Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Foreign investors, workers to benefit from eased regulations in 2023
Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho, center, speaks during a joint government press briefing on Korea's 2023 economic policy direction at the Government Complex in central Seoul, Wednesday. From left are Minister of Land, Infrastructure and Transport Won Hee-ryong, Choo and Financial Services Commission Chairman Kim Joo-hyun. Yonhap
By Yi Whan-woo
Korean gov't cuts 2023 growth outlook to 1.6 percent
By Yi Whan-woo
Korea will ease regulations on cash incentives next year for foreign businesses operating here to encourage investments in proprietary and other cutting-edge technologies on the country's path to enhancing supply chain security and nurturing new growth engines, the government said Wednesday.
Korea will also include foreign residents in its new census studies, starting in January, in a bid to cope with the declining population.
A record 111,000 foreign manual laborers will be allowed to enter Korea annually on E-9 visas beginning next year, while other medium- to long-term regulations on non-professional employment permits will be revised as well.
Such plans to increase foreign investments and deal with a shortage of workers are part of the 2023 economic policy directions announced jointly by the Ministry of Economy and Finance and relevant ministries, Wednesday.
The announcement was made as Korea is anticipated to continue facing severe headwinds due to a prolonged growth slowdown and persistently high inflation.
The finance ministry forecast the country's economy to grow by 1.6 percent, Wednesday, down from the 2.5 percent outlook for 2022.
The government's outlook is on par with the 1 percent range growth estimates by multiple financial institutions within and outside the country, including the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD).
The Korean economy grew in the 1 percent range or lower during only four past crises ― 1980 in the aftermath of the second oil crisis, 1998 in the midst of the Asian financial crisis, 2009 in the midst of the global financial crisis and in 2020 due to the COVID-19 pandemic.
Correspondingly, the government forecasts the current account surplus will fall to $21 billion next year from this year's $22 billion. In particular, exports are expected to shrink 4.5 percent after growing 6.6 percent in 2022.
The government forecasts 3.5 percent inflation in 2023, which is on par with the 3 percent range growth forecasts by the IMF and the OECD, among others. The 2023 inflation outlook is down from this year's 5.1 percent, but is still far higher than Korea's target goal in the 2 percent range.
“The economic challenges to exports and people's livelihoods are likely to deepen next year, especially in the first half before the economy slowly gets better afterwards,” Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho said during a joint government briefing on policy directions at Government Complex Seoul. “The government therefore asks for support from the business community, labor circles and others to overcome the challenges.”
World's top 4 arms exporters, Korean version of Walt Disney Company
The policy directions consist of four main goals ― stable management of macro-economic issues, recovery of people's livelihoods, private sector-driven growth and planning for the future.
The government will frontload 65 percent of the 2023 budget worth 639 trillion won in the first half of next year.
To stabilize the people's livelihoods, the government will extend tax incentives on energy, discount coupons for agricultural products and welfare benefits for the targeted groups.
To spur private sector growth, the government will push to secure overseas infrastructure projects worth a combined $50 billion won every year.
It especially will mobilize diplomatic and financial resources to win mega projects, namely the cutting-edge city of NEOM in Saudi Arabia, the relocation of the Indonesian capital from Jakarta and the construction of a new airport in Poland.
A total of 59 trillion won be offered to small and medium-sized enterprises (SMEs) to help them overcome the triple whammy of high inflation, high borrowing costs and high won-dollar exchange rate.
Support for arms exports will be expanded under the goal of Korea joining the world's top four arms exporters and bolstering its defense industry as a new growth engine.
The government seeks to enhance economic security as part of future planning. Accordingly, it will enhance tax incentives and financial support to procure minerals and crops that are strategically crucial for the supply chain and survival of the country.
In relation to private sector-driven growth, the government came up with a special strategy, translated roughly as “New Growth 4.0,” aimed at coping with the Fourth Industrial Revolution.
It is modeled after three similar strategies abroad ― Horizon Europe of the European Union, Moon Shot of Japan and High Tech Strategy 2025 of Germany.
It focuses on three tasks ― pioneering future technologies, creating digitally connected lifestyles and securing unsurpassable superiority in new growth engines against competing nations.
The tasks center on 15 projects. They are future mobility, space exploration on Korea's own, quantum technology, medical technology, green energy, artificial intelligence-based (AI) digital technology, smart logistics, carbon neutral cities, smart farming, smart grids, semiconductors and displays, bio clusters, a tourism cluster centering on the former presidential office of Cheong Wa Dae, R&D on special visual effects, metaverse and virtual reality and the winning of overseas mega deals on construction, defense and nuclear plants.
Concerning media contents and tourism, the government seeks to capitalize on the popularity of Korean films and dramas to create a domestic version of the Walt Disney Company and a tourist resort that can be comparable to Mexico's Cancun.