Nation Regrouped Into 7 Economic Blocs
By Lee Hyo-sik
Staff Reporter
South Korea will be divided into seven economic blocs and be assigned with one or two leading industries as part of government efforts to promote balanced development and turn the nation into a globally competitive business hub.
To do this, the government plans to spend 25 trillion won out of state coffers and attract another 25 trillion won from the private sector over the next five years, implementing 30 development projects aimed at expanding roads, railways and other infrastructure, as well as nurturing talented manpower.
However, critics say that the package is the Lee Myung-bak administration's attempt to satisfy both voters in the Seoul metropolitan and provincial areas in the name of balanced national development not unlike the previous Roh Moo-hyun administration.
They say the massive fiscal stimulus measure is largely aimed at helping the struggling construction industry and spurring domestic demand as the world's 13 largest economy is losing momentum fast on sluggish private consumption and investment. But they cautioned that the plan could further hike prices of goods and services by increasing the money supply and worsening fiscal soundness, arguing it could do more harm than good to the economy in the long run.
In a report to President Lee, Wednesday, the Ministry of Strategy and Finance said it selected one or two ``future-promising'' industries for each region. To help promote key industries, one or two universities in each district will also be fostered to provide skilled workers.
The government also plans to advance transportation and logistics-related infrastructure across the country through 30 development projects, including the Saemangeum development scheme in North Jeolla Province and the construction of an administrative capital in South Chungcheong Province.
``It is important to develop both the Seoul metropolitan area and provinces. The plan is aimed at leveling the playing field for both sides. We will help provincial areas expand roads and other logistics-related infrastructure to better compete with the metropolitan area,'' Strategy and Finance Minister Kang Man-soo said.
Kang stressed that the development projects will face little difficulty in attracting 25 trillion won in private investments as profitability prospects are bright. He added despite such large state spending, fiscal soundness will remain intact because the recent broad tax cut will encourage businesses to expand investments and consumers to increase consumption further down the road, resulting in larger tax revenues in the years to come.
Under the scheme, Seoul, Incheon and Gyeonggi Province will be transformed into a global business hub, equipped with knowledge-based service industries. Chungcheong Province will be fostered as Korea's Silicon Valley and a research and development (R&D) hub for Northeast Asia.
Southwestern Jeolla Province is to be developed as a center for culture as well as renewable energy development and other green growth-based businesses, while Busan and South Gyeongsang Province will become the logistics hub for Northeast Asia.
The government will also promote Daegu and North Gyeongsang Province as an information technology and knowledge-based industry center. Gangwon Province will become a leisure and medical services industry hub, with Jeju being transformed into a free international city.
Critics say the multi-billion dollar development projects are just the latest politically-motivated scheme to improve the Lee administration's standing with the public.
``The spending plan is part of the government's effort to ease growing conflict between the Seoul metropolitan area and provinces because the government cannot afford to lose support from either side. It is appealing to populism,'' Citigroup economist Oh Suk-tae said.
Oh added that there were not many new projects included in the unveiled development scheme, saying the government was recycling previously announced plans to appeal to the public.
``The spending could also worsen fiscal soundness as the government has pledged to slash its annual budget by 10 percent over the next few years and cut income taxes on individuals and businesses,'' he noted.