Government to Promote Industrial Restructuring

Deputy Prime Minister Yoo Il Ho presided over the 6^th Ministerial Meeting on the Economy on April 28, and discussed plans to tackle low growth, which include carrying out corporate restructuring and accelerating industrial restructuring.

The following is a summary of Deputy Prime Minister Yoo’s keynote address:

Corporate Restructuring

As the economy has to successfully deal with corporate restructuring in order not to fall into a slow growth trap[1], the government has announced strategies to support fast corporate restructuring.  The government will promote market-based and creditor-led restructuring, while providing the public financial institutions involved[2] with financial support they need in the process as well as addressing problems that arise in the process, such as laid-off employees. 

Creditors, corporations and government need to act timely and decisively in order for the corporate restructuring to be successful.  The government will keep an eye on how well the restructuring is going and provide help if necessary.

Industrial Restructuring

For the Korean economy to avoid slow growth, corporate restructuring should be accompanied by industrial restructuring.  The government will provide the strongest-ever support to accelerate industrial structuring:

-          Up to 30 percent tax reduction for R&D investment in new growth engines

-          Up to 10 percent tax reduction for facilities investment to commercialize new technologies

-          Expanded tax reduction for R&D investment in new medicines

-          Expanded support for service sector job creation by adopting a negative list approach

-          New tax incentives to promote the content industry

-          A 1 trillion won worth of new growth engine support fund, which is aimed at promoting high risk investment in new technologies and products through risk sharing[3]

-          Revision to macroeconomic policies with a focus on promoting industrial restructuring[4]

[1] The Korean economy grew 0.4 percent in Q1 due to slowing exports and investment.

[2] Korea Development Bank, and the Export-Import Bank of Korea

[3] The fund is designed for losses to be first taken by public investors.

[4] 6.5 trillion won of a fiscal spending increase in the 1st half through frontloaded spending and another 6.5 trillion won increase in the 2nd half through public sector investment and by minimizing budgets left unspent