc (Article 11) 
• Authority:  Ministry for Food, Agriculture, Forestry and Fisheries 
 5. Form of the subsidy
 
Grant 
 6. Recipients and terms
 
• Recipients:  The farmhouses whose usage of  agrochemicals and chemical fertilizer 
meets the standard, among tho se who produce rice by storing water in the rice fields 
that were used for rice farming from 1998 to 2000. 
 • Contents of the Subsidy:  Partial supports  for the differential amount between the goal 
price and the average price during harvesting season of the year. 
 7. Amount of the subsidy
 
(Unit:  million KRW) 
Type 2005 2006 
Lump sum transfer  - 900,669 
 
8. Duration of the subsidy  
No fixed period 
  G/SCM/N/155/KOR 
 Page 5 
 
 
  9. Trade effects of the subsidy  
There will be minimal effect on trade because th e program is being implemented in order to 
stabilize the income of domestic rice producing farmhouses. 
 
C. SUPPORT FOR MARKETING AND PROMOTION OF AGRICULTURAL AND LIVESTOCK PRODUCTS  
1. Title of the subsidy programme  
Support for Marketing and Promotion of Agricultural and  Livestock Products 
 
2. Period covered by the notification :  2005-2006 
3. Policy objective and/or purpose of the subsidy  
To improve quality and reduce logistical costs of agro-livestock products (fruits, flowering 
plants, Kimchi, vegetables, ginseng and livestock products).  4. Background and authority for the subsidy
 
• Law:  Agricultural and Rural Basic Act (Article 35)   
• Authority:  Ministry for Food, Agriculture, Forestry and Fisheries 
 5. Form of the subsidy
 
Grant 
 6. Recipients and terms
 
• Recipients 
- Exporters of fruits, flowering plants , Kimchi, Vegetable, ginseng, and 
livestock products. 
 • Contents of the Subsidy 
- Partial supports for costs of sorting, packaging, and transporting. 
 7. Amount of the subsidy
  
(Unit:  million KRW) 
Type 2005 2006 
Lump sum transfer (A) 28,882 28,882 
Loan - - 
Benefit of  loan (B) - - 
Total(A+B) 28,882 28,882 
 
8. Duration of the subsidy  
No fixed time period 
 G/SCM/N/155/KOR 
Page 6  
 
  9. Trade effects of the subsidy
 
The impact of the program on trade is expected  to be minimal, though this program supports 
the partial cost of packaging and transporting in  order to improve quality improvement and reduce 
logistical costs.   
D. S
UPPORT FOR LIVESTOCK PRODUCTS  
1. Title of the subsidy programme  
Supports for Quality improvement and Stab ilization of Hanwoo Production Base (Korean 
native cow) 
 
2. Period covered by the notification :  2005-2006 
3. Policy objective and/or purpose of the subsidy  
To improve the competitiveness and the income of Hanwoo farmhouses through quality 
improvement.   To secure Hanwoo production base against the c ontinuous 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 for Food, Agriculture, Forestry and Fisheries 
 5. Form of the subsidy
 
Grant and loan 
 6. Recipients and terms
 
 Support for Calf Production Infrastructure 
  
• Recipients 
- Recipients include members of the National Agricultural Cooperative 
Federation, Hanwoo-raising incorpor ated 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, creation of  grasslands, cultivation of feed, and 
purchase of machinery and equipment.  
 
Quality improvement Scheme 
 
• Recipients 
- Farmers who raise the castrated bulls with the certification of producer 
identification by the producer's group. 
  G/SCM/N/155/KOR 
 Page 7 
 
 
  • Contents of the Subsidy 
- Incentive supports are provided to the fa rmers who raise the castrated bulls of 
high quality. 
 
Calf Breeding Stabilization Schedule 
 
• Recipients 
- Cow raising farmers who joined the Calf Breeding Stabilization Schedule. 
 • Contents of the Subsidy 
- Supports are provided to compensate for the loss in case the average market 
price of calf is lower than the standard price of the schedule. 
 7. Amount of the subsidy
  
(Unit:  million KRW) 
 Type 2005 2006 
Lump sum transfer (A) 1,036  
Loan 2,065  
Benefit of  loan * (B) 43  Support for calf production 
 infrastructure 
Total (A+B) 1,079  
Quality improvement scheme Lump sum transfer 11,680 8,950 
Calf breeding stabilization schedule Lump sum transfer 4,179 3,598 
 
* The subsidy effect is estimated based on the difference between loan rate and the market 
rate.  (2005:  6.07%) 
 
8. Duration of the subsidy  
No fixed time period 
 9. Trade effects of the subsidy
 
The impact of the program on trade is expect ed to be minimal because the purpose of the 
program is to stabilize the income of farmers.  
  
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
:  2005-2006 G/SCM/N/155/KOR 
Page 8  
 
  3. Policy objectives and/or purpose of the subsidy
 
To facilitate using culled-out trees, small un marketable trees and recycling waste wood 
materials.  4. Background and authority for the subsidy 
 
• Law:  Act on Promotion of Forestry and Mountain Villages (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:  plywood and board producers, 
• Conditions:  Interest ra te of 4.0~5.5 percent 
• Terms of loan:  10 years (7-year repayment period with a 3-year grace period) 
 
7. Amount of the subsidy   
   (Unit:  million KRW) 
 2005 2006 
Lump sum transfer (A) - - 
Loan 11,004 10,678 
Benefit of loan*(B) 113 253 
Total (A+B) 113 253 
 
* 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 
 
Most of these products are used to meet the dom estic demand.  Therefore,  the trade effect is 
presumed to be insignificant. 
 
Production, Consumption and Trade  
 
(Unit:  1,000m3) 
 2005 2006 
Production 3,180 3,160 
Imports 2,417 2,503 
Exports 65 45 
Consumption 5,532 5,618 
  G/SCM/N/155/KOR 
 Page 9 
 
 
  B. FOREST PRODUCTS UTILIZATION ASSISTANCE PROGRAMME  
1. Title of the subsidy programme  
Forest Products Utilization Assistance Programme 
 2. Period covered by the notification
:  2005-2006 
3. Policy objectives and/or purpose of the subsidy  
To provide financial assistance for moderniza tion of forestry machinery and facilities. 
 
4. Background and authority for the subsidy   
• Laws:  Act on Promotion of Forest ry and Mountain Villages (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:  plywood and board producers  
• Conditions:  Interest ra te of 3.0~5.5 percent  
• Terms of loan:  5 years (2 year repayment period with a 3 year grace period) or  10 years (7 year repayment period with a 3 year grace period). 
 
Amount of the subsidy  
(Unit:  million KRW) 
 2005 2006 
Lump sum transfer (A) - - 
Loan 10,476 7,782 
Benefit of loan*(B) 244 203 
Total (A+B) 244 203 
 
* The subsidy effect is estimated based on the difference between the loan rate and the 
market rate. 
 7. Duration of the subsidy
 
 No fixed time period 
 8. 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/155/KOR 
Page 10  
 
  Export and Import
 
         (Unit:  1,000m3) 
  2005 2006 
Round wood - - 
Sawn wood 12 15 
Fibreboard 48 31 Export 
Particleboard 2 1 
Round wood 6,221 6,366 
Sawn wood 775 804 
Fibreboard 416 453 Import 
Particleboard 759 955 
 
 
III. FISHERY  
A. SUPPORT 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 :  2005-2006 
3. Policy objectives and/or purpose of the subsidy  
To support 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
 
Grants 
 6. Recipient and terms
 
• Recipient:  Deep-sea fishing companies, overseas resource development companies 
• Terms of grant:  Government provides gran ts to a cooperative fund to compensate for 
its loan at a lower interest rate provided to deep-sea fishing companies or overseas 
resource development companies. 
 
7. Amount of the subsidy  
  (Unit:  million KRW) 
 2005 2006 
Lump sum transfer (A) 1,910 3,693 
Loan - - 
Benefit of loan(B) - - 
Total (A+B) 1,910 3,693  G/SCM/N/155/KOR 
 Page 11 
 
 
  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 :  2005-2006 
3. Policy objectives and/or purpose of the subsidy  
To ensure food safety of fishery products a nd 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:  30 to 50 percent of the expenses 
• Terms of loan:  10 to 15 years' loan at the annual interest rate of 3 to 4 percent. 
 
7. Amount of the subsidy  
 (Unit:  million KRW) 
 2005 2006 
Lump sum transfer (A) 2,370 8,136 
Loan 16,382 19,741 
Benefit of loan*(B) 269 331 
Total (A+B) 2,639 8,467 
 
* 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 
 G/SCM/N/155/KOR 
Page 12  
 
  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
:  2005-2006 
3. Policy objectives and/or purpose of the subsidy  
To relieve financial burden a nd 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 interest rate of 3 percent for coastal and 
offshore fishery and deep-sea fishery. 
 7. Amount of the subsidy
  
 (Unit:  million KRW) 
 2005 2006 
Lump sum transfer (A) - - 
Loan 1,307,655 1,355,821 
Benefit of loan*(B) 33,868 40,539 
Total (A+B) 33,868 40,539 
 
* 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  
 
None. 
  G/SCM/N/155/KOR 
 Page 13 
 
 
  D. SUPPORT FOR AQUACULTURE FISHERY DEVELOPMENT  
1. Title of the subsidy programme  
Support for Aquaculture Fishery Development  
 
2. Period covered by the notification :  2005-2006 
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 domestic 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 Support 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 
 
6. Recipient and terms  
• Recipient:  Aquaculture fishermen 
• Terms of grants:  40 to 100 percent of the expenses • Terms of loan:  2 to 10 years' loan at the annual interest rate of 3 to 4%. 
 
7. Amount of the subsidy 
 
(Unit:  million KRW) 
 2005 2006 
Lump sum transfer (A) 7,488 7,346 
Loan 2,632 14,566 
Benefit of loan*(B) 68 379 
Total (A+B) 7,556 7,725 
 
* 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 
 G/SCM/N/155/KOR 
Page 14  
 
  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 :  2005-2006 
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 
 6. Recipient and terms
 
• Recipient:  Fishermen 
• Terms of grant:  20 to 50 percent of the expenses 
• Terms of loan:  13 to 15 years' loan at the annual interest rate of 3~4 percent 
 
7. Amount of the subsidy  
(Unit:  million KRW) 
 2005 2006 
Lump sum transfer (A) 970 116 
Loan 7,344 4,131 
Benefit of loan*(B) 135 96 
Total (A+B) 1,105 212 
 
* 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 subsidization is con tinued until 2006.  For 
deep-sea fishing vessels, the subsid ization is contin ued until 2010. 
  G/SCM/N/155/KOR 
 Page 15 
 
 
  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
:  2005-2006 
3. Policy objectives and/or purpose of the subsidy  
To support the vessel decommissioning to maintain  fleet size at sustai nable level for coastal 
and offshore fishery.  4. Background and authority for the subsidy
 
• Law:   
- Article 11 of the Special Act for th e Development of the Agricultural and 
Fishing Communities. 
- Article 19 of the Special Act for the Support 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 
 6. Recipient and terms
 
• Recipient:  Coastal and offshore fishermen 
• Terms of grant:  50 to 80 percent of the e xpenses paid in the form of vessel buy-back 
for a fisherman to leave the fishing industry 
• Terms of loan:  15 years' loan with the annua l interest rate of 4 percent for coastal and 
offshore fishermen 
 
7. Amount of the subsidy  
 (Unit:  million KRW) 
 2005 2006 
Lump sum transfer (A) 34,693 40,536 
Loan 1,681 - 
Benefit of loan*(B) 27 - 
Total (A+B) 34,720 40,536 
 
* The subsidy effect is estimated based on the difference between the loan rate and the 
market rate. 
 G/SCM/N/155/KOR 
Page 16  
 
  8. Duration of the subsidy
 
For coastal and offshore fishery, the subsidization is continued until 2010. 
 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
:  2005-2006 
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 diff erence between production cost and retail price of coal and 
briquettes.  The control over retail price of coal and briquettes attributed to the difference. 
 
4. Background and authority for the subsidy
  
• Law:  Article 26 and Enforcement Ordinance No. 22 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 acciden t compensation insurance and education 
fees. 
 
7. Amount and duration of the subsidy  
(Unit:  million KRW) 
 2005 2006 
Lump sum transfer (A) 243,855 288,280 
Loan - - 
Benefit from loan(B) - - 
Total(A+B) 243,855 288,280 
  G/SCM/N/155/KOR 
 Page 17 
 
 
  8. Duration of the subsidy  
No fixed time period 
 9. Trade effects of the subsidy
 
None. 
 
V. MANUFACTURING INDUSTRY  
 
A. SUPPORT FOR FOREIGN INVESTED ENTERPRISES  
1. Title of the subsidy programme  
Support for Foreign Invested Enterprises 
 2. Period covered by the notification
:  2005-2006 
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 
 
4. Background and authority for the subsidy
 
(a) Tax reduction 
• Laws:  Article 121-2 and 121-3 of Sp ecial Tax Treatment Control Law, 
Article 9 and 13 of Foreign Investment  Promotion Act, Regulation of each 
municipality. 
 
• Authority:  Ministry of Finance and Economy, Ministry of Commerce, 
Industry and Energy, Ministry of Administration and Home Affairs. 
 
(b) Cash Grant 
• Laws:  Article 14-2 of Foreign Investment Promotion Act. 
• Authority:  Ministry of Commerce, Industry and Energy. 
 5. Form of the subsidy
 
(a) Tax reduction:  tax redu ction and reduction in the rental fee of state-owned 
properties.  
 
(b) Cash Grant:  grants. 
 6. Recipient and terms
 
(a)  Tax reduction: 
• Recipients 
- Foreign-invested enterprises that are engaged in the service sector 
supporting other industries or are involved in businesses related to advanced technologies. G/SCM/N/155/KOR 
Page 18  
 
    
- Foreign-invested enterprises that operate in the Foreign Investment 
Zone, Free Economic Zone, Free Trade Zone, Industrial Complex Exclusively for Foreign Companies, Jeju Investment Promotion Zone and Development District of Enterprise New Town. 
 
  • Terms 
 
Requirement 
taxes Industry support service and 
high-tech industry business, Firms 
in Foreign Investment Zone (FIZ) Firms in the Free Economic 
Zone, Free Trade Zone and 
Jeju Investment Promotion 
Zone 
Corporate tax and income tax 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. A full exemption is given for the 
first 3 years after income is generated following the initiation of operation and a 50 percent 
reduction for the next 2 years 
Acquisition tax, 
registration tax, and 
property tax on land 
and buildings A full exemption is granted for the 
first 5 years after the commencement 
of operation and a 50 percent 
reduction for the next 2 years. 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. 
Customs duty, special excise tax, value-added 
tax(VAT) on capital 
goods introduced into Korea by 
foreign-invested 
enterprises within 3 years A full exemption is granted Custom duties are exempted. 
 
- Tax reduction in the rental fee of state-owned properties for 
foreign-invested companies 
 
(b) Cash Grant:   
 
- Cash grants are awarded to project s with investments above the minimum 
investment requirement and can be ma de 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 
  G/SCM/N/155/KOR 
 Page 19 
 
 
  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  is aimed at supporting regions that are 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
:  2005-2006 
3. Policy objective and/or purpose of the subsidy  
To reduce production cost by encouraging the importation of aircraft parts that are not 
produced domestically. 
 
4. Background and authority for the subsidy  
 • Law:  Article 89 of Customs Act 
 • Authority:  Ministry of Finance and Economy  
5. Form of the subsidy 
 
  Tariff reduction  
 6. Recipient and terms
 
Those designated as aircraft manufacturers or repairers in accordance with the Promotion Act 
for the Development of Aircrafts and Space Industries. 
 7. Amount of the subsidy 
 
 (Unit:  billion KRW) 
 2005 2006 
 Amount of Duty Reduction 26.2 30.2 
 
8. Duration of the subsidy  
No fixed time period 
 
9. Trade effect of the subsidy  
None 
 G/SCM/N/155/KOR 
Page 20  
 
  C. S
UPPORT FOR FARM MACHINERY MANUFACTURING  
1. Title of the subsidy programme  
Support for Farm Machinery Manufacturing 
 
2. Period covered by the notification :  2005-2006 
3. Policy objective and/or purpose of the subsidy  
- To assist off-season manufacturing of fa rm 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 production facility establishment 
of machinery required for automatization and modernization 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 de velopers of new-tech machinery 
 
• Contents of the Subsidy 
To provide financial assistance for produci ng Agricultural machinery and establishing 
as well as constructing Agricultura l machinery production facilities. 
 
7. Amount of the subsidy  
  (Unit:  million KRW) 
 
* The subsidy effect is estimated based on the difference between the loan rate and the 
market rate. 
 Type 2005 2006 
Direct subsidy(A) - - 
Loan 20,000 20,000 
Benefit of loan*(B) 130 352 
Total(A+B) 130 352  G/SCM/N/155/KOR 
 Page 21 
 
 
  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$) 
 
 
VI. ENVIRONMENT, RESEARCH AND DEVELOPMENT 
 
A. ENVIRONMENTAL IMPROVEMENT LOAN PROGRAMME  
1. Title of the subsidy programme  
Environmental Improvement Loan Programme 
 2. Period covered by the notification
:  2005-2006 
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  
 Loan 
• Source of Fund:  Public Capital Management Fund 
 
6. Recipient and terms  
• Recipient:  firms that installs and opera tes pollution prevention devices and facilities 
• Terms of loan:  7-year equal repaymen t period with a 3-year grace period at the 
annual interest rate of 4.42-5.06 percent (floating interest rate) 
 year Total sales amount(billion KRW) export import 
2005 680 341,022 282,314 
2006 650 350,869 332,211 G/SCM/N/155/KOR 
Page 22  
 
  7. Amount of the subsidy 
 
 (Unit:  million KRW) 
 2005 2006 
Lump sum transfer (A) - - 
Loan 81,925 54,000 
Benefit of loan(B)* 1,376 907 
Total (A+B) 1,376 907 
 
* 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  
 None 
 
B. SUPPORT 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
:  2005-2006 
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 
 
6. Recipient and terms  
• Recipient:  Government-invested resea rch institutions, universities, research 
institutions and private enterprises that pa rticipate in the Environmental Technology 
Development Project.  G/SCM/N/155/KOR 
 Page 23 
 
 
  7. Amount of the subsidy   
(Unit:  million KRW) 
 2005 2006 
Lump sum transfer (A) 90,700 96,500 
Loan - - 
Benefit of loan(B) - - 
Total (A+B) 90,700 96,500 
 
8. Duration of the subsidy  
No fixed time period 
 9. Trade effects of the subsidy
  
None 
 
C. PROJECT 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 (D PF, DOC) installation and "cleaner" engine 
retrofit. 
 
2. Period covered by the notification :  2005-2006 
 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 
 6. Recipient and terms
 
 
• Recipient:  A diesel vehicle owner who installs 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 inst alling emission reduction devices or retrofitting 
with "cleaner" engines (50 percent each from central government and local 
government expenditure). G/SCM/N/155/KOR 
Page 24  
 
  7. Amount of the subsidy 
 
(Unit:  million KRW) 
 2005 2006 
Lump sum transfer (A) 94,767 182,223 
Loan - - 
Benefit of loan(B) - - 
Total (A+B) 94,767 182,223 
 
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.  Theref ore, it does not differentiate a domestic or imported 
device, which means that there exists no discriminatory trade barrier. 
 
D. NATURAL 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 :  2005-2006 
 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. 
 6. Recipient and terms
 
 
• Recipient:   
- Grants for natural gas vehicle procur ement are provided to a person that 
purchases natural gas vehicles in accordan ce with the Clean Air Conservation 
Act. 
- Grants for fuel expenses are provided to a person that intends to supply 
natural gas for vehicles that use natu ral gas as fuel in accordance with the 
Clean Air Conservation Act. 
  G/SCM/N/155/KOR 
 Page 25 
 
 
  7. Amount of the subsidy  
 
 (Unit:  million KRW) 
 2005 2006 
Lump sum transfer (A) 36,969 43,992 
Loan - - 
Benefit of loan(B) - - 
Total (A+B) 36,969 43,992 
 
8. Duration of the subsidy :  2000-2010 
 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. SUPPORT FOR RECYCLING EQUIPMENT AND TECHNOLOGY DEVELOPMENT  
1. Title of the subsidy programme  
 
Loan Programme for Recycling Industry Promotion 
 
2. Period covered by the notification :  2005-2006 
 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 Promotion of Saving and Recycling of Resources 
- Article 4 of Act Relating to Sp ecial Accounting for Environmental 
Improvement 
 
• Authority:  Ministry of Environment 
 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 or ganizations engaged in recycling 
business under the Act on the Promo tion of Saving and Recycling of 
Resources that intends to install recycling equipment. 
 G/SCM/N/155/KOR 
Page 26  
 
  (b)  Technology development:  A person that intends 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, enga ged in recycling, 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, e ngaged in recycled products sales 
handling a volume of general manufactures no more than 30% in monetary units and a person engaged in repa ir and sales of second-hand electric 
appliances, furniture, etc. 
  • Terms:    
(a) Equipment, (b) Technology development & (c) Waste reduction equipment:    7-year repayment period with a 3-year grace period at the annual interest rate 
of 4.81 percent (floating interest rate) 
 (d) Management stabilization & (e) Distribution & sales support:   
3-year repayment period with a 2-year grace period at the annual interest rate of 4.81 percent (floating interest rate) 
 
7. Amount of the subsidy 
 
 
 (Unit:  million KRW) 
 2005 2006 
Lump sum transfer (A) - - 
Loan 70,000 70,000 
Benefit of loan*(B) 1,316 917 
Total (A+B) 1,316 917 
 
* 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  
 
Trade effect of this subsidy is expected to  be insignificant for the following reasons:   
- First, rather than being a direct subsid y to the recycling industry, it is a loan 
programme that does not restrict foreign investment or foreign participation;   
- Second, considering inferior quality of r ecycled products in general, they would 
hardly have consequential compe titive edge against general products. 
  G/SCM/N/155/KOR 
 Page 27 
 
 
  F. PROGRAMME 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
:  2005-2006  
 
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:  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) 
  2005 2006 
Amount of Loan 195 180 
 
8. Duration of the subsidy  
 
No fixed time period  
 
9. Trade effect of the subsidy  
  N.A.  
G. S
CIENCE AND TECHNOLOGY PROMOTION FUND 
1. Title of the subsidy programme  
 
Loan for Research and Development 
 2. Period covered by the notification
:  2005-2006 
 G/SCM/N/155/KOR 
Page 28  
 
  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 Science and Technology Framework Law  
• Authority:  Ministry of Science and Technology 
 5. Form of the subsidy
 
 
Loan 
 
6. Recipient and terms  
 
Loan of 5 or 7-year repayment period at the a nnual interest rate lower than market rate is 
provided for enterprises conducting R&D on high technology industry.  
 
7. Amount of the subsidy  
 
 (Unit:  million KRW)  
  2005 2006 
Direct subsidy(A) -  - 
Loan 88,000 53,000 
Benefit of loan*(B) 2,605 996 
Total (A+B) 2,605 996 
 
* 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  
 
Difficult to estimate.  
  
__________