Gov’t to pump $3.9 billion in growth engines

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Gov’t to pump $3.9 billion in growth engines

The government will invest 4.7 trillion won ($3.9 billion) next year into six rising industries to develop new so-called growth engines as the economy faces increasing global challenges.

Under the plan, the government will focus support on six sectors - data, artificial intelligence (AI), 5G technology, non-memory semiconductors, biotechnology and future mobility. The nearly five trillion won in support to the industries is a 45 percent rise from a similar budget allocated this year.

The government plans to spend 650 billion won on 5G next year, a rise of 86 percent from this year, while committing 230 billion won to non-memory semiconductors, an increase of 229 percent.

Most of the investment will be used to support research and development, incorporate new technology into public services and establish infrastructure such as charging stations for electric and hydrogen-powered vehicles.

The announcement comes under the Moon Jae-in administration’s policy drive for “innovative growth” from the start of this year that focuses on fostering new sectors beyond established industries that are facing growing uncertainties.

“Through large-scale investment, [the government] will support the expansion and acceleration of innovative growth,” said Hong Nam-ki, minister of economy and finance, during a senior government meeting on economic policy at the Export-Import Bank of Korea in western Seoul.

“We need to find growth engines for our economy,” added Hong, citing an uncertain global economic environment and challenges such as export restrictions from Japan, the U.S.-China trade war and increasing volatility in global finance.

The urgency expressed by the finance minister reflects growing concerns about Korea’s economic growth this year. The Bank of Korea recently downgraded this year’s economic growth forecast to 2.2 percent from 2.5 percent. Korea recorded 2.7 percent growth last year, which was the slowest in six years.

Semiconductors, Korea’s top export category, have really slumped. Due to price drops in memory semiconductors, exports have declined sharply from the previous year.

According to Trade Ministry data released Wednesday, semiconductor exports fell 27.7 percent in July from the previous year.

Overall exports have recorded on year declines for eight consecutive months since last December.

The sector faces more headwinds as Japan tightened export processes for industrial materials essential for semiconductor production and displays from July 4 due to a diplomatic row over a Korean court decision on forced laborers during the colonial period.

The emphasis on “innovative growth” is an attempt to avoid the headwinds through new industries. It is also a shift in policy direction from “income-led growth” that attempted to spur economic growth through direct increases in wages.

“Innovative growth is needed to combat the current situation, fundamentally change the economy and acquire long-term growth engines,” explained Bang Ki-sun, deputy minister of economy and finance, at a separate briefing in the Central Government Complex in Seoul.

Bang highlighted plans to improve competitiveness by fostering 200,000 new experts in the budding industries by 2023. The government announced that it will increase the number of graduate schools that specialize in AI to eight from the current three and establish 30 education centers.

The support to the six industries will be included in next year’s budget proposal to the National Assembly in September. The government added that it will also announce long-term plans to develop future mobility vehicles, AI and 5G networks before the end of this year.

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