Economy
President of S. Korea Announces record $19 bn plan to boost chip industry
South Korean President Yoon Suk Yeol on Thursday announced a record $19-billion-dollar support plan for the country’s crucial semiconductor industry.
South Korea is home to the world’s top memory chipmakers Samsung Electronics and SK hynix and last year pledged to build the world’s largest chip centre using $456 billion of private investment as it seeks an edge in the global industry.
“We have created a comprehensive support programme for the semiconductor industry worth 26 trillion Korean won, which encompasses financial, infrastructure, research and development, as well as support for small and medium-sized companies,” he said, according to a statement from his office.
The package includes a $7 billion investment announced earlier this month.
Yoon also said Seoul would extend tax benefits for chip investments, in hopes of boosting employment and attracting more talent to the industry.
The country is also building a “mega chip cluster” just outside Seoul, which the government claims will be the world’s largest semiconductor-making complex and create millions of jobs.
“As you all know, semiconductors are a field of national all-out war,” Yoon said.
“Winning or losing depends on who makes the state-of-the-art semiconductors with high information processing capabilities first. The state must provide support for semiconductors so that they do not lag behind competitors,” he added.
With the new package, Yoon said there would be a “new semiconductor financial support programme worth 17 trillion won” run through the Korea Development Bank, to allow companies to make crucial new investments.
“As companies invest enormous amounts of money in facilities such as new factories and line expansions, liquidity problems arise,” he said.
“I believe that these difficulties will be largely resolved through the Korea Development Bank’s support programme,” he added.
– Key sector –
The plan will also create a “semiconductor ecosystem fund” worth a trillion won, which will support fabless companies and small and medium enterprises linked to the industry.
“Our fabless market share is still in the one percent range, and foundry, which manufactures system semiconductors, is unable to close the gap with leading companies such as TSMC,” Yoon said.
Earlier this month, Seoul said it would set up an aid package worth more than $7 billion to support its chip industry, as part of its drive to boost the semiconductor sector, which is critical to Asia’s fourth-largest economy.
The moves come as the government looks to invest heavily in six key technologies including chips, displays and batteries, all areas where the country’s tech giants are well-established already.
Semiconductors are South Korea’s leading export and hit $11.7 billion in March, their highest level in almost two years, accounting for a fifth of South Korea’s total exports, according to trade ministry figures.
Samsung in May 2022 unveiled a massive 450 trillion won five-year investment blueprint aimed at making the country a frontrunner in key sectors from semiconductors to biologics.
Securing supplies of advanced chips has become a crucial issue internationally, with the United States and China locked in a fierce battle for control of the market.
“South Korea is supplying 80 percent of the world’s memory semiconductors, and has said it is investing 300 trillion won in the Yongin cluster, but there has been a water supply issue with it,” Kim Dae-jong, a professor of business administration at Sejong University in Seoul, told AFP.
“On top of tackling such issues, today’s announcement seems to be an effort to support innovative small and medium-sized enterprises to further strengthen their competitiveness against (rivals) like Taiwan.”
The Bangladesh Jeweller’s Association (Bajus) has announced an increase in gold prices by Tk1,400 per bhori, effective from tomorrow (26 June). This decision follows a rise in the local bullion market.
Under the new pricing structure, 22-carat gold will cost Tk1,18,355 per bhori, up from the previous rate of Tk1,16,955. The price for 21-carat gold is set at Tk1,12,978 per bhori, while 18-carat gold will be priced at Tk96,835 per bhori. Gold priced through the traditional method will now cost Tk80,062 per bhori.
This marks the 29th price adjustment by Bajus this year.
Indonesia’s economy is expected to steadily grow over the next two years on the back of domestic consumption and investment despite weak exports, a World Bank report said Monday.
Household spending, traditionally a strong contributor to Indonesia’s GDP, and election-related spending helped to expand Southeast Asia’s largest economy 5.11 percent in the first quarter of 2024.
And it is expected to expand five percent overall this year, followed by 5.1 percent in 2025 and 2026, according to the World Bank’s Indonesia Economic Prospects report.
The latest projection was an increase from the Bank’s previous estimates of 4.9 percent this year and next, followed by five percent in 2026.
“The economy is expected to benefit from a pick-up in public consumption and investment but will face headwinds, notably from worsening terms of trade,” the report said.
It noted several risks to the economy, including high interest rates and geopolitical shocks, which could further weigh on exports already impacted by lower prices.
“The outlook is stable, but risks are tilted to the downside,” World Bank senior economist Wael Mansour told a news conference.
“Our baseline (projection) assumes continuity in policy, especially those linked to boosting investment.”
The latest projection assumes a large contribution from public consumption — with government spending expected to increase — while foreign direct investment as a share of GDP is projected to return to pre-pandemic levels, Mansour said.
He added that Indonesia’s “credible” fiscal rule had helped attract investments and lower Indonesia’s risk premiums.
But president-elect Prabowo Subianto, who will take office in October, is reportedly looking to increase the country’s debt-to-GDP ratio to 50 percent — from less than 40 percent — to fund his campaign promises including free school meals.
A member of Prabowo’s campaign team has denied the plan.
The government’s 2025 budget, due by October, is expected to outline an implementation plan for the new administration’s economic goals, and signal its fiscal policy stance.
A surge in the inflow of remittances and export proceeds has led to an increase in dollar supply in commercial banks, resulting in the highest letter of credit (LC) openings in the last 23 months in May.
However, LC settlements during the same period experienced a slight decline compared to April.
Bangladesh Bank data shows in May, both the government and private commercial banks opened import LCs amounting to $6.83 billion.
The previous highest $7.02 billion worth of LCs were opened in June 2022. Since then, despite fluctuations, LC openings have generally followed a decreasing trend.
In April of the current year, LCs worth $5.68 billion were opened. LC openings in May increased by more than 20% compared to April. In comparison to the same period in 2023, LC openings in May increased by 19.5%.
According to several policy-setting officials from both government and private commercial banks, the inflow of dollars in May was higher compared to normal times. One significant reason cited was the receipt of remittances amounting to $2.25 billion in that month. The figure stands in contrast to an average monthly remittance inflow of less than $2 billion in the current fiscal year.
Besides, despite a decrease in overall exports in May, there was a slight increase in export LCs in banks compared to previous times. Payments for previously made exports started arriving. With the initiation of the crawling peg in the exchange rate on 8 May, exporters are obtaining more favourable rates for dollars, prompting them to bring these back into the country.
Syed Mahbubur Rahman, managing director and chief executive officer, Mutual Trust Bank, told the nes reporter, “Due to the recent activation of the interbank dollar market, which was previously inactive, banks are now able to collect dollars from there. As a result, even though some banks have experienced a decrease in remittances, they are gaining confidence in acquiring dollars from the interbank market. This assurance has enabled them to open more Import LCs.”
The banks in the country are benefiting from the introduction of the crawling peg in the exchange rate system, he said.
“The crawling peg system has reduced the gap between the market rate and the dollar rate, giving customers more confidence to open LCs.”
Mahbubur also said similar to industrial raw materials, the volume of LCs for intermediate goods imports also rose. He mentioned that this trend is positive for the economy.
The deputy managing director of a private commercial bank said due to a favourable inflow of dollars in May, commercial banks are increasing their LC openings.
He mentioned that there has always been demand for LC openings, but previously they used to be more cautious in approving import LCs. For example, if someone applied for 5 LCs earlier, they might have approved only 2. However, in May, due to the good dollar flow, they on average approved 4 out of 5 LC applications.
In May, there was a slight increase in opening LCs for government imports, including jute oil and fertilisers. An official from a state-owned bank said one of the main reasons for this increase is the greater availability of foreign exchange, which facilitated more LC openings in bank accounts.
Ali Reza Iftekhar, managing director and chief executive officer of Eastern Bank told the news reporter, “Our liquidity situation in dollars has improved compared to before. Remittance flows are now steady. Moreover, our bank’s export proceeds have also increased. Additionally, there are now dollar transactions happening in the interbank market, which has led to an increase in dollar inflows.”
Transactions in this market were almost closed for a long time, he said, adding, “As a result, we have been able to increase our LC openings for imports. This trend will gradually move towards further improvement.”
LC openings, however, may decrease slightly in June due to the banks’ accounts being closed for a few days during Eid, said a senior official of a leading private bank.
“Besides, RMG and production-related houses remained closed for several days during Eid. As a result, there is reduced demand for raw materials. These factors contribute to a trend of decreased LC openings for imports during the Eid months.”
In the first 11 months of the current fiscal year, a total of $63.02 billion worth of import LCs were opened — a slight year-on-year increase from $62.08 billion.
LC settlements in May decrease slightly
In May, banks settled import LC payments totalling $5.48 billion, which was 5% lower compared to April, central bank data shows.
A senior official of the central bank said currently, the pressure on deferred LC payments has reduced compared to before. “Banks have reduced opening deferred LCs to mitigate exchange rate risks. Consequently, the volume of payments has also decreased,” he said.
In the first 11 months of the current fiscal year, LC settlements for imports decreased by 12% to $60.79 billion compared to the same period of the previous fiscal year.
A managing director of a private bank said due to lower LC openings in the past two years, pressure on payments reduced. Currently, banks are selling dollars at rates between Tk118.40 and Tk118.70 for LC settlements. On the other hand, they are collecting dollars from remittances at rates ranging from Tk117.80 to Tk118.30.
