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Korea to invest over W20 tril. in 'New Deal' initiatives, next year
Deputy Prime Minister and Finance Minister Hong Nam-ki, second from left, speaks during a meeting with ministerial-level meeting at the Korea Export-Import Bank (Eximbank) in Yeouido, Seoul, Thursday. Yonhap
By Lee Kyung-min
By Lee Kyung-min
The government plans to spend at least 20 trillion won next year to back up President Moon Jae-in's ambitious "Korean New Deal,” mostly aimed at creating jobs and helping the economy recover from the fallout from COVID-19, Finance Minister Hong Nam-ki said Thursday.
“The government will accelerate efforts to move forward with various New Deal projects. The specifics and action plans of the New Deal Fund will be announced after thorough discussions,” Deputy Prime Minister and Finance Minister Hong Nam-ki said during a ministerial-level meeting at the Korea Export-Import Bank (Eximbank) on Yeouido, Seoul.
The “New Deal Fund” aims to absorb the “overflowing” liquidity in the market and use it for investment. Details will be announced in September along with the 2021 budget plan. The government plans to attract 16 trillion won from the private sector, about 10 percent of the 160 trillion won needed for the grand initiative that will continue through 2025.
Hong said he would try to persuade lawmakers for early legislation of a relevant law. “The government will closely collaborate with provincial governments on various aspects for this,” Hong added.
First suggested by the ruling Democratic Party of Korea (DPK) ahead of the National Assembly elections in April in which the DPK won a landslide victory over opposition parties, the six-year New Deal plan would construct a digital infrastructure and an improved safety net for both young and old jobseekers.
Hong said state agencies are all set to help the government achieve visible results, adding the administration has identified 40 projects which have a higher growth potential.
The government via the initiative seeks to weather the looming economic challenges following the contagious pandemic. The policy involves three key pillars _ Digital New Deal, Green New Deal and stabilizing social safety nets.
Aiming for digital innovation
Of note among the latest updates is the governmnet's plan to set up a fund of 400 billion won ($336 million) to invest in firms whose business models seek to foster digital innovation over the next five years. The fund will outline data transaction guidelines and standardization, a crucial step to laying the ground work for efficient data management and utilization.
The government will help nurture a highly skilled research workforce with master's and doctorate degrees, whose expertise in artificial intelligence will better advance the country's drive to become a leader in the digital economy.
Hong stressed new technologies and services will take shape via what the government calls a “data dam,” a large data storage system encompassing key industries.
“The government will expand industry data platforms, and bolster cooperation within and among the key industries to help resolve pressing issues facing key players,” Hong said.
Electric vehicle (EV) car part makers, for example, will be able to develop high-functioning equipment and will provide a consistent update on their products via more comprehensive cooperation in a more open, direct fashion, a highly plausible scenario that can and will replace the current top-down, chain-of-command work system. Korea aims to have 1.13 million EVs and 200,000 hydrogen vehicles on the roads by 2025, up from 91,000 and 5,000 each by the end of 2019.
Overall digitization will be in order for the industrial supply chains, as well as new business models based on new technologies applied to pre-collected data concerning planning, research and development (R&D), design, production, logistics and distribution and export.
“Digitization of industries will be pursued using a manufacturing- and information technology-based infrastructure to strengthen the competitive edge of local firms amid accelerated efforts undertaken by countries around the world towards a fully digital economy,” he said.
The finance minister added the government was on track to specify possible benefits for market participants and investors supporting the Korean New Deal initiatives.
Some of the ideas discussed thus far include giving back investors their initial investment in full with a 3 percent annual return guaranteed, a plan put forward by Rep. Lee Kwang-jae of the ruling DPK. He also suggested that requests for redemption will be processed by the government.
The lawmaker sitting on the National Assembly Economy and Finance Committee proposed that a low 5 percent tax be imposed on gains of investors that put in up to 300 million won. The rate should be 14 percent for gains on investments over 300 million won, he said.
But First Vice Minister of Economy and Finance Kim Yong-beom opposes the idea of promising a guaranteed return, a move distancing himself from what could later become a full-blown fiasco brought on by mismanagement of funds pooled from the public.
“The idea of the New Deal Fund is under consideration with its planned structure to reflect the need to be mindful that the government should give stable returns back to the public,” Kim said at a briefing at the Seoul Government Complex in Gwanghwamun. “But the fund is not based on the concept that a guarantee must be promised.”