"Next Government Must Maximize Innovation Capacity, Rebuild Market Order, and Stabilize Housing Market"

[Asia Economy Reporter Jeong Hyunjin] To respond to changes in the post-COVID era, it has been argued that the next government must embark on a grand journey to 'reset' the rules across society, maximizing innovation capabilities, rebuilding market order, and restoring public hope through housing market stabilization.

The Korea Economic Research Institute (KERI), under the Federation of Korean Industries, made this claim on the 29th while proposing policy tasks for the next government at the seminar titled "40th Anniversary Seminar of the Korea Economic Research Institute: Reestablishing the Direction of the Korean Economy and Policy Tasks for the Next Government."

Cho Kyung-yeop, head of the Economic Research Office, who presented on macroeconomics, fiscal policy, and supply chain sectors, proposed three key policy themes for the macroeconomic field: sustainable growth strategy, market order restoration, and public hope recovery, along with related detailed policy tasks. KERI called for a transition to a private-sector-led economy to restore market order and emphasized the need to strengthen the rule of law to expand social capital. For housing market stabilization, they advocated for a temporary reduction of capital gains tax, repeal of the three lease laws, expansion of housing supply, and abolition of the price ceiling system for pre-sale housing. KERI also proposed measures to prevent debt defaults among self-employed individuals and to promote loan conversions focusing on long-term and high-interest loans.

Furthermore, KERI stressed that securing fiscal soundness is a crucial task for the next government. As part of fiscal reform, they called for the introduction of an independent fiscal committee, separation of the Budget and Accounts Committee into a 'Budget Committee' and an 'Accounts Committee,' and the adoption of a fiscal total volume system for balanced national development. They also emphasized the need to adjust welfare spending considering intergenerational equity and highlighted the importance of corporate tax relief, inheritance tax reform, and abolition of the securities transaction tax. Regarding Korea's strategy amid the US-China hegemonic competition era, KERI underscored the necessity of strategic responses to the global supply chain restructuring. To this end, they urged performance-driven industrial policies, upward strategies, improvements in reshoring policies, and strategic responses to the continuation of the trade reciprocity system.

Lee Taegyu, senior research fellow, who presented policy tasks in labor, industry, and environment sectors, emphasized the need for sweeping institutional reforms and securing institutional flexibility. He warned that "jobs in the Fourth Industrial Revolution era are fundamentally different from the past," and that the current segmented dual labor market?between large corporations and SMEs, regular and irregular workers?would widen disparities in working conditions and further exacerbate income polarization. KERI proposed policy directions including reforming the seniority-based wage system, enhancing flexibility in employment and dismissal, and building cooperative labor-management relations through balancing power between labor and management. They also suggested establishing a 'National Future Education Committee.'

Alongside this, KERI proposed abolishing compartmentalized regulations, shifting from a positive regulatory system of 'principle prohibition, exception allowance' to a negative regulatory system of 'principle allowance, exception prohibition,' and significantly reducing punitive administrative regulations such as the Serious Accident Punishment Act. They also advocated improvements to the Commercial Act and the Fair Trade Act and pointed out the need to improve the current regulatory oversight system. In the environmental sector, concerns were raised about the feasibility of the 2050 carbon neutrality scenario and the Nationally Determined Contributions (NDC), emphasizing the need to reset a feasible carbon neutrality scenario.

In the discussion, Park Jaewan, chairman of the Korea Peninsula Advancement Foundation and emeritus professor at Sungkyunkwan University, presented the next government's historical mission as the realization of a civilized state where 'communitarian liberalism is established,' arguing that this would expand freedom and opportunity and promote community values. He also identified four core tasks for the next government: ▲restoration of liberal democracy ▲creation of a market economy led by the private sector ▲harmonious 'inclusive society' and national integration ▲improvement of the quality of life for North Korean residents and peaceful reunification of the Korean Peninsula.

Meanwhile, Cho Seunghee, director of the Park Chung-hee Memorial Foundation, set the next government's goal as "aiming for Korea's G-2 status through a major transformation of corporate policy." Director Cho evaluated that the persistent trend of low growth and worsening distribution over the past 30 years stems from 'anti-corporate policies' and argued that this trend must be reversed through a major transformation of corporate policy in the next government. Former lawmaker Kim Jongseok (former director of the Yeouido Institute and former president of KERI) stated, "The reform tasks the next government must undertake, whether regulatory reform, labor reform, or public reform, should fundamentally focus on increasing public trust in policies and institutions."