By Yoon Ja-young
The government will enhance fiscal stability while continuing its expansionary policies to support economic revitalization.
At the 2015 fiscal strategy meeting presided over by President Park Geun-hye, the Ministry of Strategy and Finance presented a master plan for fiscal management between 2015 and 2019.
“At homes, mothers first cut unnecessary spending instead of borrowing money if they have to spend money on something. The country’s fiscal management should follow this principle as well,” President Park said, criticizing the reckless legislation by lawmakers that isn’t accompanied by a funding plan.
She added that fiscal management without strategic guidelines was like sailing without a mast or oars.
The finance ministry explained that there will be strong restructuring of fiscal spending in the budget next year. Firstly, all government projects will be reevaluated from a zero-base, and ineffective projects will be scrapped or have their budgets slashed. The number of government subsidized projects will be cut by 10 percent, and new projects will go through a more thorough evaluation.
“Amid the tough fiscal climate, there will be multi-directional fiscal reform in central and local government as well as in state-run enterprises, to increase fiscal support in areas where it is needed. The funds saved by fiscal reform will be spent supporting the working class and the underprivileged and in increasing youth employment,” said the country’s vice strategy and finance minister Bang Moon-kyu.
“Tax hikes are the last measure to be taken by the government. We aim to form a virtuous circle where the economy is revitalized through fiscal reform and diverse stimulus measures, increasing the tax income for the government,” he added.
There will also be restructuring of state-run enterprises in charge of social overhead capital (SOC), agriculture and fisheries, and arts and culture. For instance, the Land and Housing Corporation (LH) won’t be building apartments larger than 60-square meters as this can be done by the private sector. The management services of LH rental homes will also be open to private companies.
To increase youth employment, the government plans to provide up to 10.8 million won in subsidies per year for businesses that employ a young worker on top of adopting a peak wage system. The government is encouraging businesses to adopt this system, where the employee agrees to a reduced salary a few years ahead of retirement, in return for guaranteeing job security and extending the retirement age. However, concerns have been raised that businesses may stop hiring new workers for a few years as there will be less workers retiring. The government is planning to subsidize part of the wages in order to increase employment.
Regarding R&D, the government’s support will be concentrated on small- and medium-sized businesses. It also plans to enhance transparency in defense arms procurement, increasing participation of non-military experts in the process.