The South Korean government will provide emergency funds totaling 240 billion won ($225.6 million) to two coastal cities hit by a prolonged slump in the shipbuilding sector and an anticipated closure of GM Korea’s factory.

After a policy meeting chaired by the country’s finance minister and deputy prime minister Kim Dong-yeon on Thursday, the Korean government has decided to inject an emergency fund of 240 billion won to Gunsan and Tongyeong.

Gunsan in North Jeolla Province is grappling with economic uncertainty after the operation of the country’s largest shipbuilder Hyundai Heavy Industries Co.’s factory in the city has remained suspended since last year, and GM last month announced to shut down its Korean operation’s manufacturing factory in Gunsan by May. Those two companies have accounted for a major share of the city’s economy.

Tongyeong, South Gyeongsang Province, the home of the country’s mid-sized shipyard Sungdong Shipbuilding & Marine Engineering Co., is also bracing for economic hardship as the shipbuilder is set to file for court receivership due to mounting losses from a slump in oil prices and weak demand for tankers.

The liquidity injection is part of the first stage of the government’s emergency support for the struggling regions. Out of 240 billion won, 130 billion won will be set aside for a program that provides special warranty to subcontractors of the ailing firms, 50 billion won for funds for small businesses, and 60 billion won for special loan guarantees provided by regional credit guarantee foundations.

Along with fund injection, the government has decided to extend maturing policy finance-backed loans by one year and roll over principal repayment. In a separate move, the government will seek to defer unpaid tax and social insurance payments and provide consulting services on reemployment for those who have lost jobs to reduce the risk of the economic fallout from ongoing corporate restructuring.

An unnamed government official said that the latest measures were drawn to prevent regional economies of Tongyeong and Gunsan from deteriorating further and that the government will come up with further support measures if necessary after collecting opinions of related ministries and regional officials.

By Yoon Won-sup and Lee Eun-joo

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]