The government will actively support the launch of investment projects worth around 24 trillion won within this year by creating infrastructure and shortening administrative procedures. To counter downward pressure caused by sluggish orders, public institution investments will be increased by an additional 1 trillion won, raising the total to 8 trillion won. The temporary investment tax credit, which provides an additional 10 percentage points of tax credit on companies' increased investments, will be extended for one more year until the end of next year. Through revitalizing stagnant investments and promoting consumption, the government aims to invigorate the domestic economy and reduce the time lag for the positive effects of export growth to spread to the domestic market.
On the 2nd, the government held an Economic Ministers' Meeting chaired by Choi Sang-mok, Deputy Prime Minister and Minister of Economy and Finance, and announced the "Recent Domestic Economy Review and Response Direction" containing these measures.
Operation of 24.4 trillion won investment projects... 3rd measures to be announced next month
First, in the investment sector, which has recently shown visible recovery, the focus will be on promoting the implementation of the 1st and 2nd investment activation measures already announced and strengthening the investment capacity of small and venture companies. On-site projects worth a total of 24.4 trillion won will be swiftly launched, and dispute mediation will be supported for 62 public-private joint construction investment projects worth up to 20.6 trillion won in the fourth quarter. For the entire second half of the year, the goal is to manage the implementation of the top 10 manufacturing facility investment plans worth 62 trillion won.
The Ministry of Economy and Finance stated, "Through the expanded 'Investment Express,' now including vice ministers from related ministries, Ministry of Economy and Finance officials will visit key project sites to gather opinions and significantly expand the policy support system, including seeking regulatory improvements and infrastructure support." Among the 1st and 2nd investment measures, five projects worth 23.6 trillion won, such as the establishment of a cosmetics factory in Cheongju, construction of a general hospital in Naepo New Town, and the Pohang hydrogen reduction steelmaking site development project, will complete major preliminary procedures for groundbreaking within the fourth quarter. The third investment activation measures will be announced next month.
Choi Sang-mok, Deputy Prime Minister for Economic Affairs and Minister of Economy and Finance, is delivering opening remarks at the "Meeting between Ministers of Related Ministries and Heads of Six Economic Organizations for Investment Promotion" held on the 24th at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul. Photo by Heo Young-han younghan@
For small and venture companies lacking investment capacity, financial support will be expanded. The temporary investment tax credit for small and medium-sized enterprises will be extended for one more year until the end of next year. This tax credit provides an additional 10 percentage points on the increased investment amount by companies and was scheduled to expire at the end of this year, but it will be extended to encourage corporate investment. Policy finance, loans, and guarantees will be expanded by 27.9 trillion won compared to the second half plan, with 16.8 trillion won allocated exclusively for small and medium-sized enterprises.
Specifically, in the construction sector, in addition to the already announced additional 7 trillion won investment by public institutions in the second half, 1 trillion won will be further reinforced to expand infrastructure investment. In the housing sector, to accelerate the early supply of 110,000 newly built rental houses by next year, the contract signing period will be shortened from 7 months to less than 4 months, and incentives for increasing advance payment rates within the year will be expanded. To expedite project progress, the advance payment limit for public construction contracts will be temporarily extended up to 100% until the second half of next year.
The burden of construction costs will be alleviated through three major construction cost stabilization projects. The construction cost increase rate will be managed at around 2%, lower than the recent three-year average of 8.5%, until 2026, guiding the long-term trend line (around 4% annually) to settle in the mid to long term. Additionally, tax and other cost reductions will be considered to ease business burdens, such as deferring capital gains taxation when contributing land in-kind to public REITs.
To quickly resolve unsold housing in local areas, the period for excluding completed unsold houses held by housing construction businesses from comprehensive real estate tax aggregation will be temporarily extended from 5 to 7 years until 2026. Purchase-type registered rental housing will be allowed for unsold apartments (85㎡ or less) completed in local areas. For corporate restructuring real estate investment trusts (CR REITs) purchasing unsold local housing, the Housing and Urban Guarantee Corporation (HUG) mortgage guarantee limit will be temporarily increased from 60% to 70% until the end of next year.
Expansion of policy finance for low-income groups... Hae-sal-loan Bank repayment extended up to 10 years
On the 16th, when the interest rate for low-income policy loans was raised by 0.4%, a banner related to Saetalon loans was hung on the exterior wall of a bank in Seoul. Photo by Jinhyung Kang aymsdream@
Next year, fiscal support for low-income groups, elderly disabled, and wage arrears victims will be expanded by 4 trillion won. The annual livelihood allowance for low-income groups will be increased by 1.41 million won next year, and the scale of senior job opportunities will be supplied at a record high of 1.1 million. The target for advance payment and clearance loans for wage arrears will also be expanded to 20,000 people.
For financially vulnerable groups, the scope of policy finance repayment deferral will be expanded from unemployed or closed small business owners to micro small business owners with annual sales under 300 million won, and long-term installment repayment for Hae-sal-loan Bank will be extended up to 10 years. A new debt forgiveness program for small vulnerable debtors will be introduced, forgiving 100% of the principal if repayment ability does not improve within one year. Additionally, support for Hae-sal-loan Youth will be expanded to young individual entrepreneurs, and the value limit for agricultural and fishery products under the Anti-Graft Act will be raised from the current 150,000 won normally and 300,000 won during holidays to 300,000 won year-round to support consumption of agricultural and fishery products and alleviate difficulties for farmers and fishermen.
For small business owners and self-employed business closure support projects, the fund operation plan will be revised to provide about 13 billion won by early this month without disruption, and to reduce labor cost burdens, the permissible scope of work for foreign employment permits (E-9) in the restaurant industry will be clarified and implemented from this month’s application reception.
Electric vehicle purchase subsidies for multi-child families will be expanded from next month to promote durable goods consumption, while to stabilize prices, the government will release 6,000 tons of available autumn cabbage early and increase imports by 4,100 tons, securing more than 10,000 tons of additional supply.
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