1st YEAR in OFFICE President strives to create biz-friendly conditions

President Yoon Suk Yeol listens to an official from Doosan Enerbility at the company's nuclear reactor factory in Changwon, South Gyeongsang Province, in this June 22, 2022 photo. Yonhap

By Lee Kyung-min

• Published May 9, 2023 1:09 PM KST
• Updated May 10, 2023 4:48 PM KST

Gov't still has long way to go before bearing fruitful results

By Lee Kyung-min

Since his inauguration, President Yoon Suk Yeol has made attempts to restore market-oriented growth and root out what he calls the “deviant behaviors” of some labor unions, under a drive to revitalize an economy scarred by the COVID-19 pandemic and other external economic shocks.

One of his drives that has been hailed was a greater use of nuclear energy and fostering the industry, which has been long demonized under a nuclear phase-out drive railroaded by his predecessor Moon Jae-in.

Others include expanded tax credits for key growth driver industries, including semiconductors, related parts and equipment manufacturers, as well as lowering corporate, property and capital gains taxes.

The president sought to fortify fiscal soundness, a shift from expansionary policies during the pandemic years.

However, the conservative administration has yet to outline the specifics of pension, education and labor reforms, the three areas Yoon promised to reform which will determine the long-term sustainability of the rapidly aging country, economic analysts say.

They also say Yoon's business-friendly push and his moderate success should not completely overshadow calls to strengthen education and the social safety net, without which the country's chronic low-growth issue will not be able to find a breakthrough.

Restoring nuclear energy ecosystem

“It is all about consistency now,” said Lee Jong-ho, a senior researcher at the Nuclear Research Institute for Future Technology Policy associated with Seoul National University.

The nuclear power expert said Yoon's energy policy drive provides much-needed growth momentum for the local nuclear energy industry seeking to expand overseas.

“The reoriented energy policy will help local players contribute to strengthening the country's energy sovereignty and competitiveness in the global market, provided that the government follows through on the investment commitments,” said the former head of Korea Hydro and Nuclear Power's technology and engineering division.

Underpinning the rosy outlook is the government support for the nuclear power industry set to be expanded to over 2 trillion won ($1.51 billion) this year, up from 1 trillion won last year.

Reinforced research and development (R&D), financing and government guarantee programs will help the stagnant industry players, almost all of which nearly perished under the previous Moon administration, according to Lee.

The Yoon administration is also set to resume the suspended use of nuclear energy and stalled construction of new nuclear plants, coupled with plans to export about 10 Korea-developed APR-1400 reactors during his single, five-year term.

The primary examples include the commercial operation of Shin Hanul unit 1 at the Shin Hanul Nuclear Power Plant in Uljin, North Gyeongsang Province, in December. The operation came five years after construction was halted under the previous administration. The stalled construction of Shin Hanul units 3 and 4 will resume in 2024.

The reactor is expected to help reduce the country's dependence on liquefied natural gas (LNG), the chief culprit in the spike of energy prices and the country's trade deficit. Korea has few natural resources and imports over 93 percent of its fuel sources for energy needs.

Providing larger tax credits

The Yoon administration has focused on greater tax incentives to businesses, as outlined in the K-Chips Act. It includes increasing tax credits for semiconductor facility investments, shortening and simplifying the approval process for manufacturing plant construction and making exemptions for government-commissioned feasibility studies.

It also plans to establish the world's largest high-tech semiconductor cluster in Yongin, Gyeonggi Province, by 2042

Sitting inside the 7.1 million-square-meter industrial complex will be memory chips, foundries, design, fabless manufacturing, local parts supply, materials and equipment firms.

Market watchers say the plan can help Korean firms counter the rapidly strengthening market dominance of Taiwan's TSMC, the global top semiconductor powerhouse.

The corporate tax ceiling was lowered by 1 percentage point to 24 percent last year. But that did not meet the calls from business lobbies, which say the rate should be lowered further to 22 percent.

Long way to go

Although the Yoon administration has touched on politically and socially divisive business issues, it remains doubtful whether this has resulted in any progress, an official at one of the major business associations said on condition of anonymity.

“It is still early in his five-year term, so we will have to see whether and how fast the drives will bear fruit,” he said.

Business conditions have improved somewhat, but education, pension and labor reforms have yet to pick up speed, according to Lee In-ho, former president of Korea Economic Association, a local academic society.

The Yoon administration has been agile in addressing and tackling the impact of global uncertainties on the local economy, Lee said. But the president has not shown the same intensity with domestic issues.

“Both education and pension reforms must be pursued from the standpoint of sustainability and population crisis,” he said. “Readjusting government spending as well as raising monthly premiums for state-run health insurance services are among many considerations. Measures to enhance labor flexibility and productivity will help solve labor risks for many corporate entities.”