The faster-than-expected deterioration of external conditions, including the global economic slowdown, is posing a threat to Korea’s heavily foreign market-dependent economy. Nonetheless, as our economic fundamentals are strong, the country’s macroeconomic indicators, including the inflation rate, unemployment rate and foreign exchange reserves, have been brought under stable management. Overcoming the first-quarter slump, the economic growth rate is also projected to gradually begin to recover in the second quarter.
However, global economic uncertainties are still huge. Domestically, many mounting obstacles – such as the weakening competitiveness of flagship industries – should be overcome to stimulate investment, exports and consumption.
Just when the people’s desire for the Government and the National Assembly to come together to surmount the grave economic situation is higher than ever, it is very regrettable that political confrontations and conflicts are intensifying. The Government, too, with a greater sense of responsibility and extraordinary determination, should make all-out efforts to restore economic vitality.
More than anything else, the creation of future growth engines through new industries is crucial. The key is transforming the fast-follower model economy into a pace-setting one. To this end, the Government has focused on fostering new industries. To innovate economic fundamentals and the ecosystem, it has pushed for strategies to nurture the four major elements of the platform economy – data, artificial intelligence, the hydrogen economy and 5G technology – as well as the eight leading industries, including biohealth, smart factories, smart farms, fintech and drones.
The recent success commercializing 5G technology for the first time in the world has increased our confidence that the Republic of Korea can spearhead innovation and become a top global leader. The Government is also putting its energy into establishing a vision for innovative finance so that the sector can transition into one that supports the development of new industries. In addition, the Government is implementing a manufacturing renaissance strategy so that manufacturing, the traditional flagship, can restore its vitality through innovation.
The efforts so far have been just the beginning of our transition to a pace-setting economy. We need to accelerate the process of innovating the nation's industries as a whole, thereby creating an opportunity for our economy's transformation and a new leap forward.
Among other things, the Government plans to designate system semiconductors, biohealth and future cars as three key industries to be nurtured intensively and, thus, prioritized for support. We will provide full policy support to help these areas emerge as the three mainstays of our economy's new growth engines.
In order to increase economic dynamism and move toward an innovative economy, special emphasis has to be placed on generating a second venture boom. Under my Administration, new venture investment saw its largest-ever increase. Both the amount of investments in business ventures and the number of newly founded businesses are at an all-time high. Korea ranks second in the world following the United States in terms of total investment as a percentage of its GDP. The number of unicorn companies – unlisted startups valued at over 1 trillion won – has recently risen to eight from three in 2017, proving their fast-paced growth.
There is a saying, "Whip an already galloping horse." As more people and money gravitate toward startups, I urge you to do your best to provide policy backing that further spurs startups and an investment boom, for instance, by raising an exclusive scale-up fund as well as by promoting angel investment and crowd funding.
Private investment needs to be revived to reinvigorate the economy. It is truly welcome news for the national economy that both SK Hynix and Samsung recently announced major investment plans: 120 trillion won to build a semiconductor cluster in Yongin and 133 trillion won in system semiconductors, respectively. I look forward to more increases in corporate investment going forward.
I urge the Government to do its best as well to create an environment conducive to corporate investment. To this end, it will be necessary to redouble efforts to address investment-related difficulties by actively engaging in on-site communication with businesses as well as to identify and support new corporate investment projects. Regulatory innovation, to which the Government is devoting itself, is also inevitable to boost corporate investment.
Long-delayed legislation related to regulatory innovation has been completed, and the world’s most advanced regulatory sandbox system, which allows new business models to be tested first and regulated later, has been implemented. Considering the fact that 26 cases have already been approved in only 100 days since its implementation, notable progress has been made in terms of speed compared to other countries. There is still a long way to go, but we should do our utmost so that regulations do not become obstacles to corporate investments or the provision of conveniences and benefits to the public.
Government investment also plays a large part in boosting economic vitality. The Government should give even more impetus to creating a boom in investment in new industries and business ventures in addition to providing investment assistance to traditional flagship industries that are now undergoing hardships, such as automobiles and shipbuilding.
An active fiscal policy role is more pressing than ever. Enhanced efforts to reinforce the economy by taking advantage of national finance are absolutely necessary to ease downside risk from external economic conditions and boost the nation’s real economy and domestic demand. The International Monetary Fund and other international economic organizations have strongly recommended this route as Korea’s fiscal condition is considered very sound relative to that of other OECD member states, allowing room for an expansionary fiscal policy.
My Cabinet submitted a supplementary budget bill to the National Assembly on April 25. In addition to such urgent budget items needed to protect the people’s wellbeing from fine dust, wildfires and other disasters, it is to preemptively respond to external economic conditions and actively support the economic vitality of low-income families.
The economy is all about timing. The later the supplementary budget proposal is processed, the bigger the burden becomes on the lives of the public and the livelihood of ordinary citizens. I hope that the National Assembly will resume normal operation as quickly as possible and swiftly review and pass the Government’s supplementary budget proposal.
Moreover, I urge the Government to cooperate with local governments and see to it that the allocated funds can be frontloaded. Also, I ask you to make efforts to ensure that the estimated 10.5 trillion won of the annual budget surplus already distributed to local governments can be disbursed as soon as possible.