Finance Minister Hong Nam-ki speaks at a meeting of ministers for the Korean New Deal in western Seoul on Thursday. (Yonhap)
South Korea has decided to set aside 20 trillion won ($16.8 billion) from next year’s budget to finance its “New Deal,” a policy package designed to boost the economy in the post-coronavirus era through digital transformation, the finance minister said Thursday.
It also vowed to establish and operate an exclusive fund worth 400 billion won until 2024 to back up digital and tech startups.
“Full execution of the 4.8 trillion won fund from the third supplementary budget will be carried out in the second half of this year and some 20 trillion won will be set aside from next year’s budget plan for the Korean New Deal,” Deputy Prime Minister and Finance Minister Hong Nam-ki said at a ministerial meeting for the economic stimulus package.
“To bring about swift and full effects of the budget, we will focus on executing the secured budget in the early stages and for new investments,” he added.
The Korean New Deal -- parallel to the United States’ Great Depression-era program in the 1930s -- was first announced in April and with a detailed roadmap in July, in hopes that it would keep the economy afloat through digital and green innovation plans. It calls for a 160 trillion won investment by 2025 and creation of 550,000 new jobs.
The Moon Jae-in administration has so far drawn up three rounds of extra budgets worth some 60 trillion won in total to minimize economic fallout from the latest pandemic, pushing this year’s budget from the initial 512.3 trillion won to 546.9 trillion won. Part of the 35.3 trillion won third extra budget will be funneled into the New Deal package.
A special 400 billion won fund for digital and tech startups would be operated from this year to 2024 as well, Hong added. The fund would financially support promising startups in commercializing their technologies.
“We will establish the fund, then standardize and prepare trading guidelines for data, systematically supporting data utilization,” he said.
The Digital New Deal is one of the two key pillars of the stimulus package, which the government plans to spend at least 2.7 trillion won to materialize. It centers on developing technologies that have been tied to the fourth industrial revolution including 5G and artificial intelligence. The “untact” technology, which promotes a contact-free society through digital innovation, is also a key theme.
In line with the digital fund, Hong vowed to soon announce details to the state-run “New Deal Fund” that seeks to attract private investors to finance projects tied to the stimulus package.
The ruling Democratic Party of Korea hinted some details on the fund earlier this month, including a stable 3 percent annual yield and tax benefits. But it drew divided response from the market, with concerns that the government can’t guarantee such stable returns unless they mend possible losses with the taxpayers’ money.
Meanwhile, Hong addressed the latest flare-up in coronavirus cases, which prompted Korea to raise the level of social distancing in Seoul and Gyeonggi Province on Sunday by one notch to Level 2, of the three-tier system, for two weeks.
“We will prepare economic recovery measures based on the latest quarantine situation,” he said.
“It is regretful to adopt such strict social distancing measures as the country’s spending, manufacturing and investment were on the verge of recovery on the back of the stabilizing trend of new cases. Tight social and personal quarantine are most important to prevent the situation from heading into Level 3 … and we will continue monitoring different parts of the economy.”
By Jung Min-kyung (firstname.lastname@example.org)