WORLD TRADE
ORGANIZATIONG/SCM/N/71/KOR
2 August 2001
(01-3830)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
New and Full Notification Pursuant to Article XVI:1 of the
GATT 1994 and Article 25 of the SCM Agreement
KOREA
The following communication, dated 19 July 2001, has been received from the Permanent
Mission of the Republic of Korea.
_______________
The Republic of Korea submits the following notification with regard to the full notification
pursuant to Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies and
Countervailing Measures.
Korea has included in this notification subsidies which may not be “specific” under Article 2
of the Agreement, or that may not have trade ef fects under and Article XVI:1 of the GATT 1994.  It
should be recognized, pursuant to Article 25.7 of the Agreement, that present notification does not
prejudge its legal status or effects under the GATT 1994 and the Agreement, or the nature of the
measures notified.G/SCM/N/71/KOR
Page 2
TABLE OF CONTENTS
Page
I. AGRICU LTURE.................................................................................................................. .....3
     A. F OOD GRAIN MANAGEMENT PROGRAMME ................................................................................3
     B. L IVESTOCK SUPPORT PROGRAMME ............................................................................................6
        1. Hanwoo-raisin g Stabilization Programme ........................................................................….6
        2. Support for Pork Production.......................................................................................... .........7
     C. M ARKETING IMPROVEMENT PROGRAMME FOR AGICULTURAL AND LIVESTOCK
PRODUCTS ............................................................................................................................... ....9
II. FORESTRY.................................................................................................................... .........12
     A. P LYWOOD & B OARD ASSISTANCE PROGRAMME ......................................................................12
     B. F OREST PRODUCTS UTILIZATION ASSISTANCE PROGRAMME ..................................................14
III. FISHERY.................................................................................................................... .............15
     A. S UPPORT FOR DEVELOPMENT OF DEEP-SEA FISHERY ..............................................................15
     B. S UPPORT FOR FISH PRODUCTS PROCESSING DEVELOPMENT ...................................................16
     C. S UPPORT FOR FISHING ACTIVITIES ...........................................................................................17
     D. S UPPORT FOR AQUACULTURE FISHERY DEVELOPMENT ..........................................................18
     E. L OCAL TAX REDUCTION FOR BUILDING AND ACQUISITION OF DEEP-SEA FISHING
VESSELS ............................................................................................................................... .....20
IV. COAL I NDUSTR Y ............................................................................................................... ..21
     A. S UPPORT PROGRAM ME FOR THE COAL INDUSTRY ..................................................................21
V. MANUFACTURING INDUSTRY ........................................................................................24
     A. S UPPORT FOR FOREIGN INVESTED ENTERPRISES ......................................................................24
     B. T ARIFF REDUCTION ON AIRCRAFT PARTS ................................................................................25
     C. R ESERVE FOR FARM MACHINERY PRODUCTION ......................................................................26
     D. S UPPORT FUND FOR THE STONE INDUSTRY ..............................................................................28
VI. RESEARCH AND DE VELOPMENT ..................................................................................29
     A. A UTOMOBILE LOW EMISSION TECHNOLOGY DEVELOPMENT SUPPORT ...................................29
     B. L OAN PROGRAMME FOR R & D OF INFORMATION AND COMMUNICATION ..............................31
     C. S UPPORT FOR R&D OF ENVIRONMENTAL TECHNOLOGY DEVELOPMENT PROJECTS ...............32
     D. S CIENCE AND TECHNOLOGY PROMOTION FUND ......................................................................33G/SCM/N/71/KOR
Page 3
I. AGRICULTURE
A. FOOD GRAIN MANAGEMENT PROGRAMME
1. Title of the subsidy programme
Foodgrain Management Programme
2. Period covered by the notification
1999-2000
3. Policy objective and/or purpose of the subsidy
To maintain a buffer stock of staple food for food security purposes
4. Background and authority for the subsidy
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 bean, red bean, green bean, cornFinancial Resource:
- rice, barley:  Government budget (Food Grain Management Special Account)
- soy bean, red bean, green bean:  Fund for Agriculture & Fisheries Product Price Stabilization
- corn:  Government budget (Special Account for Structural Development of Rural Areas)
6. Recipient and criteria
(1) Rice and barley
The government purchases rice and barley from farmers.  The quantities and prices are
approved by the National Assembly within the AMS under the WTO Agreement on
Agriculture.
(2) Soy beans and legumes(red beans and green beans)
The MAF determines the purchasing price and quantity every year before the planting
of soy beans within the AMS of the WTO Agreement on Agriculture.  Pursuant to the
MAF decision, the Agriculture and Fishery Marketing Corporation (AFMC)
purchases soy beans from farmers during the harvest season.G/SCM/N/71/KOR
Page 4
(3) Corn
Pursuant to the guidelines for purchasing price and quantity set by the MAF within
the AMS of the WTO Agreement on Agriculture, the National Agricultural
Cooperatives Federation (NACF) purchases corns from farmers during the harvestseason and sells the commodity at market price.  The MAF compensates the NACF
for losses incurred as a result of the above transaction.
7. Amount of the subsidy (Government expenditures for foodgrain purchases)
  (Unit: W billion )
Item /Year 1999 2000
Rice 958.2 911.2
Barley 58.4 47.0
Soy Beans 5.4 7.4
Corn 3.6 2.7
8. Duration of the subsidy
The government purchase system for the above items was introduced before the beginning of
the UR negotiations, and will be implemented within the AMS commitments as agreed uponwith the WTO.
9. Trade effects of the subsidy
- The self-sufficiency level of Korea's grain production has been declining from 56 per
cent in 1980 and 43.1 per cent in 1990 to 28.5 per cent in 2000.
- 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/71/KOR
Page 5
TABLE 1
Statistics on foodgrain production, consumption and trade
Commodity Unit 1999 2000
Production 1,000 M/T 5,097 5,263
Imports " 97106
Exports " 0 0Rice
Consumption " 5,278 4,993
Production " 235 181
Imports " 138 143
Exports " 0 0Barley
Consumption " 353 347
Production " 140 116
Imports " 1,423 1,567
Exports " 0 0Soya Beans
Consumption " 1,540 1,583
Production " 80 79
Imports " 7,679 8,830
Exports " 0 0Corn
Consumption " 7,740 8,864
Note:  Years refer to the 12-month period from November to October.
* Data for 2000 is provisional.G/SCM/N/71/KOR
Page 6
B. LIVESTOCK SUPPORT PROGRAMME
1. Hanwoo-raising stabilization programme
1.1. Title of the subsidy programme
Hanwoo-raising stabilization program
1.2. Period covered by the notification
1999-2000
1.3. Policy objective and/or purpose of the subsidy
To maintain Hanwoo(Korean native cattle) production base against the continuous decline of
the number of cattle and calf
1.4. Background and authority for the subsidy
Law:  Livestock Act (Article 3 and 26)Authority:  Ministry of Agriculture and Forestry
1.5. Form of the subsidy
SubsidySource of fund: Livestock Development Fund
1.6. Recipient and criteria
< Calf production stabilization programme >
(1) Recipient:  Hanwoo-raising farmers signed for the calf production stabilization
programme
* no restrictions for participation to the programme
(2) Content of the support: the calves born by the Hanwoo enrolled in the programme
will be compensated for part of the price gap once the average price of marketed calf
falls below a certain level (in the year 1999: 800,000 won, 2000: 900, 000 won)
< The subsidy for Hanwoo productivity >(1) Recipient: Hanwoo-raising farmers enrolled for the calf production stabilization
programme
* no restrictions for participation to the programme
(2) Content of the support: Subsidy payment for Hanwoo enrolled for the programme which
gives births more than 3 timesG/SCM/N/71/KOR
Page 7
1.7. Amount of the subsidy
(Unit:  million won)
1999 2000
Calf production stabilization
Subsidy for Hanwoo productivity632
--
7,566
1.8. Duration of the subsidy
no fixed time period
1.9. Trade effects of the subsidy
As the number of domestic cattle head decreased, its beef self-supply has been in decline.
- The number of Hanwoo head raised: (’99.12) 1,952,000 head -> (2000.12)
1,590,000 ( ∆ 18.5%)
- The self-sufficiency rate of beef: (’99) 61.0% -> (2000) 52.8%
The programme’s impact on trade is expected to be minimal, because it has been established
to secure the domestic beef supply infrastructure under the declining beef self-sufficiency
rate.
<Beef production, consumption and trade>
                                                            (Unit:  1,000 M/T)
Year 1999 2000
Production 230 214
Imports 192 262
Exports 0 0
Consumption 393 402
* Self-sufficiency rate: (’99) 61.0% -> (2000) 52.8%
2. Support for Pork Production
2.1. Title of the subsidy programme
Support for Pork ProductionG/SCM/N/71/KOR
Page 8
2.2. Period covered by the notification
1999 - 2000
2.3. Policy objective and/or purpose of the subsidy
To support the production and supply of high-quality pork.
2.4. Background and authority for the subsidy
Law: Livestock Act (Article 3)
Authority: Ministry of Agriculture and Forestry
2.5. Form of the subsidy
loanSource of fund:  Livestock Development Fund
2.6. Recipient and criteria
(1) Recipient:
Pig breeding farms that have supplied more than certain amount of pigs that meets the
quality standards to meat processing companies
(2) Content of the subsidy:
- 40,000 won per head- one-year loans at an annual interests rate of 5 per cent
2.7. Amount of the subsidy
(Unit:  W million)
Year 1999 2000
Grant (a)
    (Support for pork quality improvement)
Loan
    (Support for standard pork production)
Estimated subsidy (b)6,297
25,057
2,037-
34,968
2,815
Total subsidy (a+b) 8,334 2,815
* The subsidy effect is estimated based on the difference between the average market interest
rate and the loan rate.G/SCM/N/71/KOR
Page 9
2.8. Duration of the subsidy
no fixed time period (As of 2000, grants were no longer extended for pork quality
improvement)
2.9. Trade effects of the subsidy
The programme is not directly related to pork production, but to produce and supply safe and
high-quality pork to consumers.  Since the amount of the subsidy accounts only for 0.1 per
cent of the total value of pork production in 2000, its effect on trade is presumed to be
insignificant.
<Pork production, consumption and trade>
(Unit:  1,000 M/T)
Classification 1998 1999 2000
Production 940 899 915
Imports 71 160 123
Exports 113 103 21
Consumption 898 968 1,000
C. MARKETING IMPROVEMENT PROGRAMME FOR AGRICULTURAL AND LIVESTOCK PRODUCTS
1. Title of the subsidy programme
Marketing Improvement Programme for Agricultural and Livestock Products
2. Period covered by the notification
1999-2000
3. Policy objective and/or purpose of the subsidy
To improve quality and reduce distribution cost of fruits, flowers, Kimchi, vegetables, and
livestock products
4. Background and authority for the subsidy
Law:  Special Act for Rural Development (Article 16)Authority:  Ministry of Agriculture and ForestryG/SCM/N/71/KOR
Page 10
5. Form of the subsidy
Financial assistance
Source of fund:  Government budget, Special Account for Structural Improvement of Rural
Areas
6. Recipient and criteria
Recipients:  Exporters of fru its, flowers,  Kimchi, vegetables, and livestock products
- Content of the subsidy:  provide financial assistance for selection, packaging,
transportation, etc.
7. Amount of the subsidy
          (Unit:  W billion)
1999 2000
Total amount of the subsidy
(Fruits)
(flowers)
(Kimchi)
(vegetables)
(livestock products)14.9
3.0
4.4
2.1
4.6
0.818.3
5.1
5.3
2.0
5.5
0.4
8. Duration of the subsidy
The subsidy is classified as Export Subsidy permitted for Developing Countries and will be
provided until 2004 pursuant to Article 9 (1) (d), (e) and (4) of the WTO Agreement on
Agriculture.
9. Trade effects of the subsidy
This programme provides financial assistance to support packaging, transportation etc.(only
packaging for livestock products) to improve quality and reduce distribution cost of
agricultural and livestock products, but the trade effect is presumed to be insignificant.G/SCM/N/71/KOR
Page 11
<Statistics on production, consumption and trade>
Fruits(Apples and pears)
(Unit:  M/T)
1998 1999 2000
Production 718,800 749,300 813,200
Import 0 0 0
Export 7,459 6,683 11,074
Consumption 711,341 742,617 802,126
 Flowers
(Unit:  US $ million )
1998 1999 2000
Production 431 502 510
I m p o r t 1 31 71 9
Export 12 20 29
Consumption
(won billion)585 596 664
Kimchi
(Unit:  M/T)
1998 1999 2000
Production
(processing)455,405 473,314 487,405
Import 10 92 473
Export 15,939 24,560 23,433
Consumption 1,595,285 1,570,900 1,556,621
• Consumption here is the sum of consumption of processed, self-made, and imported kimchi.G/SCM/N/71/KOR
Page 12
Vegetables
(Unit:  M/T)
1998 1999 2000
Production9,247 9,447 10,483
Import 130 194 220
Export 39 38 41
Consumption 9,338 9,603 10,662
Livestock products
(Unit:  M/T)
1998 1999 2000
Production749,152 711,365 739,445
Import 55,673 141,954 95,891
Export 88,326 80,279 16,156
Consumption 716,499 773,040 819,180
II. FORESTRY
A. PLYWOOD & B OARD ASSISTANCE PROGRAMME
1. Title of the subsidy programme
Plywood & Board Assistance Programme
2. Period covered by the notification
1999-2000
3. Policy objective and/or purpose of the subsidy
- To support the replacement of plywood production facilities designed for broad-leaf trees
with ones that can also use coniferous trees.
- To promote the use of domestic wood by providing support for board production facilities,
using culled-out trees, small unmarketable trees and waste wood materials.G/SCM/N/71/KOR
Page 13
4. Background and authority for the subsidy
Law:  Forestry Development and Promotion Act (Article 10)
Authority:  Forestry Administration
5. Form of the subsidy
Loan
Source of fund: Special Account for Financial Investment and Loan
6. Recipient and term
- Recipient: plywood and board producers- Conditions:  Interest  rate ( 7.5 per cent)
- Term of loan:  10 years(7-year repayment period with a 3-year grace period)
7. Amount of the subsidy
(Unit:  W billion)
Year 1999 2000
Subsidy effect 0.3 0.18
* The subsidy effect is estimated, based on the difference between the interest rate on the loan
and market interest rate(13.05 per cent).
8. Duration of the subsidy
No fixed time period.
9. Trade effect of the subsidy
The board and plywood production is mostly used to meet the domestic demand.  Therefore,
the trade effect is presumed to be insignificant.
< Production, Consumption and Trade>
Unit 1999 2000 Total
Production 1000 m3 2,249 2,412 4,661
Imports 1000 m3 1,277 1,568 2,845
Exports 1000 m3 225 195 420
Consumption 1000 m3 3,301 3,785 7,086G/SCM/N/71/KOR
Page 14
B. FOREST PRODUCTS UTILIZATION ASSISTANCE PROGRAMME
1. Title of the subsidy programme
Forest Products Utilization Assistance Programme
2. Period covered by the notification
1999-2000
3. Policy objective and/or purpose of the subsidy
- To foster domestic wood industry by providing financial assistance for modernization
of forestry machinery and facilities and thereby promote the use of domestic wood
materials by providing financial assistance for the purchase of domestic wood.
4. Background and authority for the subsidy
Law:  Forestry Development and Promotion Act (Article 10), Forestry Act (Article 109)Authority:  Forestry Administration
5. Form of the subsidy
LoanSource of fund:  Special Account for Structural Improvement of Rural Areas
6. Recipient and terms
- Recipient:  individuals or corporations that operate wood processing facilities
- Terms of loan:- Utility processing facilities:  Interest rates:  5.0-8.0 per cent (7-year repayment period
with a 3-year grace period)
- Purchase of materials raw:  Interest rates: 5.5 per cent (2-year repayment period with
a 3-year grace period)
7. Amount of the subsidy
(Unit:  W billion)
Year 1999 2000
Subsidy effect 1.1 1.0
* The subsidy effect is estimated based on the difference between the loan rate and the market
interest rate (13.05 per cent).G/SCM/N/71/KOR
Page 15
8. Duration of the subsidy
No fixed time period.
9. Trade effects of the subsidy
Domestic wood production is mostly used to meet the domestic demand.  Therefore, the
effect on trade is presumed to be insignificant.
<Production, Consumption and Trade>
Unit 1999 2000 Total
Production 1000 m3 4,626 4,407 9,033
Import 1000 m3 697 677 1,374
Export 1000 m3 7 13 20
Consumption 1000 m3 5,316 5,071 10,387
* The statistics for the production is estimated figures.
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
1999-2000
3. Policy objective and/or purpose of the subsidy
- To support the management of deep-sea fishery
4. Background and authority for the subsidy
Law:
- Article 87 of the Fisheries Act
- Operation Principle of the Support for Overseas Resources Production
Authority:  Ministry of Maritime Affairs and Fisheries
5. Form of the subsidy
LoanG/SCM/N/71/KOR
Page 16
6. Recipient and term
- Recipient:  deep-sea fishermen
- Content of the support:  Providing loans for fishing in distant waters
- Term of loan:  One-year loan at the interest rate ranging from 6.25 to 8 per cent.- authorities in charge: National Federation of Fisheries Cooperatives
7. Amount of the subsidy
(Unit: W million)
Year Amount of the loan Estimated subsidy amount
1999
2000
total352,000
331,000
683,0007,900
7,400
15,300
* The subsidy amount is estimated based on the difference between the loan rate and the market
rate.
8. Duration of the subsidy or time restriction under related laws
It is hard to set duration as the programme is maintained within the limit of the budget
available.
9. Trade effect 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 Fish Products Processing Development
2. Period covered by the notification
1999-2000
3. Policy objective and/or purpose of the subsidy
To develop new fishery products, increase the production of high quality  products and
modernize the storage and processing facilities.
4. Background and authority for the subsidy
Laws :
- Article 5 of the Law on the Support for Agriculture and Fish Processing Industry
- Article 15 of the Special Act for Rural Development
- Authority:  Ministry of Maritime Affairs and FisheriesG/SCM/N/71/KOR
Page 17
5. Form of the subsidy
Grants, Loan
6. Recipient and criteria
- Recipient:  Companies engaged in constructing facilities for handling, storing and
processing fish.
- Content of the support:  Supporting the cost necessary for fish processing facilities.
- Period of the loan
- Support for operations of fish processing:  1 year- Support for the storage and processing facilities of fish products: 10 years
(repayment within 7 years with a 3-year grace period)
- Interest rate:  5 per cent
7. Amount of the subsidy
(Unit:  W million)
1999 2000 Total
Grants(a)
Loan
Estimated subsidy by loan(b)
Amount of  total subsidy (a+b)2,400
16,800
900
3,3002,000
18,200
700
2,7004,400
35,000
1,600
6,000
* The subsidy effect is estimated based on the difference between the loan rate and the market
interest rate.
8. Duration of the subsidy
Until 2004
9. Trade effect of the subsidy:
It is difficult to estimate the trade effect.
C. SUPPORT FOR FISHING ACTIVITIES
1. Title of the subsidy programme
Support for Fishing Activities
2. Period covered by the notification
1999-2000
3. Policy objective and/or purpose of the subsidy
To relieve financial burden and support stable fishing business operation by providing loansG/SCM/N/71/KOR
Page 18
4. Background and authority for the subsidy
Laws:
- Article 87 of the Fisheries Act- Operation Principle of the Funds for Supporting Fishing Activities
Authority:  Ministry of Maritime Affairs and Fisheries
5. Form of the subsidy
Loan
6. Recipient and criteria:
- Coastal and off-shore fishermen as well as inland fishermen
- Content of the support:  provide loans that cover more than 20 per cent of the
business operation costs according to the business scale
- Period of the loan:  1 year
- Interest rates:  5.0 –5.5 per cent
7. Amount of the subsidy
(Unit  W billion)
Year 1999 2000
Loan amount 1,205 1,205
Subsidy effect* 46.9 50.7
* The subsidy effect is estimated based on the difference between the loan rate and the market
interest rate.
8. Duration of the subsidy
There is no fixed time period.
9. Trade effect of the subsidy
It is difficult to estimate the trade effect.
D. SUPPORT FOR AQUACULTURE FISHERY DEVELOPMENT
1. Title of the subsidy programme
Support for Developing Aquaculture Fishery
2. Period covered by the notification
1999-2000G/SCM/N/71/KOR
Page 19
3. Policy objective and/or purpose of subsidy
- To have stable supply of fishery products by supporting establishment of
aquaculture fishing in the face of changes in the domestic and overseas fishing
industries.
-   To promote the development of aquaculture fishing to enhance productivity
in the fishing industry
4. Background and authority for the subsidy
Law:  Special Account for Infrastructure Improvement of Rural Areas
Authority:  Ministry of Maritime Affairs and Fisheries
5. Form of the subsidy
Grants, Loan
6. Recipient and criteria
- Recipient: fishermen engaged in aquaculture
- Content of the subsidy:
1998-1999: loans that cover 80 per cent of the cost, 20 per cent financed by the
developer
2000: loans that cover 70 per cent of the cost, 30 per cent financed by the developer
(in case of common aquafarm development, 40 per cent covered by government
grant, 40 per cent by loan and 20 per cent financed by the developer)
- Term of loan:  a 7-year repayment period with a 3-year grace period
- Interest rates:  5 per centG/SCM/N/71/KOR
Page 20
7. Amount of the subsidy
(Unit:  W billion )
Year 1999 2000
Amount of subsidy(a) 2.0 2.4
Loan 24.1 10.7
Subsidy effect of loan(b) 1.6 0.3
Total
(a+b)3.6 2.7
* The subsidy effect is estimated based on the difference between the loan rate and the market
rate.
8. Duration of the subsidy
Until 2004
9. Trade effect of the subsidy
It is difficult to estimate the trade effect.
E. LOCAL TAX REDUCTION FOR BUILDING AND ACQUISITION OF DEEP-SEA FISHING VESSELS
1. Title of the subsidy programme
Local Tax Reduction for Building and Acquisition of International Line Vessels
2. Period covered by the notification
1999-2000
3. Policy objective and/or purpose of the subsidy
To reduce the tax burden on building and acquisition of international line vessels.
4. Background and authority for the subsidy
Law:  Paragraph 2&3, Article 284 of Local Tax ActAuthority:  Ministry of Administration and Home Affairs
5. Form of the subsidy
Tax reductionG/SCM/N/71/KOR
Page 21
6. Recipient and term
- Exemption of acquisition tax on vessels acquired for the purpose of registering as
international ship according to the International Vessel Registration Law.
- Exemption of Common Facility Tax on vessels registered as international ship as of
the date of taxation and 50 per cent reduction in property tax.
- If the vessel is not registered as international ship within 6 months from the date of
acquisition, the exempted acquisition tax will be levied.
- Acquisition tax and Property tax shall be reduced by 50 per cent for Vessel which is
acquired for coastal line and not registered under the International Vessel Registration
Law
7. Amount of subsidy
(Unit:  W billion )
Year 1999 2000 total
Amount 13.9 23.6 37.5
8. Duration of the subsidy
Until 31 December 2003
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
1999-2000G/SCM/N/71/KOR
Page 22
3. Policy objectives and /or purpose of the subsidy
- To support the restructuring of the coal industry in response to drastic decline in
demand for briquette, and the subsequent reduction of production.
- To activate regional economy shrunken as a result of the restructuring.
- To stabilize sales prices of coal and briquettes, and subsidize the difference between
sales prices and production costs.
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
Subsidy and loan
6. Recipient and term
(a) direct subsidy
- Support for coal production:
provided to coal extracting businesses that  implement facility modernization
projects(until 2000)
- Support for storage of anthracite coal:
Purchase surplus anthracite coal and to provide support for its storage(until
2000)
            - Development of coal mine closing areas:
Support in building infrastructure in the area designated as development area
and under development plan (central government 80 per cent, local
government 20 per cent)
- 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.
(b) Loan
- Support for Substitute businesses to replace coal mining
content: Provide loans to those who start businesses in areas where coal mines
have been closedG/SCM/N/71/KOR
Page 23
recipient: those who start, expand, or move businesses within the
development planning area, undertakers of the plan, those who move
businesses to agricultural and industrial sites within the area where coal mines
have been closed
conditions:
Classification Period of loan LimitInteres
t rates
For facilitiesRepayment within 5 years
with 5-year grace periodMaximum 5 billion won 5.5%
For operationRepayment within 3 years
with 2- year grace periodMaximum 0.5 billion
won5.5%
7. Amount and duration of the subsidy
(Unit:  W million )
Classification 1999 2000 duration
Support for coal production 2,925 1,744 Until 2000
Support for storage of anthracite
coal42,856 19,367Until 2000
Development of coal mine closing
areas61,217 70,731 Until 2005
Support for stabilizing sales prices
of coal and briquettes323,025 246,781Direct
subsidy
Subtotal(a) 430,023 338,623
Support for substitute businesses
in place of coal mining2,338 29,645 Until 2005
Loan
Estimated subsidy(b) 54 800
Total subsidy(a+b) 430,077 339,423
• The estimated subsidy is based on the difference between the market rate and the loan rate.
8. Trade effect of the subsidy
Due to the decline in demand for domestically-m ined anthracite coal, the government has
implemented a policy aimed to reduce coal production and close coal mines.  As a result of
this policy, import demand for such energy resources as bituminous coal is increasing.G/SCM/N/71/KOR
Page 24
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
1999-2000
3. Policy objective and /or purpose of the subsidy
To induce foreign direct investment.
4. Background and authority for the subsidy
Law:  Article 121 of Special Tax Treatment Control Law (STTCL), Foreign Investment
Promotion Act
Authority:  Ministry of Finance and Economy,  Ministry of Commerce, Industry and Energy,
                   Ministry of Administration and Home Affairs
5. Form of the subsidy
Tax reduction
Reduction of public land rental fee
6. Recipient and term
- Foreign invested enterprises which engage in services sector supporting other
industries or which use advanced technology.
- Foreign invested enterprises that operate in Foreign Investment Zones, including Free
Trade Zones
7. Amount of the subsidy
-           Reduction and exemption of taxes
. Full exemption of corporate tax and income tax for foreign invested
enterprises for the first 7 years after income is generated and 50 per cent
reduction for the following 3 years.
. Full exemption of acquisition tax, registration tax, property tax and aggregate
land tax on land acquired or owned by foreign invested enterprises for the
first 5 years after income is generated and 50 per cent reduction for the
following 3 years.G/SCM/N/71/KOR
Page 25
. Full exemption of customs duty, special excise tax and value-added tax on
capital goods brought into Korea by foreign invested enterprises within 3
years for operation of businesses eligible for tax exemption or reduction.
- Reduction and exemption of land-use fees
. 100 per cent exemption for foreign invested enterprises located in Foreign
Investment Zones or Industrial Parks for Foreign Invested Enterprise which
satisfy any of the criteria for tax reduction and exemption in the above and
make investment of  more than one million dollars.
. 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.
. 50 per cent reduction for foreign invested enterprises located in National
Industrial Parks operating manufacturing businesses with investment of morethan 10 million dollars.   
8. Duration of the subsidy
no fixed time period
* Tax reduction or exemption regime for 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, and thus it is difficult to estimate the trade
effect.
B. TARIFF REDUCTION ON AIRCRAFT PARTS
1. Title of the subsidy programme
Tariff Reduction on Aircraft Parts
2. Period covered by the notification
1999-2000
3. Policy objective and/or purpose of the subsidy
To encourage 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 89)- Enforcement Decree of Customs Act (Article 113)
- Enforcement Ordinance of the Customs Act (Article 35,36)G/SCM/N/71/KOR
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Authority:  Ministry of Finance and Economy
5. Form of the subsidy
Tax reduction
6. Recipient and criteria
Those who manufacture or repair aircrafts according to the Promotion Act for the
development of aircrafts and space industries.
7. Amount of the subsidy
  (Unit:  W billion)
Year 1999 2000
Amount of Duty
Reduction9.2 10.6
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
1999-2000
3. Policy objective and/or purpose of the subsidy
- To assist off-season production of farm machinery and meet the high demand for
farm machinery in busy seasons.
- To provide financial support to promote development, production and use of new
technology farm machinery.
4. Background and authority for the subsidy
Laws:  The Farm Mechanization Promotion LawAuthority:  Ministry of Agriculture and ForestryG/SCM/N/71/KOR
Page 27
5. Form of the subsidy
Loan
* Source of fund: Government budget ( Special Account for Structural Development of Rural
Areas)
6. Recipient and criteria
(1)  Recipient:  Farm machinery manufacturers, new machinery technology developers(2) Content of the support: 1 year loan for farm machinery production and new
technology development at 5 per cent annual interest rate .
7. Amount of the subsidy
(Unit:  W billion)
Year Amount of the loan Estimate of the subsidy
1999
200045.7
383.7
2.3
* 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 period
9. Trade effect of subsidy
This subsidy amount accounts only for 0.2 to 0.4 per cent of the total value of farm
machinery production. Therefore, its effect on trade is almost non-existent.
<Statistics of sales and trade>
Classification 1999 2000
Sales (W billion) 1,061 1,233
Imports  (U$ million) 94.2 131.8
Exports  (U$  million) 92.7 134.8G/SCM/N/71/KOR
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D.  SUPPORT FUND FOR THE STONE INDUSTRY
1. Title of the subsidy programme
Support Fund for the Stone Industry
2. Period covered by the notification
1999-2000
3. Policy objective and/or purpose of the subsidy
- To develop domestic stone resources and stabilize its supply
4. Background and authority for the subsidy
Law::  Article 6 of the Law Concerning the Special Account for the Energy and Resources
Industry
Authority:  Ministry of Commerce, Industry and Energy
5. Form of the subsidy
Subsidy and loan
6. Recipient and criteria
 (a)       direct subsidy
recipient: one who has been involved in stone development or who has a license for
quarrying and planning for stone development, one who has been recommended by
governors
                          content: 100 per cent subsidy for drilling and execution
(b) loans
                          recipient: one who has been engaged in quarrying industry, stone processing
                          content: for facilities and operation expensesG/SCM/N/71/KOR
Page 29
             Terms of the loans
Term Maximum Amount Interest Rate
Facility
Fund5-year repayment
period with a three-
year grace
period100 per cent of the facility
investmentInterest rate: 6.5 %
Operation
fund2.5-year repayment
with a 1.5-year grace
periodUp to 80 per cent of the
CostInterest rate: 7.0%
7. Amount of the subsidy
                    (Unit:  W million)
Year 1999 2000
Direct subsidy(a)
Loan
Subsidy Effect(b)437
10,000
77437
10,500
143
Subsidy total(a+b) 514 580
* The subsidy effect is estimated based on the difference between the market interest rate and
the loan rate.
8. Duration of  the subsidy
no fixed time period
9. Trade effects of the subsidy
The effect on trade is insignificant.
VI. RESEARCH AND DEVELOPMENT
A. AUTOMOBILE LOW EMISSION TECHNOLOGY DEVELOPMENT SUPPORT
1. Title of the subsidy programme
Automobile Low Emission Technology Development Support
2. Period covered by the notification
1999-2000G/SCM/N/71/KOR
Page 30
3. Policy objective and/or purpose of the subsidy
Though large-size diesel vehicles account for only 3.2 per cent, the pollutants they emit are
36 per cent of the total pollutants generated by all vehicles. In 1999, 85.5 per cent of air
pollutants in Seoul was caused by vehicles, an d this calls for urgent measure to reduce the
pollution caused by large-size diesel vehicles.
As an anti-pollution measure, the government is strengthening the gas emission standards to
protect national air quality and to accommodate world wide environmental protection
movements including greenhouse gas reduction.
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 2000Long-term emission
levelProject objective
Large-size vehicle 7.0 g/kwh 5.0 g/kwh 4.0 g/kwh
Medium/small
vehicle1.02 g/km 0.65-0.75 g/km 0.5 g/km
4. Background and authority for the subsidy
Law: Air Preservation Law (Article 31.2: Support for Technology Development)
         Law on Environment Technology Development and Support (Article 5)
         Law on Environment Improvement Fund (Article 11, Sub-paragraph 2)
         Law on Special Account for Environment Improvement (Article 4, Paragraph 1)
Authority:  Ministry of Environment
5. Form of the subsidy :
Government contribution
6. Recipient and criteria
- Recipient:  research institutions developing the following 4 technologies:
. high pressure injection pumps
.            combustion chamber design and engine mapping.            cold ERG technology.           hybrid automobiles intended for public shuttle buses in small and medium sizeG/SCM/N/71/KOR
Page 31
- Amount: government contribution amounting to 50 per cent of R&D costs, which will
be repaid to the government after the technology is developed
- Criteria: research institutions that have research facilities, equipments and human
resources to carry out the project and have accepted the financial responsibility of theproject
. Selection process: public notice in newspaper or official gazette
. Institutions are required to submit a proposal to the Deliberation  Committee
on Low Emission Technology for deliberation and final decision.
7. Amount of the subsidy
  (Unit:  W billion)
Year 1999 2000 Total
Contribution amount 1.0 1.5 2.5
8. Duration of subsidy
- 1998-2001
- However, because the gas emission standards will continue to be strengthened even
after 2006, subsequent programs will be drawn up based on the results of the currentprogramme.
9. Trade effect of the subsidy
- It is impossible to measure trade effect, for this project aims at solving national air
pollution problems caused by diesel vehicles.
- It also aims to protect environment through reduction of green house effect generated
by air pollution and protection of ozone layer, by reducing pollutants such as NOx
emitted by diesel vehicles, and by using anti-pollution technology.
B. LOAN 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
1999-2000
3. Policy objective and/or purpose of the subsidy
To provide loan to research and development projects of information and communication that
is large size and involves high risksG/SCM/N/71/KOR
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4. Background and authority for the subsidy
Law: Article 34 of Basic Act on Information Promotion, Article 28 of the Enforcement
Decree.
Authority:  Ministry of Information and Communication
5. Form of the subsidy
Loan (Source: Information Promotion Fund)
6. Recipient and Criteria
- Recipient of support:  Private firms in the field of information and communication
(including domestic corporations owned by foreigners)
- Conditions of the loan:  changeable according to market interest rates
7. Amount of the subsidy
Unit:  W billion)
Year 1999 2000
Amount of loan 236.5 146.9
8. Duration of the subsidy
started in 1993 with no fixed time period
9. Trade effect of the subsidy
This support programme provides no special benefits in terms of interest rates and loan period
compared to those provided by private financial institutions. Therefore, trade effect isexpected to be insignificant.
C. 
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
1999-2000
3. Policy objective and/or purpose of the subsidy
- To obtain internationally-competitive environmental technology and to promote
environment industryG/SCM/N/71/KOR
Page 33
- To provide financial support to research institutes, invested jointly by private
investors and the government and 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 5),
Regulations and Guidelines on R & D of Environment Technology Projects
Technology Development Promotion Act (Article 8.3)
Authority:  Ministry of Environment
5. Form of the subsidy
Government contribution (Environmental Technology Development Projects)
* source of fund: Special Account for Environment Improvement
6. Recipient and criteria
Government invested research institutions, universities, research institutions and private
enterprises that participate in the Environmental Technology Development Project.
7. Amount of the subsidy
 (Unit: W billion)
Year 1999 2000 total
Amount of  the subsidy 21.9 24.2 46.1
8. Duration of the subsidy
Since 1992 with no fixed time period.
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
1999-2000
3. Policy objective and/or purpose of subsidy
To assist R&D activities of private enterprisesG/SCM/N/71/KOR
Page 34
4. Background and authority for the subsidy
Law :
- Science and Technology Promotion Act (Art. 14)- The Enforcement Decree of Science and Technology Promotion Act.
- The Enforcement Regulation of Science and Technology Promotion Fund
Authority:  The fund is managed by the Korea Science Foundation, a private organization
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 for national interests.
- Conditions of support
. Lending period:  7 years, including a maximum of 3- year grace period.. Interest rate: 6.0-6.5 per cent per year:. Limits on subsidy amounts: W 1 billion per project
W 3 billion per company100 per cent of the total amount required by
a company for a project (a large enterprise:
80 per cent)
. Scope of activities eligible for the subsidy: R&D on high technology industry
and pre-competitive R&D activities.
7. Amount of the subsidy
(Unit : billion won)
1999 2000
Loan 54.3 30.8
8. Duration of the subsidy
Since 1993 with no fixed time period
9. Trade effect of the subsidy
Its effect on trade is insignificant.
__________