The government is rolling up its sleeves to 'reorganize' the oil and petrochemical industry in crisis. When the deterioration of a key industry in a specific region is anticipated, it is considering adjusting the requirements for designating areas such as Ulsan, Yeosu, and Daesan, where petrochemical complexes are located, as 'industrial crisis preemptive response zones' supporting various government aids. The plan also supports the reduction of expenses for petrochemical corporations and the transition to high-value materials with future competitiveness.
On the 23rd, the relevant ministries held an economic ministers' meeting and an industrial competitiveness enhancement ministers' meeting, announcing the 'plan to enhance petrochemical industry competitiveness' containing this content. This measure has been prepared in response to a structural crisis faced by the domestic petrochemical industry due to a global supply glut in petrochemicals.
◇ easing industrial crisis response zone and employment retention subsidy requirements
The government first decided to adjust the requirements for designating industrial crisis preemptive response zones. These zones are designated when significant deterioration of a regional key industry is anticipated due to unexpected internal and external shocks, aiming to minimize negative impacts on the industry and regional economy through comprehensive government support. For instance, Pohang was designated after concerns about the steel industry slump due to Typhoon Hinnamnor.
Ulsan, Yeosu, and Daesan, where petrochemical industrial complexes are located, are mentioned as potential candidates for designation. An official from the Ministry of Trade, Industry and Energy noted, "Depending on the future changing designation requirements, the efforts and contributions of the local governments to overcome the crisis will be considered in selecting industrial crisis preemptive response zones."
At this time, the government also plans to ease the requirements to provide 'employment retention subsidies' to partner companies with more than 50% of their revenue from petrochemicals. The subsidy system offers support to employers who implement employment retention measures like suspensions or temporary leaves to continue employing workers despite necessary employment adjustments due to revenue and production decreases. Currently, a 15% decline in monthly average revenue compared to the previous year is required, which will be adjusted to a '10% decrease.'
In addition, the government will postpone tax payments for companies pursuing business restructuring within industrial crisis preemptive response zones. When assets are sold for the purpose of repaying financial debt or securing investment resources according to business restructuring plans, the taxation deferral period will be extended from the current 'four-year delay on gains with three-year partitioning for inclusion' to 'five-year delay with five-year partitioning.'
◇ injecting 3 trillion won in policy funds to facilitate petrochemical industry restructuring
Policies will be established to help move away from current generic material-centered production, vulnerable to a global supply glut, toward 'business restructuring' into high-value materials with assured future revenue. The government has recently supplemented the criteria, such as the decision standard for 'industries with supply excess,' in order for the petrochemical industry to benefit from the 'Corporate Vitality Act' (special law to boost corporate vitality). This system provides special provisions to allow corporations to swiftly carry out business restructuring when aiming to enhance competitiveness through structural changes or business innovation activities.
Accordingly, the grace period for holding company regulations will be extended from three years to five years to allow buyers to comply with equity regulations after generating revenue during business restructuring. The Fair Trade Commission will proactively provide pre-consulting to ensure speedy corporate mergers and acquisitions (M&A) for joint venture establishment and new business absorption and mergers.
To secure liquidity for the petrochemical industry pursuing business restructuring, policy funds will be injected. Loans at low interest rates will be provided for necessary funds, including facility investment, R&D, and operating funds, with 90-100% guarantee support. The policy finance funds, including loans and guarantees to be injected in this way, will amount to 3 trillion won. The Korea Development Bank's 'business structure transformation support fund' will also be utilized.
◇ support measures like duty-free and licensing to focus R&D investment in three major areas
The plan also helps reduce expenses. The duty-free period for naphtha, a major raw material for the petrochemical industry, and crude oil for naphtha production will be extended until the end of next year, and the petroleum import surcharge for LNG (liquefied natural gas) used as a raw material in the petrochemical industry will be refunded. Considering some petrochemical corporations are pursuing the introduction of ethane for competitiveness, the necessary permits for constructing terminals and storage tanks will be supported through a fast-track process.
Efforts to focus R&D capabilities will also support high-value material technology linked to key industries, core technology for carbon reduction, and technology responding to global environmental regulations, the three major fields of petrochemicals. A public-private joint '2025-2030 R&D investment roadmap' will be established in the first half of next year, and matching with private investment will promote an application for a preliminary feasibility study for 'high-value and eco-friendly chemical material technology development.'
In addition, plans for 'industry-wide self-consulting service' to diagnose the future global competitive landscape of the petrochemical industry and derive desirable business restructuring directions will be promoted early next year. The results produced will be used as standards and principles for government support. The government plans to follow up with support measures in finance, competition law, and trade based on industry demands.