[One Year of the Yoon Administration] Investment Poured In as Regulations Were Lifted

One Year Since the Inauguration of the Yoon Suk-yeol Government: Evaluation of Industrial and Real Estate Policies

One year after President Yoon Suk-yeol's inauguration, the industrial sector has become the center of change. The government has focused on fostering advanced industries and easing regulations that hinder corporate investment, while companies have responded to the government's efforts with investment commitments worth hundreds of trillions of won. The change is still in its early stages. For Korean companies caught in the US-China hegemonic competition to reap the fruits of their investments, there is still much the government must do.

[Image source=Yonhap News]

On the 3rd, the industrial sector expressed expectations that the advanced industry development policies, which have taken shape during the first year of the Yoon Suk-yeol administration, will translate into corporate investments and bring a fresh breeze to the Korean economy. Under the dynamic economic principle of "private sector leads, government supports," the government has begun laying the groundwork to ensure that corporate investments yield optimal results. A representative example is the advanced industry development policy, including semiconductors. With the implementation of the 'K-Chips Act' (Amendment to the Restriction of Special Taxation Act), the investment tax credit rate for national strategic technologies such as semiconductors and secondary batteries has been raised to up to 25%. Coupled with the Ministry of Land, Infrastructure and Transport's plan to promote the creation of advanced national industrial complexes, specialized clusters related to advanced industries are being established, and government permits and approvals are being expedited to help companies accelerate their investments. Companies have pledged to support the government's regulatory reform efforts through active investment.

In Yongin, Gyeonggi Province, the world's largest 'Advanced System Semiconductor Cluster' is being established, and private companies in national advanced industry sectors such as semiconductors, displays, and secondary batteries have committed to investing a total of 550 trillion won by 2026. Business leaders have worked alongside President Yoon, who has taken on the role of South Korea's first sales representative, not only domestically but also in the United Arab Emirates (UAE), Switzerland (Davos Forum), Japan, and the United States.

The industrial sector is requesting that the government further strengthen efforts to expand investment incentives and ease regulations so that corporate investments can be effective, as well as resolve trade frictions arising from US-China trade conflicts. Alleviating the burdens on Korean companies caused by the US Semiconductor Support Act and the Inflation Reduction Act (IRA) remains an unresolved challenge. To avoid falling behind competing countries' advanced industry support strategies, which include massive government subsidies and regulatory reforms, the government must expand the scope of investment incentives and regulatory easing. Additionally, measures to revise working hours?controversial due to the 'maximum 69 hours per week' debate and facing public opposition?remain necessary, as does addressing ongoing legal effectiveness issues with the Serious Accident Punishment Act, which has been in effect for over a year, and securing and nurturing talent essential for fostering advanced industries.

Meanwhile, experts have positively evaluated the Yoon administration's real estate policies, noting that regulatory normalization has been substantially achieved. To ensure a soft landing for the real estate market, the government introduced the 1·3 measures in January this year, focusing on lifting regulatory zones and easing subscription regulations. As a result, apartment sales in Seoul have nearly reached 3,000 units per month, showing a slight recovery from previously sluggish transaction volumes. In the subscription market, which had seen frequent undersubscription, the Dunchon Jugong complex sold out successfully, and new housing complexes in Seoul have attracted strong subscription interest, indicating that the sales market is emerging from a slump.

However, the fact that the positive momentum has been limited to Seoul and the metropolitan area highlights the limitations of the government's measures. The easing of subscription regulations has opened the door for homeowners with a single apartment in provincial areas to apply for subscriptions in Seoul, leading to a concentration of funds in the capital. The consistently high number of unsold units, exceeding 70,000 monthly, could act as a trigger for an economic crisis.

Although the government's successive measures have narrowly averted a hard landing in the real estate market, the economic downturn expected in the second half of the year is likely to become a variable for the housing market. In the first half, the housing market showed signs of recovery due to special home loan programs and pressure to lower loan interest rates, but the government has few cards left to stimulate the market in the second half. Some predict that if the pace of base interest rate hikes slows or the upward trend halts, leading to a downward adjustment in loan interest rates, the market could stabilize or even rise. On the other hand, there are concerns that the economic recession could deepen the decline in housing prices.