Democratic Party looks into compensating small businesses for COVID losses

National Assembly will decide on related legislation in February

Democratic Party leader Lee Nak-yon (center) meets with party members and leaders in the small business community at the National Assembly on Jan. 12. (Yonhap News)

The ruling Democratic Party is working on concrete plans to compensate small businesses and the self-employed for their losses during the COVID-19 pandemic.

The plan involves legislation, in contrast with the one-off support provided through disaster relief payments. Many are now watching to see whether the National Assembly will amend the relevant laws when it meets in February.

Meeting with reporters on Jan. 13, Hong Ihk-pyo, director of the Democratic Party’s policy committee, said the party was “actively considering something fundamentally along those lines [compensating businesses for lost sales].”

“Since last week, and for some time before that, we’ve been holding discussions with financial authorities on fiscal support for businesses subject to operation restrictions and shutdown orders,” he explained.

“We’ll be reaching a conclusion shortly, but since there are a lot of things to consider, such as the scale, criteria, and methods, we’ll be announcing the conclusion once the party has examined the details,” he added.

Financial authorities said they have been examining issues such as the need for and legitimacy of institutionalizing compensation for temporary business closures, along with the associated ripple effects.

“The necessity and legitimacy of institutionalizing [compensation] will need to be considered separately from disaster relief funds,” said a senior official with the Ministry of Economy and Finance (MOEF).

“There have been discussions on that [in the National Assembly], so the administration will also be looking into it,” the official continued.

In a Jan. 12 telephone interview with the Hankyoreh, a Democratic Party official said, “If we’re going to use the law to restrict business operations, we need legal measures to compensate people for the associated losses.”

“The party’s policy committee is currently looking into that,” the official added.

Most centrally, the compensation plan that the party is considering involves state payouts to small enterprise owners and self-employed individuals that have suffered losses due to operation restrictions and shutdown orders. Since Jan. 11, the government has been making customized disaster relief payments of 1 to 3 million won (US$907-2,720) each to small business owners and the self-employed. The new approach is likely to involve separate comprehensive financial support based on calculations of personnel costs, rent, and income.

Some of the key questions include how the losses from business closures or restrictions will be calculated and how much will be compensated. A general picture of total sales for the self-employed last year will become available once value-added tax reports for the second half of 2020 is completed by Jan. 25. But small-scale businesses often fail to report sales in full, and decreased sales can’t be calculated for new businesses. The associated fiscal burden also has to be taken into account.

Members of the Democracy Party shared different views. Lawmaker Lee Dong-ju sponsored a “special act for restitution to small enterprises suffering losses due to the COVID-19 pandemic.” The bill’s provisions include the establishment of a committee for calculating and compensating losses. Fellow lawmaker Kang Hoon-sik is preparing a related bill that calls for compensation based on the minimum wage for the duration of operation restrictions, with the state covering half of rent costs.

The Justice Party has been even more aggressive. On Jan. 12, it proposed National Assembly discussions in February on legislation to compensate small businesses. Many lawmakers from the People Power Party (PPP) have also shown support, although the leadership remains cautious due to concerns about the fiscal burden on the state.

“The government needs to provide appropriate compensation in cases where people have suffered losses due to business restrictions and forced closures as part of disease control measures,” said PPP floor leader Joo Ho-young in a telephone interview with the Hankyoreh on Jan. 13.

At the same time, he said, “We’re going to need to look closely into whether the state’s finances can absorb that.”

By Noh Ji-won, Seo Young-ji, Noh Hyun-woong, and Lee Kyung-mi, staff reporters

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