Policy Issue

Economic Policies for the Second Half of 2018

인쇄

The second half policies focus on 1) creating jobs and strengthening social safety nets 2) accelerating ‘growth through innovation’, 3) sharing the outcomes of growth, and 4) maintaining expansionary fiscal management.


1. Create jobs and strengthen social safety nets

The government will both promote employment and strengthen social safety nets. 


1) Strengthen social safety nets
- Expand the EITC  in terms of both coverage and the amount received
- Expand the unemployment insurance: Increase the amount and period, and gradually broaden the eligibility to artists and independent contractors
- Work to raise the job seeker allowance and to adopt unemployment entitlements
- Increase monthly basic disability benefits to 250,000 won from September this year and basic retirement benefits to 300,000 won next year, which will cover the bottom 20 percent earners, and ease requirements for housing benefits and basic social security benefits
- Develop a payment system for self-employed small merchants, which will cost them no fees
- Work to introduce a new credit card processing fee system, which will be applied to small merchants
- Work to guarantee up to 10 years of commercial lease agreements if the tenant wants to renew it, and to find ways to protect tenants in case renewals are impossible due to building reconstruction


2) Help create jobs
- Work to promote private sector job creation in a long-term perspective, taking into consideration changes in demographics and industries
- Review local governments’ employment programs and introduce nationwide the ones which work well
- Quickly implement the supplementary budget for young adult jobs, and continue to increase jobs for middle aged workers
- Expand public sector jobs to 810,000 by 2022


3) Continue to improve the quality of life
- Increase housing supply for the newly married and young adults, such as through urban renewal projects
- Accelerate the construction of high speed rails for the Seoul metropolitan area , study if it is better to publicly manage the bus transport service, repair or replace old housing and transportation facilities, and strengthen the maintenance of public facilities with a focus on increasing safety and improving the environment
- Expand the national health insurance coverage, and work to lower transportation charges and communications costs
- Increase public daycare centers and expand the public babysitting service


4) Work for the administration’s labor policies
- Continue to give minimum wage support to small businesses
- Introduce a support to help enforce a 52 hour workweek
- Work to narrow income gaps: Reduce wage gaps between permanent and temporary workers, and promote the use of wage information systems
- Work on the reforming of the labor market: Seek innovation in the current employment system, while strengthening safety nets, such as unemployment benefits


2. Accelerate ‘growth through innovation’

The government will work to improve regulations and promote investment.


1) Improve regulations
- Announce in August the regulations to be reformed and draw up reforming plans in the second half: Focus on the reforms that have been suspended due to conflicts of interest, and work on them through government-wide cooperation, such as regular ministerial and vice ministerial level meetings
- Work for the reform bills suspended at the National Assembly to become law


2) Promote corporate investment
- Help solve regulatory difficulties which have stalled the investment, such as those related to approval
- Revise the corporate investment support with a focus on local job creation and new technology development
- Support startups: Successfully implement the startup support supplementary budget, improve the new technology evaluation system, and find ways to support M&As and boost secondary markets, such as raising funds for the purpose


3) Work on national future growth engine project
- Work on the national future growth engine project: Select from private sector projects and concentrate government investment on those projects, including tax support and financing, to grow them into future growth engines
- Continue to seek ways to reform the country’s major industries, such as cars and petrochemicals
- Draw up plans to boost the service sector, focusing on potential growth engines, such as the sharing economy, tourism and healthcare


4) Develop human capital that meets the demand of the industry
- Educate workforce according to the demand of the industry: Draw up plans to provide lifelong training, as well as promote work-study


5) Work closely with local governments
- Set up a local ‘growth through innovation’ system in which local governments draw up plans and the government provides support accordingly
- Set up an industry-local university partnership program


3. Share the outcomes of growth

The government will work for the outcomes of growth to be felt by all involved.

 

- Work to allow multiple derivative actions and mandate electronic shareholder voting
- Regulate contracts between large conglomerates and their subsidiaries, as well as transactions between their financial subsidiaries and non-financial subsidiaries
- Carefully watch unfair practices, such as those with suppliers and franchisees, as well as those involving intellectual property rights
- Work on ‘inclusive finance’, such as by revising current financial products for low-income households to be more customer-friendly, improving delinquency work-out programs and regulating misselling
- Promote profit-sharing with suppliers, as well as encourage large conglomerates to assume corporate responsibility, such as by cooperating with SMEs, creating jobs and serving the public good


4. Maintain expansionary fiscal management

The government will increase spending by around 4 trillion won to help the economy maintain growth momentum, and will strengthen its risk management. 


1) Maintain expansionary fiscal management
- Increase spending: Implement about 4 trillion won worth of stimulus mainly composed of government funds and investments by state-owned enterprises, as well as appropriate earmarked reserves to support corporate restructuring and local economies
- Keep the 2019 budget expansionary: Keep the 2019 budget expansionary as long as it does not hurt the country’s mid- to long-term fiscal sustainability, continue to focus spending on job creation, ‘growth through innovation’ and social safety nets
- Work on maintaining fiscal soundness: Tightly control discretionary budget spending and work to increase spending efficiency


2) Strengthen risk management
- Be prepared for global trade situation: Closely monitor changes in global trade, such as US-China trade conflicts on tariffs and US security investigation of vehicle imports, work to diversify trade partners and improve product quality, and make a decision on the joining of the CPTPP  as soon as possible
- Be prepared for global financial market uncertainty: Closely monitor financial market risks in some emerging economies in the wake of Fed’s rate hikes and implement financial market stabilization measures if necessary, and make ready support for heavily indebted low-income households and small self-employed businesses in case local market rates increase in line with Fed rates


* For further details, please refer to the attached file.
 

File Issue.pdf
Nov 2018

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The Economic Bulletin is a monthly English publication that covers the current status and future outlook of the Korean economy, as well as key economic policies and indicators. By sharing such information with foreign residents in Korea and international opinion leaders, the Economic Bulletin aims to generate a greater international level of understanding on the Korean economy.