Gov’t pledges structural reforms for 2015

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Gov’t pledges structural reforms for 2015

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Finance Minister Choi Kyung-hwan, fourth from left, and other government officials including Yoon Sang-jick, the minister of trade, industry and energy, third from right, hold a press conference at the government complex in Gwanghwamun, central Seoul, on Monday to lay out the economic policy direction for 2015. The Ministry of Strategy and Finance reduced its forecast for next year to 3.8 percent. [NEWSIS]

Hoping to hit a 3.8 percent growth target for next year, the government pledged a wide range of structural reforms.

The government said Monday that next year will be a “golden time” for the Korean economy to build a new foundation for long-term growth.

Despite some regulatory reforms and stimulus policies, the Korean economy has lost steam throughout the year. Therefore, the government said the need for structural reforms for the very foundation of the economy is urgent.

Although it did not detail the specifics, the government said the main goal is to secure the recovery momentum by reforming the labor market, public pension system, education system and financial market. At the same time, it decided to keep the current expansionary fiscal policy in a bid to bolster weak growth.

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The economic team led by Choi Kyung-hwan, the deputy prime minister for the economy and finance minister, have applied fiscal measures and eased some regulations to boost domestic consumption and business investments since it came together in July. Although the measures were considered aggressive, they weren’t enough to stimulate the economy.

“Amid rising uncertainties at home and abroad, the structural problems accumulated in the past - such as a rigid labor market, a textbook-focused education system and selfishness in the financial sector - are major drags on our economy,” said Choi at a joint press conference with other ministers at the Central Government Complex in Gwanghwamun, central Seoul, on Monday.

“The government will focus on improving economic fundamentals next year through structural reforms. By reforming the labor market, the education system and the financial sector, the government will allow workers and money to be distributed in an efficient manner.”

Structural reforms were a major topic of conversation by global economic leaders at the 2014 annual meetings of the International Monetary Fund and World Bank held in Washington D.C. in October. Japan’s Abenomics is considered nearly a failure because it failed to follow through on promised structural reforms.

President Park Geun-hye emphasized at an advisory meeting on the economy at the Blue House on the same day that next year will be the last chance to improve the health of the economy. Next year will be the only year without a national election so the government can focus on the economy.

“Reforming the labor market is an urgent, important task that can’t be postponed anymore,” Park said. “The current dual structure of the labor market [composed of salaried workers and irregular or contract workers] will hinder high-quality job creation and reduce economic vitality.”

The main focus of the plan to reform the labor market is to improve the lot of irregular workers by raising minimum wages and easing contract terms. Details of the plan will be announced after the government reaches an agreement with the labor unions and company managements.

As for the public pension system, there are already plans to change the system for civil servants. In addition, the government will come up with reform plans for pensions for teachers in June and soldiers in October.

The government is considering a wide range of deregulations for financial institutions including private equity funds.

For education, it will start discussing moving the start of the school year to September in line with other advanced countries to extend vacations for local students and attract more foreign students.

BY song su-hyun [ssh@joongang.co.kr]







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