No Sign of Global Leading Projects and Job Prospects Bleak in the 'Korean New Deal'

Quantity Only Set, No Amount
Project May Be Reduced During Budget Planning
Regulatory Innovation Plans by Industry Also Missing

[Asia Economy Reporter Jang Sehee] Although the government increased the scale of the 'Korean New Deal' project by 84 trillion won from the plan announced last month (76 trillion won), there are criticisms that it is insufficient to lead the global economy as it includes projects far from securing new growth engines. The job creation aspect is also unclear as specific timing and details are not specified, making it uncertain whether jobs will actually be created.

The Korean New Deal announced by President Moon Jae-in on the 14th is a plan to invest a total of 160 trillion won by 2025 to create 1,901,000 jobs. President Moon defined it as "a declaration of a great transformation for Korea to leap forward as a leading country."

Looking at the Korean New Deal plan announced by the government, it includes projects such as replacing outdated equipment or providing direct financial support (vouchers). Representative projects include customized security consulting and security product installation support (6,650 SMEs), replacement of old PCs and laptops for teachers (200,000 units), and voucher support for consulting use by SMEs (160,000 companies).

Examining the details of the Korean New Deal, all projects specify only quantities without indicating amounts. A government official said, "The amount for each project will be finalized after the next year's main budget is compiled," adding, "The project amount could increase or decrease." This means the projects could be scaled down during the next year's budget compilation process.

The government announced it would create 567,000 jobs through the Digital New Deal, 659,000 jobs through the Green New Deal, and 339,000 jobs through strengthening social and employment safety nets, but most of these are short-term government-led jobs. Examples include data construction, opening and utilization (295,000 jobs), establishment of digital-based education infrastructure for all elementary, middle, and high schools (9,000 jobs), and building smart medical and care infrastructure (5,000 jobs).

There is criticism that the government's job calculation method prioritizes quantity over quality, as it cited the 2018 employment inducement coefficient. The 1.9 million jobs included in this plan are the result of multiplying the investment amount by the Bank of Korea's employment inducement coefficient (2018). Since the employment inducement coefficient can change depending on the economic elasticity of upstream and downstream industries or changes in industrial structure, it is analyzed that the government’s target will fall significantly short.

Bang Ki-seon, Deputy Director-General of the Ministry of Strategy and Finance, stated, "If the employment inducement coefficient or job inducement coefficient changes in the future, there may be some changes. This should be seen as a benchmarking figure rather than an exact job target."

There are also criticisms that the focus on government financial support has excluded long-standing regulatory reforms. Although the government cited regulations as a future threat, it did not present guidelines on this. Choo Kwang-ho, Director of the Job Strategy Office at the Korea Economic Research Institute, said, "The Korean New Deal is too focused on government spending and investment," adding, "Regulations that hinder corporate activities should be lifted first." He also emphasized, "It is urgent to ease detailed industry-specific regulations such as industrial safety facility regulations and medical device approvals."

The fiscal cost of abolishing the support obligation standard proposed by the government is also expected to be enormous. The National Assembly Budget Office projected that if the support obligation standard is abolished, an additional average annual cost of 10.1502 trillion won will be required from 2018 to 2022. The support obligation standard has been criticized for its side effect of preventing poor elderly people from receiving livelihood benefits because they have children who exceed certain income and property criteria but do not actually provide care.

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