Korea reviews incentives to companies with stable supply chains for core items

Bang Ki-sun, first vice minister of economy and finance. [Photo by Yonhap]

The South Korean government is working on a law that guarantees incentives to local companies making investments in enhancing supply chains for core materials and parts that are the key to the nation’s economic security.

According to multiple industry sources on Thursday, the Ministry of Economy and Finance plans to announce a legislation next week on a fundamental law to ensure stable supply chains for key strategic items to protect economic security.

Under the law, the government will designate so-called “leading companies” that invest in building stable supply chains for national key strategic items and grant them with equity investments, tax incentives and other financial aids to their investments. In exchange, the government will receive corporate data and information about their customers, suppliers, the supply-demand condition of the strategic items and the price trends to use them to build the national management system for the critical items.

To support this, the government plans to create a supply chain stabilization fund, said Bang Ki-sun, first vice minister of economy and finance.

The government plans to submit a related bill to the National Assembly by the end of this year and enforce the law from the second half of next year after six months of grace period.

Large companies like POSCO Holdings with trading companies that engage in overseas resources development are expected to benefit the most.

POSCO Holdings is building a plant that is capable of producing 25,000 tons of lithium salt annually in Argentina with an aim to complete its construction in the first half of 2024. It is also reviewing measures to secure production capacity of key materials like nickel with global material companies.

Samsung, SK, and other chips and battery manufacturers are also expected to benefit from the new law because they can receive state incentives or investment when they make investment decisions to secure key materials and components as “leading” companies, said an unnamed industry official. In particular their trading companies like Samsung C&T and LX International can play an important role.

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