Lee Pledges Tax Cuts, Public Sector Reform
By Na Jeong-ju
Staff Reporter
President Lee Myung-bak pledged in an inaugural speech Monday that he will pursue a small government and a business-friendly country to accelerate economic growth.
He said his government will focus on enhancing competition in the public sector and lower taxes for corporations.
``We will start with the government and transform it into a lean and capable organization,'' Lee said in the ceremony held in front of the National Assembly. ``We shall increase our effectiveness by abiding to the small government, big-market principle.''
Lee said he will reduce the number of public servants and remove or ease unnecessary regulations for companies. He called corporations the ``source of national wealth and the prime creator of jobs,'' saying he will allow them to start businesses and build factories without difficulty.
``We need to create an environment where entrepreneurs can invest freely and our companies can roam the world market,'' he said.
Lee's economic policymakers have said the government will pursue a drastic reform of the country's 298 public firms to turn them into more efficient and profit-oriented organizations. It will set up the roadmap soon to return public firms to the private sector, including a plan to privatize three state owned entities ― the Korea Land Corp., the Korea National Housing Corp., and the Korea Housing Finance Corp.
``The privatization of public firms is the centerpiece of Lee's economic reform. Lee aims to attract private funds to revitalize the sluggish economy,'' said Kwak Seung-jun, a Korea University economic professor who served as an advisor to the presidential transition committee.
Earlier, the committee said Lee's government will raise 20 to 30 trillion won through the privatization of state-run firms and banks and use the money to support small- and mid-sized enterprises.
``Innovative small- and medium-sized enterprises must be encouraged and invigorated,'' Lee said Monday. ``We will certainly help such companies grow in size, and compete and cooperate with large corporations.''
The government plans to reduce corporate income taxes to help businesses expand investment and create jobs, and strengthen the country's growth potential.
During his presidential campaign, Lee pledged to cut maximum corporate taxes from 25 to 20 percent to help create a more business-friendly environment.
The committee is considering lowering taxes by 1 percentage point per year over the next five years. Currently, companies earning over 100 million won in taxable income are subject to up to 25 percent of corporate income tax.
``We must lower taxes,'' Lee said. ``Only then will we see investments and consumption increase once again.''
As for Korea's macroeconomic outlook, he has said the economy will expand 6 percent this year through deregulation, tax cuts and improved labor-management relations despite high oil prices and other external negatives. However most economic research institutes at home and abroad have lowered Korea's growth rate to below 5 percent, citing a U.S. economic slowdown and rising inflationary risks.
Lee also pledged to build a nation that is friendlier to foreign investors.
``The opening of the market to foreign investors is an unavoidable mega-trend,'' Lee said. ``Such an economy as ours, which depends so much on exports, should increase national wealth through free trade regimes.''