[EDITORIALS]Pushing the wrong buttonsThe government has set out its economic policies for the second half of this year. At a briefing, Finance Minister Han Duck-soo said, “The domestic economy will grow 5 percent this year and will grow stably next year.”
Perhaps because such optimism underlies the administration’s policymaking, it offered no important programs to stimulate the economy. Korea’s corporations have been asking the administration to allow them to build factories in the Seoul metropolitan area, but the Roh team replied in its second-half policies with an irrelevant offer that corporate investments in “company towns” in the provinces be exempt from the cap on investments by the biggest of the jaebeol.
And though the administration had said it was a policy principle to reduce tax exemptions, the second-half policies include several minor tax exemptions. The policies also include an “investment road map” for 10 industries, including automobile manufacturing. That leads to a thought: Does this administration still has more road maps left to make, even though it has already drawn up more than 100 of them?
From the experience of recent years, it is clear that policies focusing on how to spend the national budget, while restraining private investment, will be of no help in boosting the economy.
The current emphasis on property and capital gains tax increases is leading to a dilemma for homeowners: See and pay higher taxes on profits or hang on to properties and pay higher property taxes?
Exports are slowing down and capital investment is showing no sign of recovery.
The number of “decent jobs” is shrinking as well. But the new policies have nothing to say about those problems. Well, what could we expect? Mr. Han said himself, “The policies are in accord with the keynote of the Roh administration’s policies and complement it.”
Making the situation worse, the Uri Party is saying different things, confusing the markets. The party’s chief policymaker, Kang Bong-kyun, said Wednesday that the central bank’s efforts to raise interest rates are a problem. Now the Bank of Korea is getting rates to where they should be, and the market is adjusting to the bank’s policy on rates. Mr. Kang’s interjection will only muddy the waters.
He should stay out of the central bank’s business. It is sloppy and careless for the party and the administration to comment on rates and risk undermining the stability of monetary policy.