FKCCI Proposes 40 Legislative Tasks to the National Assembly Including Investment Activation and Job Improvement

[Asia Economy Reporter Changhwan Lee] The Federation of Korean Industries (FKI) has presented over 40 legislative tasks to the 21st National Assembly aimed at restoring South Korea's economic resilience after the COVID-19 pandemic.

The three major areas proposed by the FKI are investment activation, improvement of the job environment, and creation of new industries, with more than 40 legislative tasks presented by sector.

Regarding investment activation, a representative task is the need for active deregulation and the establishment of a new tax credit for facility investment.

South Korea's regulatory competitiveness remains low despite operating a regulatory cost management system. In the corporate regulation ranking of the International Institute for Management Development (IMD) World Competitiveness Ranking, South Korea ranked 50th out of 63 countries in 2019, which is very low.

The FKI pointed out that South Korea's regulatory cost management system remains at the level of the UK's initial One in One Out system, and since the implementation of the regulatory cost management system, the net number of regulations has actually increased based on total volume. The One in One Out system requires that when one regulation is introduced, one existing regulation must be eliminated.

The FKI emphasized that the regulatory cost management system should be further strengthened to improve the business environment, which has been contracted due to COVID-19. They proposed introducing a One in Two Out system, which mandates that when a regulation is introduced and regulatory costs above a certain scale are expected, at least two regulations must be reformed. They explained that easing the regulatory cost burden could create a foundation for long-term corporate investment activation.

To dramatically increase private investment, which had been stagnant even before the spread of COVID-19, the FKI also proposed establishing a tax credit for facility investment. Since the temporary investment tax credit was abolished in 2011, only tax credit systems for equipment investment with specific purposes such as energy saving and environmental preservation exist, and support for general equipment investment is insufficient.

Regarding jobs, the FKI demanded easing conditions for incentives for hiring career-interrupted women and lifting the total quota regulation on enrollment for cutting-edge fields.

Women who have left the labor market due to childbirth and childcare face difficulties in reemployment, resulting in South Korea's female employment rate (57.2%) being below the OECD average (65.0%). The FKI argued that it is necessary to strengthen incentives for companies hiring career-interrupted women to promote women's participation in economic activities.

Furthermore, the shortage of future industrial manpower is clearly reflected in the enrollment issues of computer science departments. While Stanford University in the U.S. increased its enrollment from 141 in 2008 to 745 in 2018, Seoul National University has maintained 55 students for 16 years, which the FKI claims shows the current status of manpower related to the Fourth Industrial Revolution.

The FKI stated that cutting-edge departments should be exempt from the total enrollment quota regulation for universities in the Seoul metropolitan area temporarily, so that the manpower shortage in new industries can be resolved as soon as possible.

Regarding new industries, the FKI said it is necessary to expand and convert the R&D tax credit, strengthen support for in-house venture startups, and provide groundbreaking incentives through a patent box tax system for small and medium-sized enterprises.

The COVID-19 crisis has shaken the foundation of companies and negatively affected R&D. Since reducing R&D investment results in losing quality jobs and future new business opportunities, the FKI argued that bold incentives are needed especially in difficult times.

The FKI stated that the R&D tax credit, which had been reduced since 2013, should be expanded and converted, and that a reserve system should be allowed so that companies can deduct reserves set aside for R&D up to 3% of sales from taxable income. This is because setting aside reserves increases the amount excluded from the tax base under tax law, effectively reducing corporate tax.

They also proposed expanding support for in-house ventures, which have disappeared since the venture boom of the 1990s, so that a second Naver can emerge. They suggested broadening the exemption range for startup fees payable when in-house ventures spin off, and considering the introduction of special R&D tax credits for in-house ventures and corporate tax reduction incentives for parent companies.

The FKI also advocated for the introduction of a patent box system to encourage small and venture companies to actively invest in new industries. The patent box system is a proactive incentive system that applies a uniformly low tax rate to income generated from successfully commercialized intellectual property.

This content was produced with the assistance of AI translation services.