Financial Support for Companies entering International Organization procurement market

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Hello everyone! The weather has been really nice for a couple of days! Enjoy this beautiful fall season of the year, while being careful not to catch a cold!

“South Korea becomes first former aid recipient country to join OECD Development Assistance (ODA) committee.” Recently, we often hear and talk about these words. Right, it is a remarkable thing for Korea to become a donor country from the beneficiary.

According to the study by KOTRA (Korea Trade-Investment Promotion Agency), Korean firms account for 2.4 percent of the total fundraising in international organization, which means that Korean share is quite small. Then, why is the percentage so low and what could be done to expand it?

Actually, there has not been a proper organization dealing with financial support for companies entering international organization procurement market. Current measures to encourage those companies are not effectively managed without any precise and comprehensive criteria to apply the aggregate credit ceiling system. Under the current measure, the Bank of Korea qualifies the companies with P/O (Purchase Order) as the ones eligible for the aggregate credit ceiling loans.

However, there have been a few problems related to P/O due to the unclear definition and content of it. This led many banks to refuse their dealings with exporting companies having P/O. Many banks were concerned about a lack of credibility of P/O which is ambiguous about its issuer and contents.

Then, what is the aggregate credit ceiling system?

Let me explain simply with the diagram. As you can see from the diagram above, the loans provided by the Bank of Korea are allocated to commercial banks. Then those commercial banks are to provide financial support to SMEs in other forms of loans being granted.

Until now, it has been difficult to exactly define which companies are qualified for the aggregate credit ceiling system. In order to support more exporting companies entering international organization procurement market, the aggregate credit ceiling system will be expanded. Also, more specific guideline will be introduced to clearly define P/O qualified for the aggregate credit ceiling loan. For those companies not meeting the outlined P/O criteria, commercial banks will assist them through other kinds of financial support. KOTRA will encourage the commercial banks to do so by providing information which illustrates authenticity of P/O.

As you can see, exporting companies are encouraged to take their step forward to international organization procurement market. It is obviously a good news for the exporting companies! Later on, you may read my blog post saying that “A great leap in Korean share of the fundraising in international organization”. Look forward to hearing such a nice news!

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