President Moon Jae-in said Tuesday that the South Korean version of the “New Deal” initiated by his administration would be linked to a push for balanced growth between the Greater Seoul area and other regions.
The project is intended to “shift the axis of national development” from the capital and nearby cities to local areas, he said during a weekly Cabinet meeting. He pledged that the government would do its best to ensure the initiative would provide fresh vigor for local economies and become a turning point in facilitating balanced national development.
Looking at his pledges from a critical perspective, Moon is adding a political dimension to what is set to be a signature policy agenda for the remainder of his five-year tenure, which ends in May 2022.
The next presidential election is scheduled for March that year, followed by nationwide local polls three months later.
Moon and his aides need to focus on carrying through deregulation and other measures to ensure the success of the economic revival plan instead of seeking to use it for political gain.
Last week, Moon announced a plan designed to transform the country’s economy through a set of digital infrastructure and environment-friendly programs to overcome the novel coronavirus-induced shock and prepare for the post-pandemic era. It calls for spending 160 trillion won ($133 billion) by 2025 to create 1.9 million jobs.
Creating more good-paying jobs may well be the core goal of the New Deal initiative, as it will lead to increased earnings and consumption, which in turn will boost corporate investment, catalyzing the economy into a virtuous cycle.
Over the past three years, the Moon government has expanded fiscal spending to create a massive number of temporary and part-time jobs in the public sector, which have been taken largely by senior citizens.
Biased toward labor demands, it has turned a deaf ear to calls for forging a more business-friendly environment by lifting regulatory restrictions to encourage companies to increase investments and employment. The number of good-paying jobs in the private sector, which are preferred by young job seekers, has continued to decrease with corporate activity dampened by unfavorable business conditions, which have been exacerbated by the coronavirus crisis.
According to government data, the number of employees aged 60 and above jumped more than 30 percent from 3.84 million in 2016 to 5.09 million in the second quarter this year, while the figure for people aged 15-29 slid nearly 5 percent from 3.9 million to 3.72 million over the cited period.
Though it has been criticized as a patchwork of existing programs, the plan announced by Moon can be expected to add a large number of quality jobs by providing startups and ventures with more business opportunities in innovative sectors.
Crucial for making this happen is to carry through sweeping regulatory reforms.
An increasingly complex set of regulations have barred local companies from entering new business areas, leaving them to lag behind foreign innovative firms in new industries that are set to lead the post-coronavirus recovery.
Moon made no mention of the need to accelerate deregulation when he unveiled the New Deal plan. Rather, the ruling Democratic Party of Korea, which has an overwhelming parliamentary majority, is pushing to enact a horde of bills to impose more regulatory restrictions on business activity.
The Moon government should affirm its will to transform the economy in preparation for the post-coronavirus era by going all out to eliminate regulations across the board. Above all, the labor market should be made more flexible to help more young people get jobs in innovative sectors.
Even new laws meant to promote new industries would ultimately curtail corporate activity by expanding the discretion of government agencies.
Considering noneconomic factors -- for example, distributing projects to disadvantaged regions with the underlying motive of improving voter sentiment -- would undermine the efficiency and relevance of the New Deal initiative.
Moon’s remarks connecting the initiative with efforts to enhance balanced national development came amid growing public discontent over his administration’s failure to curb soaring housing prices in Seoul and adjacent areas. In a parliamentary speech Monday, ruling party Floor Leader Kim Tae-nyeon proposed relocating the National Assembly and more government offices from Seoul to the administrative city of Sejong to help tackle the overheated property market and overpopulation in the capital area.
It needs to be noted that the New Deal might end up as no deal at all, as critics have suggested. That is likely if it is affected by noneconomic factors, and if it is not accompanied by sweeping deregulation.