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Stimulating private sector-led growth

Published: 04 May. 2022, 20:08

The presidential transition committee has set 110 state agendas under Yoon Suk-yeol’s presidency. The economic catchphrase is the “private sector-led, government-pushed dynamic economy.” The incoming administration has set the direction in economic growth led by the private sector by creating an environment where companies can freely explore innovation. Action plans included reversal of the Moon Jae-in administration’s push to phase out nuclear reactors, normalization of real estate policies, pension reform, promotion of future strategic industries and sweeping deregulation.

The new government must undo the failed policies of the previous government. To achieve carbon neutrality without upsetting energy prices, nuclear reactors’ roles should be enhanced. The outgoing administration has wasted five valuable years by insisting on weaning the country off nuclear reactors without clear scientific grounds. The transition committee plans to aggressively employ nuclear reactors for energy security and carbon neutrality and strengthen the competitiveness of the country’s reactor ecosystem.

The incoming administration must also normalize the real estate market distorted by a myriad of unreasonable regulations. The multiple levies on properties by taxing for purchase, ownership and sale should be fixed. Pension reform that has been neglected by the current administration must also be initiated. Social discussions must be hastened to address the question about the sustainability of pensions due to the serious imbalance across generations.

Promotion of new strategic industries like chips, bio, artificial intelligence and batteries is also urgent. Radical regulatory reforms are necessary for private-led economic growth. De-regulations involving various parties of conflicting interests must start at the early stage of a new government. Tightening social security to ease disparities in assets and income is another important task. Populist campaign promises — like the frequent cash handouts by the outgoing administration during the pandemic — should be revisited for their economic feasibility and be moderated or canceled if necessary. How to finance the so-called 100 million won ($78,895) saving plan for every young person raises questions.

The economic climate has become perilous. High consumer prices, interest rates and exchange rates are sounding loud alarms. In April, the consumer price index rose 4.8 percent year on year, the steepest in 13 years and six months. Strong inflation due to high energy prices is expected to last for some time. The new conservative government must tackle our economic crisis. It must stabilize prices and people’s livelihoods over the short term and stimulate private sector-led growth over the long term.