[Yoon Seok-yeol Elected] Creating Private Investment and Jobs through Regulatory Innovation... The Direction of 'Y-nomics'

Establishing a 'Regulatory Reform Task Force' to Revitalize Corporate Investment... Expanding Potential Growth Rate from 2% to 4%

President-elect Yoon Seok-yeol is performing an uppercut ceremony for supporters in front of the People Power Party headquarters in Yeouido, Seoul, on the 10th. Photo by Yoon Dong-ju doso7@

[Asia Economy Sejong=Reporters Kwon Haeyoung and Son Seonhee] The economic policy direction of Yoon Suk-yeol, the president-elect of the 20th Republic of Korea, can be summarized as revitalizing private investment and creating jobs through regulatory innovation on a broad scale. To stabilize people’s livelihoods, 50 trillion won will be provided to small business owners affected by COVID-19, while in the tax sector, the punitive real estate taxes such as comprehensive real estate tax and capital gains tax surcharges on multiple homeowners imposed by the Moon Jae-in administration will be eased. However, due to the severe 'minority government' landscape, cooperation from the Democratic Party of Korea is essential for legislation and personnel appointments, raising concerns that it may be difficult to strongly push major policies in the early days of the administration.

◆ Private-led Growth Drive through Regulatory Reform＝ At the core of Yoon’s economic pledges lies the philosophy of a free market economy led by the private sector. The plan is to abolish various regulations that restrict corporate activities, achieve innovation-led growth centered on the private sector, and thereby maximize the advantages of the market economy to create momentum for economic growth.

Yoon stated in his pledge book that he will establish a 'Regulatory Reform Task Force' to activate corporate investment. He also plans to expand R&D and tax support in new industries such as future cars, secondary batteries, and bio sectors. He emphasized revitalizing corporate activities by introducing a multiple voting rights system for venture companies and improving the current 'related party' system, among other corporate law reforms.

Changes are also anticipated in job policies. Prioritizing 'private innovation and creativity,' the plan is to actively support small and medium-sized enterprises (SMEs) and mid-sized companies entering new industries to create quality jobs that young people desire most. The growth ladder for small, venture, and startup companies will be restored, and the tax-exempt limit on stock options will be raised to 200 million won to attract talented personnel. Furthermore, technology sectors such as nuclear power, batteries, solar power, and hydrogen will be intensively developed to reach the global top three level, creating related high-quality jobs. Support for self-employed and platform workers will also be strengthened. This marks a differentiation from the Moon administration, which, despite branding itself as a 'job government,' focused heavily on increasing public jobs throughout its five-year term, concentrating mainly on managing macro job indicators.

Yoon aims to double South Korea’s current potential growth rate of about 2% to 4% through this private-led innovation growth. He also stated that sustainable welfare’s virtuous cycle will be achieved based on such growth.

◆ Full Effort to Stabilize Livelihoods Including 50 Trillion Won Compensation for Small Business Losses… Challenge of Strengthening Fiscal Soundness＝ Efforts will also be made to stabilize livelihoods, including support for small business owners who have suffered for over two years due to COVID-19. Yoon promised to inject 50 trillion won in fiscal funds to compensate losses for small business owners and self-employed affected by COVID-19. During his candidacy, he announced an additional 6 million won on top of the existing government support of 3 million won, providing up to 10 million won. His plan includes implementing a pre-compensation system that first provides half of the support amount proportional to the degree of regulation and damage. An emergency debt restructuring plan similar to that implemented during the International Monetary Fund (IMF) foreign exchange crisis will also be introduced, expanding the principal reduction rate for small debts from the current 70% to 90%. If the situation worsens, the government will consider bulk purchasing and managing bad debts of self-employed individuals and establishing a bad debt resolution fund.

Additionally, a 'rent-sharing system' will be introduced, where rent is divided equally among landlords, tenants, and the government. For two years after the end of COVID-19, landlords’ rent reductions will be fully tax-deductible, and value-added tax and utility bills for small self-employed businesses will be reduced by 50%.

Especially since Yoon pledged to implement compensation for self-employed losses immediately upon taking office, discussions on the second supplementary budget are expected to intensify with the new government’s launch. It will be difficult to secure 50 trillion won solely through expenditure restructuring, making the issuance of deficit bonds highly likely. In that case, national debt will surpass 1,100 trillion won this year, and the ratio to gross domestic product (GDP) is expected to rise from the current 50.1%. Moreover, as Yoon has announced tax relief measures on real estate and stocks, including reductions in comprehensive real estate tax, capital gains tax and acquisition tax on multiple homeowners, and abolition of capital gains tax on stocks, the national finances, which are already propped up by debt, may deteriorate further, making fiscal soundness management an urgent task.

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