The Korean New Deal is a massive five-year national development strategy announced on July 14, 2020.
Taking its name from U.S. President Franklin Roosevelt’s sweeping response to the Great Depression in 1933, the new deal aimed 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.
On his part, South Korean President Moon Jae-in called the program “a huge shift for Korea to make the leap to becoming a leading Nation.”
The Main Policies of the Korean New Deal
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.
In this sense, the Digital New Deal focuses on three key projects –data dam, smart (AI) government, and smart healthcare, while the Green New Deal stresses on three key projects: green remodeling, green energy, and eco-friendly mobility of the future.
The Main Actors
In addition to central and local governments, the private sector is working closely together for implementing 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.
How Will the Policy Be Funded?
The Government will disburse 114 trillion won (100 billion USD) directly, while 25 trillion won (22 billion USD) are going to 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.
The ‘Regionally Balanced New Deal’
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.
How is the New Deal doing so far?
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.
Korea’s Strengths to Accomplish This Successfully
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 megabit per second (Mbps) on Speedtest Global Index published by global internet analyst Ookla. The index compared the 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 ‘Green New Deal’ & Korea’s Commitment to Carbon Neutrality (Net-Zero)
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’.