[Yoon Administration Economy] Structural Reform in '5 Major Sectors'... "Changing the System to Boost Productivity"

[Image source=Yonhap News]

The government will actively promote structural reforms in five major sectors: public and pension, labor market, education, finance, and service industries. The plan is to significantly enhance productivity and growth potential through innovative improvements in key economic and social areas.

The 'New Government Economic Policy Direction' announced on the 16th includes the direction for structural reforms in these five sectors.

First, through intensive structural reforms in the public sector, including finance, public institutions, and public pensions, the government aims to improve the productivity and efficiency of the bloated public sector.

To this end, the National Fiscal Strategy Meeting will be held to fully shift the fiscal stance to sound finance and establish a new framework for fiscal management. The new government will set management targets for fiscal aggregates such as fiscal balance and national debt and devise multifaceted fiscal innovation measures to achieve these goals.

Legislation of simple yet binding fiscal rules will be pursued, and not only discretionary spending but also mandatory and rigid expenditures will be strongly restructured. Based on internationally used balance rules and after gathering expert opinions, detailed fiscal rule standards will be prepared and legislation promoted in the second half of this year.

For fiscal system innovation, fiscal systems over 20 years old, such as education finance grants and preliminary feasibility studies, will be rationalized to reflect changes in economic and social conditions.The preliminary feasibility study threshold for Social Overhead Capital (SOC) and Research and Development (R&D) will be raised from 50 billion won to 100 billion won.

President-elect Yoon Suk-yeol received the national agenda prepared by the transition committee from Ahn Cheol-soo, the chairman of the transition committee, during the plenary meeting held at the Presidential Transition Committee in Samcheong-dong, Jongno-gu, Seoul, on the morning of the 3rd of last month. Photo by Transition Committee Press Corps

The new government will also accelerate pension reform. For public pensions, an improvement plan for the National Pension will be prepared by the second half of next year through financial calculations. Alongside this, discussions on public pension reform will be promoted through the Public Pension Reform Committee.

For private pensions, to strengthen the function of securing retirement income, tax benefits will be expanded to encourage higher participation rates and returns for individual and retirement pensions. The contribution limit eligible for tax credits for pension savings and retirement pensions will be raised from the current 4 million won (7 million won including retirement pensions) to 6 million won (9 million won).

To provide high-quality public services, intensive innovation of public institutions will also be pursued. If public institutions independently promote work and personnel restructuring and the liquidation of investee companies, incentives will be provided, and regular surveys on welfare operation status will be conducted.

A concentrated management system for financially risky institutions will be introduced to establish soundness plans and strengthen investment, personnel, and fund management. In particular, an innovation task to shift public institutions' seniority-based salary, personnel, and organizational management to a job- and performance-centered system will be implemented.

[Image source=Yonhap News]

Labor reform will focus on revising rigid working hours and wage systems to flexibly respond to the rapidly changing labor environment.

Within the basic framework of the 52-hour workweek system, the choice of working hours operation based on labor-management agreements will be expanded, and health protection measures will be implemented simultaneously to ensure workers' health rights are not compromised.

After surveys, field analysis, and collecting labor-management opinions, a working hours system improvement plan will be prepared by the second half of this year and the amendment bill submitted to the National Assembly.

To induce a transition to a job- and performance-centered wage system, a Korean-style job-based wage information system will be established to provide job-specific wage information, and a wage system reform guidebook tailored to field demand will be distributed.

Education reform will boldly shift the education paradigm to enable the cultivation of future-leading innovative talents reflecting field demands.

To revolutionize university regulations, comprehensive regulatory reforms will be conducted across higher education, including department quotas, university evaluations, academic management, and university operations.

Priority will be given to improving regulations that hinder the training of talent in advanced fields such as semiconductors, and additional measures to drastically expand quotas in advanced fields will be prepared by the second half of this year.

To timely supply necessary personnel for local industries and companies, support systems and curricula for local (specialized) universities and vocational high schools will be restructured, while a cross-ministerial collaboration system for nurturing talent in new industries will be established.

Kim So-young, Vice Chairman of the Financial Services Commission, is speaking at the emergency inspection meeting between the ruling party and the government on restoring fairness in the virtual asset market and investor protection measures, held on the afternoon of the 13th at the National Assembly Members' Office Building in Yeouido, Seoul.
[Photo by Yonhap News]

For financial innovation, digital innovative finance and private sector innovative growth will be supported.

In response to changes in the digital environment, the institutional foundation for promoting convergence between financial and non-financial sectors will be strengthened, and overall financial industry regulations will be improved.

A Financial Regulation Reform Task Force (TF) will be established to identify tasks responding to digital transformation, big tech growth, and climate change. Additionally, a Basic Act on Digital Assets will be enacted to create an environment where the virtual asset market grows responsibly based on investor trust.

In the capital market, a foundation for a leap forward will be established to eliminate the Korea discount and support sustainable growth of the real economy through the activation of venture capital.

To this end, the introduction of the financial investment income tax will be postponed for two years, and capital gains tax on domestic listed stocks will be abolished except for ultra-high-value stockholders. Participation of foreign financial institutions in the domestic foreign exchange market will be permitted, and fair competition conditions and macroprudential systems will be supplemented.

The government will improve service industry productivity to the level of major advanced countries through bold regulatory innovation and strengthened service industry-friendly support.

Regulations related to promising service sectors such as content, tourism, and healthcare will be thoroughly reviewed to relax regulations that hinder innovation, and discrimination against the service industry in tax support for employment, investment, and startups will be eliminated while expanding tax support for new growth service industries.