'Semiconductor, Battery, Vaccine' National Strategic Technologies to be Fostered... Special Fund Support of '2 Trillion+α'

2021 Second Half Economic Policy Direction

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance (second from right), is speaking at the Democratic Party of Korea's 2021 Second Half Economic Policy Direction Party-Government Meeting held at the National Assembly Members' Office Building on the 25th. 2021.6.25 Photo by Yonhap News

[Sejong=Asia Economy Reporter Son Sun-hee] The government will significantly expand tax and financial support in three major national strategic technology sectors: semiconductors, batteries (secondary batteries), and vaccines. The aim is to actively support corporate investment and innovation to achieve an economic rebound beyond overcoming the COVID-19 crisis.

◆ Up to 50% tax credit for R&D in 'national strategic technologies'... Support for export companies facing 'logistics difficulties' = On the 28th, the Ministry of Economy and Finance announced the '2021 Second Half Economic Policy Direction,' which includes such corporate revitalization measures. For the three major national strategic technology sectors?semiconductors, batteries, and vaccines?tax credits of up to 40-50% for research and development (R&D) and up to 10-20% for facility investment will be supported from the second half of this year through 2024.

Additionally, to promote new investments in related fields, a special fund of 2 trillion won plus alpha (α) will be concentrated on facility investment support from the second half of this year through 2023. This expands the scope and scale of the 1 trillion won special facility investment fund announced under the existing 'K-Semiconductor Strategy.'

To legally support this, the government will also push for the enactment of a special law tentatively titled the 'Special Act on Strengthening Competitiveness and Protection of National Core Strategic Industries.' This special law will include comprehensive support measures for core strategic industries such as R&D, special permits for approvals, regulatory easing, customized workforce training support, and protection of core technologies from an economic security perspective. It is expected to be discussed in conjunction with the National Assembly’s semiconductor special law.

Furthermore, sequential announcements of support plans for major industries such as shipping, batteries, shipbuilding, automobiles, and venture sectors are planned for the second half of the year. In particular, comprehensive measures to fundamentally enhance industrial competitiveness will be prepared in fields such as vaccines and batteries, following the outcomes of the Korea-US summit in May.

Regarding the '110 trillion won investment project' involving public, private, and private capital announced earlier this year by Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki, the Ministry of Economy and Finance stated that it will steadily implement the project in the second half of the year as well. The target for the second half is 58 trillion won out of the total 110 trillion won.

In relation to the rapidly progressing global minimum tax discussions, the government will continue to support returnee companies to expand domestic production bases. The deadline for completing new or expanded domestic business sites required for returnee companies to receive corporate tax reduction benefits has been extended from 'within one year after the transfer or closure of overseas business sites' to 'within two years,' making it more realistic.

Amid an unprecedented export boom this year, domestic export companies are facing difficulties such as increased logistics costs due to rapidly increased volumes. Accordingly, from July, the government will add two more temporary vessels to the existing two on the high-demand trans-Pacific route, increasing the total to four, and prioritize allocating a certain amount of shipping capacity per main route to small and medium-sized enterprise shippers. In addition, financial support will be strengthened by supplying 125 trillion won in export financing in the second half of the year, and support such as quarantine exemption and priority vaccination will be provided to facilitate smooth overseas activities for businesspeople.

Lee Eok-won, the first vice minister of the Ministry of Economy and Finance, said regarding the selection criteria for 'national strategic technologies,' "The detailed scope of technologies will be selected considering the effectiveness and fairness of support through consultations with related ministries and industry opinions," and added, "It is scheduled to be announced through the tax law amendment bill around the end of next month."

Regarding concerns that tax benefits related to semiconductors, batteries, and vaccines might be concentrated only on some large corporations, he explained, "This is not about distinguishing between large and small-medium enterprises but about providing tax support for industries and technologies that are important from the perspective of the national economy, security, and strategy," adding, "Semiconductors have a large industrial ripple effect amid intensifying global technological hegemony competition, and the government intends to provide very bold support for batteries, which are core parts of future vehicles, and vaccines, which are directly related to the lives of the people."

◆ Accelerating the 'Korean New Deal'... Promoting five promising new industry development projects = The Korean New Deal project, which will invest a total of 22.5 trillion won this year, aims to produce visible results in the fields of digital, green new deal, and safety net reinforcement within the year. Related to this, the government plans to actively cooperate with the National Assembly to complete the ten major legislative tasks of the New Deal, including the Environmental Impact Assessment Act, the Basic Data Act, and the Carbon Neutrality Basic Act, in the second half of the year.

Additionally, to expand public participation, the government is considering the additional establishment of a New Deal fund and plans to expand the scope of tax benefits for the New Deal infrastructure fund. The goal is to promptly form sub-funds of the 4 trillion won policy-type New Deal fund this year and raise an additional 4 trillion won investment next year. Detailed information will be disclosed at the announcement of 'Evolving New Deal, Korean New Deal 2.0' on the 14th of next month, marking the first anniversary of the Korean New Deal.

Furthermore, core projects will be promoted to nurture and support five promising new industries: cloud computing, blockchain, intelligent robots, healthcare, and metaverse.

Support budgets to train a large number of core personnel in these new technology fields will be intensively reflected in next year’s budget. In the software (SW) sector, a total of 413,000 people will be trained by 2025, and 36,000 semiconductor specialists will be trained over the next 10 years.

Large corporations such as Samsung (SSAFY), SK (HiFive), and POSCO (AI·Big Data) will design and train, and the Korea Chamber of Commerce and Industry will operate excellent training models for new industries to establish a corporate-led 'K-Digital Talent Development System.' For unemployed youth under 34 years old, more than 1,000 additional trainees will be added annually to the existing operating personnel. The required funds will be jointly borne by the government and the private sector.

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