Gov't sets hopes high on New Deal investments

Home > Business > Economy

print dictionary print

Gov't sets hopes high on New Deal investments

President Moon Jae-in, center, attends a meeting on the Korean New Deal fund held at the Blue House on Thursday. [YONHAP]

President Moon Jae-in, center, attends a meeting on the Korean New Deal fund held at the Blue House on Thursday. [YONHAP]

The government on Thursday announced a 20 trillion won ($16.8 billion) Korean New Deal fund for the next five years.  
While the government including state-owned financial companies will contribute 35 percent of the fund, it expects the remaining 65 percent to come from the private sector.  
The government will invest 3 trillion won and state-owned financial companies 4 trillion won. The remaining 13 trillion won is supposed to be investments from the private sector.  
Private financial companies are expected to create their own funds, which would attract investors. Those funds will act as feeders to the master fund, which will invest in New Deal projects or companies involved in them.  
In addition to the Korean New Deal fund, the government said it will pursue New Deal infrastructure funds while encouraging the private sector to create their own New Deal-related funds.  
A New Deal infrastructure fund, which will be publicly traded, will have to invest a certain portion of the investment it raises in infrastructure related to the Moon administration's Korean New Deal policy.
In order to attract investors, the government plans to offer a tax benefit.
Profits will only be taxed at 9 percent. The current tax on dividends from fund investments is 14 percent.
However, there is a limit on the 9-percent tax rate, which is 200 million won in profits or dividends per investor.
According to the Korean government there are already 570 funds that are investing in infrastructure projects.
The government also plans to change regulations to allow pension systems to invest in the New Deal infrastructure projects.  
The government will also change regulations so that private companies could create their own funds investing in New Deal projects. 
The government is hoping to create a minimum 160 trillion won of investments for the Korean New Deal in the next five years.  
While the government will be funding 114 trillion won, the plan is to attract 46 trillion won from the private sector.  
“In the next five years, [roughly] 100 trillion won of policy finance and 70 trillion won from private finance will be injected into Korean New Deal projects and [related] companies,” President Moon Jae-in said in a meeting held at the Blue House on Thursday in which Finance Minister Hong Nam-ki, Financial Services Commission Chairman Eun Sung-soo and other top officials laid out the investment plan.  
“We plan to succeed with the Korean New Deal through three pillars — the government, state-owned financial institutions and private financial companies — with the help of the people,” Moon said.
“The success of the Korean New Deal will only be possible with private investments and the public actively participating in it,” the President said.  
He encouraged investors to actively invest.  
“It not only creates profits for individuals but it will serve as an opportunity for people to directly invest in Korea's future,” Moon said.  
“The future of the country will be determined by the Korean New Deal,” Moon continued. “Today the government and [the Korean] finance [industry] have taken a huge step.”
In late April, Moon proposed the so-called Korean New Deal to overcome the coronavirus crisis and find a new foundation for future growth.  
The government hopes that the Korean New Deal, which is made up of two major categories — digital and green industries — would contribute to creating 1.9 million jobs.  
However, there are many doubts as to whether the government-led investment funds will be able to attract private investments.

More in Economy

Stats show a dearth of cheap digs, politician claims

Covid-19 sees marriage, births fall as divorce, death rises

Government property reconstruction project mentioned

Gov't vows to spend extra budget with dispatch

Parties get closer to deal on 4th extra budget

Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)

What’s Popular Now