In 2020, South Korea's Ministry of Economy and Finance announced the ‘Korean New Deal,’ a series of policies designed to support post-COVID economic recovery.
'SEE' sums up most important details about this new program.
Taking its name from U.S. President Franklin Roosevelt’s sweeping response to the Great Depression in 1933, the Korean New Deal is a massive 5-year national development strategy announced on July 14 2020 aiming at lifting the domestic economy out of COVID-19 impact and a prolonged low-growth trap. The plan includes an investment of 160 trillion won (140 billion USD) that will ultimately create 1,901,000 jobs by 2025.
President Moon Jae-in called the program “a huge shift for Korea to make the leap to becoming a leading Nation”.
The ‘Digital New Deal’ and the ‘Green New Deal’ are the two main pillars of the strategy while the deal also actively seeks to provide stronger employment and safety nets.
The Korean New Deal features a total of 28 projects in 7 focus areas* that promote the growth of non-face-to-face (‘untact’) and green industries. The government has selected 10 signature projects among them: three for Digital New Deal, three for Green New Deal, and four for digital-green industrial convergence.
Digital New Deal: the focus is placed on three key projects –data dam, smart (AI) government, and smart healthcare.
Green New Deal: the emphasis is placed on three key projects: green remodeling, green energy, and eco-friendly mobility of the future.
Digital-green industrial convergence: the government plans to focus on four key projects: green and smart schools, digital twin, digitalization of SOC, and smart and green industrial complexes
While Korea has managed to minimize the economic damage of COVID-19 by implementing a successful infectious disease prevention and control system (and that without resorting to either extensive lockdown or total border closure) the Government has decided that it was the perfect time for the country to take a bold step further into the digital and green transformation of the country.
As times of crisis are worsening inequalities, President Moon emphasized the need to ensure that the New Deal is built upon robust employment and social safety nets, implementing a monumental shift toward a more inclusive society.
Central and local governments as well as the private sector are working closely together for the implementation of the projects while relevant standing committees of the National Assembly are making efforts to give legal and budgetary backing, including a ‘K-New Deal Committee’ from the ruling party.
A monthly or bimonthly ‘Strategy Meeting’ chaired by the President gathers all those actors to evaluate the progress made.
2020, Starting the Transformation – Investment has been made in projects that help overcome the crisis or that can be implemented immediately. (6.3 trillion won including 4.8 trillion won from the treasury have been invested through the 3rd Supplementary Budget 2020.)
2021-2022, Scaling up the Investments – Investment is being increased to achieve the new growth path. (67.7 trillion won including 49 trillion won from the treasury will be invested and 887,000 jobs to be created.)
2023-2025, Settling the Transformation – Final touches will be added to solidify the new growth path. (160 trillion won including 114.1 trillion won from the treasury will be invested, and 1,901,000 jobs will be created.)
In all, the Government will disburse 114 trillion won (100 billion USD) directly, while 25 trillion won (22 billion USD) will be financed locally (local gov’t) and another 21 trillion won (19 billion USD) will come from the private sector.
Citizens will also be given the opportunity to participate directly via “New Deal Funds”. The goal is to raise 4 trillion won by 2021 and 20 trillion won (18 billion USD) by 2025 and President Moon symbolically invested 50 million won (44 thousand USD) in those funds in January.
Overall, the government hopes that its fiscal injection will serve as a ‘pump primer’ for more investments.
As Korea is still a very centralized country with Seoul Capital Area being the second largest metropolitan in the world (it counts more than 25.6 million people, half of the country’s population, while the estimated population within the city limits alone is over 10 million), President Moon emphasized
that the Korean New Deal also aims to shift the economic balance toward regions outside of the greater Seoul.
To do so, some of the planned projects will be led not by the central government but by local governments, including the expansion of factory robotics in Daegu, the autonomous vehicle testing in Sejong as well as the development of a publicly backed delivery platform in Gyeonggi.
Some of the projects will be led by state-owned institutions, such as smart digital power plants run by the Korea Electric Power Corporation in Gwangju and Naju, South Jeolla, and upgrades to liquefied natural gas production by Korea Gas Corporation.
The plan will also create special economic zones, by providing fiscal and tax support while lifting regulations.
Projects in all the sectors are on the right track with a very positive response from the private sector and the general public, with some projects even already ahead of the timeline especially in the field of the Digital New Deal.
As President Moon Jae-in’s term comes to an end in 2022, some key laws are expected to be passed by the National Assembly in the first half of this year to back up the New Deal and ensure the continuity of the project.
In terms of IT to start with, Korea is the only nation on Earth with 100% mobile phone ownership (Israel the next highest with 88%), and its smartphone penetration reached 95% in 2019 (the average among advanced countries: 76%)
South Korea also reigns in internet connectivity with the fastest 5G networks.
In 2020, the country ranked No. 1 with an average internet connection speed of 121 megabits per second (Mbps) on Speed test Global Index published by global internet analyst Ookla. The index compared mobile internet download speed of 140 countries.
Korea’s mobile internet speed is 3.4 times faster than the world average of 35.96 Mbps which is of great advantage to carry out its Digital New Deal.
In the field of sustainable energy, Korea’s companies are leading in fields such as EV batteries or hydrogen power.
The Korean (Green) New Deal can be considered as a first step toward the country’s carbon neutrality. On the other hand, Korea’s commitment to ‘Net-Zero’ by 2050 before the international community also had a huge impact on the Green New Deal legitimacy and created a very positive dynamic for the country to go ‘greener’.
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