Advance payments in state contracts to be expanded to help virus-hit firms

The Cabinet on Tuesday approved a revised ordinance on advance payments in state contracts to help companies damaged by the coronavirus pandemic, officials said.

Under the revised ordinance, the government will be allowed to make up to 80 percent of a total contract sum in an advance payment from late this month, the Ministry of Economy and Finance said in a statement.

Currently, the government is allowed to make up to 70 percent of a total contract sum in an advance payment, officials said.

The revised ordinance will go into effect from late April, the ministry said.

The coronavirus pandemic has hit South Korea's export-reliant economy hard, sparking a string of projections of negative growth for this year.

To date, the novel coronavirus has infected more than 10,500 people in South Korea, with the death toll passing 220.

In a bid to boost private consumption, the ministry has said it will encourage the public sector to create 3.3 trillion won ($2.7 billion) worth of demand through advanced payments and purchases.

Vice Finance Minister Koo Yun-cheol said the government aims to create the demand in the first half of the year.

Of the 3.3 trillion won worth of demand, 1.2 trillion won will be allocated to swiftly invest into the equipment industry, Koo said.

"Central government ministries, public institutions, local governments and regional public corporations will join these efforts to revive domestic demand that has frozen rapidly," Koo said in a separate statement. (Yonhap)