[General Election Pledge Analysis①] "Let's Save Semiconductors" in Unison... Diverse Solutions for Reviving the Economy

Ruling and Opposition Parties Pledge Expanded Support Including Semiconductor Cluster Aid
People Power Party Moves to Control Industry and Prices Through Tax Support
Democratic Party Promises R&D and Nationwide Cash Payments

The ruling and opposition parties are competing to announce pledges aimed at revitalizing the economy and improving people’s livelihoods. The People Power Party has focused on industrial revitalization through tax support. The Democratic Party of Korea has proposed solutions such as expanding research and development (R&D) budgets and providing universal support payments. However, most announcements have been declarative without detailed specifics, raising doubts about their feasibility.

Both parties are rushing to present policies to foster advanced industries such as the semiconductor industry. The perception that semiconductors are Korea’s “lifeline” played a significant role, but a major factor was that one of the key battlegrounds in this general election is the southeastern metropolitan area known as the ‘Semiconductor Belt.’ Both parties are fighting fiercely to win votes in this region.

On the morning of the 18th of last month, candidates from the People Power Party for the 22nd National Assembly election in the southern Gyeonggi region posed before announcing their semiconductor pledges at the Gyeonggi Provincial Council in Suwon, Gyeonggi Province. [Image source=Yonhap News]

The People Power Party proposed through regional pledges related to Gyeonggi Province the “prompt promotion of a super-large semiconductor cluster” and the “creation of the world’s largest semiconductor mega cluster through the establishment of an advanced industrial complex.” In addition to resolving power and water supply issues, they pledged to build a system for nurturing advanced talent and improve academic regulations that have been obstacles to cultivating high-level talent. The Democratic Party also promised to “establish a strong economic and security foundation by fostering advanced strategic industries such as semiconductors,” including creating a system semiconductor ecosystem based on processes below 2 nanometers, expanding support for advanced packaging, extending the sunset date for investments in national strategic technologies such as semiconductors, and applying tax credits for investments in R&D equipment and used equipment for national strategic technologies. The Democratic Party differentiates itself by emphasizing the creation of an RE100 (Renewable Energy 100%) semiconductor cluster to enhance export industry competitiveness.

Besides this, the People Power Party pledged to extend the sunset of the tonnage tax system, which imposes corporate tax on shipping income based on the volume of operating vessels, to reduce tax burdens on shipping companies; expand tax credits for investments by pharmaceutical and bio companies in bio ventures; support talent development and semiconductor development related to artificial intelligence (AI); and build additional learning data. To boost export competitiveness, they plan to expand trade negotiations and foster exports of content, tourism, finance, and information and communication technology as key export items, presenting a vision of becoming an export G5 (top 5 countries). The Democratic Party focused on expanding the R&D limit to 5% to indicate future growth directions. Previously, the current government had reduced the R&D budget to 3.9% of total government expenditure this year by restructuring an overly large R&D budget last year. Regarding exports, they pledged to open the era of $1 trillion in exports through diversification of export markets to reduce high dependence on specific countries.

Lee Jae-myung, leader of the Democratic Party of Korea, is taking a commemorative photo with President Kim Dong-seop after a semiconductor policy meeting at SK Hynix in Icheon on the 7th of last month.
[Image source=Yonhap News]

Although not included in the party manifestos, the People Power Party recently requested the government to temporarily reduce the value-added tax on everyday items related to the working class, such as childbirth and childcare products, processed foods like ramen, instant rice, canned goods, and food ingredients like sugar and flour, from the current 10% to 5%. This aims to reduce the price burden on ordinary people through tax relief. They also pledged to support asset formation through expanding tax exemptions on Individual Savings Accounts (ISA). On the other hand, the Democratic Party defined the current period as a time when cardiopulmonary resuscitation is needed for the livelihood economy and pledged to provide livelihood recovery support payments of 250,000 won per person and an average of 1 million won per household.