Revising Economic Penalties Tightening Businesses, Chuseok Livelihood Measures to Be Announced Next Month [Ministry of Economy and Finance Report]

Deputy Prime Minister Choo Kyung-ho Reports Ministry of Economy and Finance to President Yoon
August Chuseok Livelihood Measures Announcement and Strengthened Macroeconomic Risk Assessment
Transition from Expansionary to Sound Fiscal Policy

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Kwon Haeyoung] The government is pushing to convert economic penalties that excessively restrict corporate activities into administrative sanctions such as fines. A public-private joint "Economic Regulation Innovation Task Force (TF)" co-led by the Deputy Prime Minister for Economy and private experts will be launched within this month to carry out strong regulatory reforms. Additionally, policy priorities will be placed on managing soaring prices and stabilizing livelihoods, with a Chuseok livelihood support plan to be announced next month, while strengthening macroeconomic risk management to respond to downside risks in the economy.

On the 11th, Deputy Prime Minister for Economy and Minister of Economy and Finance Choo Kyung-ho held a Ministry of Economy and Finance work report at the Presidential Office in Yongsan, Seoul, covering these matters. This was the first departmental work report since President Yoon Suk-yeol’s inauguration, starting with the Ministry of Economy and Finance, followed sequentially by other ministries.

First, the government will form a public-private joint TF to reform key regulations in the economic sector. The Deputy Prime Minister for Economy and private experts will serve as co-team leaders, with economic ministry ministers and numerous private experts participating as team members. Under the TF, six working groups will operate focusing on field difficulties, environment, healthcare, new industries, location, certification, and shadow regulation improvements, along with an "Economic Regulation Tribunal" to assess the effectiveness and appropriateness of regulatory improvement proposals. The government plans to achieve definite results through the public-private joint Regulation Innovation Strategy Meeting.

The government will also conduct a comprehensive review of legal provisions under each ministry’s jurisdiction to convert excessive economic penalties into administrative sanctions such as fines and rationalize sentencing. To this end, a TF involving the Ministry of Economy and Finance, Ministry of Justice, Fair Trade Commission, and other related ministries will be established and operated.

In the work report, the Ministry of Economy and Finance also focused on stable management of macro and livelihood economies. Prioritizing livelihood and price stabilization, the government will check the implementation status of price measures through an inter-ministerial TF and prepare a Chuseok livelihood support plan in August.

To respond to downside risks to economic growth, measures to boost export and investment vitality such as expanding trade finance by more than 40 trillion won and deregulation will be pursued. To prevent macroeconomic risk factors from materializing, an early warning system (EWS) will be operated continuously, with joint inspections and responses by related agencies on financial and foreign exchange markets and financial institution soundness.

The work report also included strengthening the Ministry of Economy and Finance’s policy coordination function centered on key economic issues of the new government. Through inter-ministerial collaboration led by the Ministry of Economy and Finance, the plan is to focus on nurturing core industries such as semiconductors and shipbuilding, intensively review and prepare responses to future challenges like population crisis and carbon neutrality, and strengthen the comprehensive role in external economic strategies including supply chain stabilization and bloc formation responses.

The fiscal management policy will shift from an "expansionary fiscal" stance to a "sound fiscal" stance, carrying out the largest-ever expenditure restructuring. The management fiscal balance will be limited to within 3% of the Gross Domestic Product (GDP), and national debt will be capped at the mid-50% level by 2027, with a new fiscal rule to be prepared in September.

The government will introduce a rapid preliminary feasibility study (PFS) system, shortening the PFS period from the previous 9 months to 6 months, and raise the threshold for social overhead capital (SOC) and research and development (R&D) projects subject to PFS from 50 billion won to 100 billion won.

In addition, while promoting public institution efficiency, a "Public Institution Management System Reform" plan will be prepared to strengthen autonomy and responsibility of ministries and agencies. This includes reducing the number of institutions directly supervised by the Ministry of Economy and Finance and expanding the weight of financial performance indicators in performance evaluations.

The Ministry of Economy and Finance will comprehensively review its 28 committees, abolishing or integrating those with similar functions to reduce their number by more than 30% compared to the current level.

The tax reform plan to be announced at the end of this month will include measures to boost economic vitality, stabilize livelihoods, and expand tax infrastructure.

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