Dir.-Gen. Choi Sang-mok of the Economic Policy Bureau at the Ministry of Strategy and Finance said in an interview with NewsWorld, “The government plans to pursue the thorough management of economic risks and build stability into each sector in times of a prolonged and constant crisis from a big-picture perspective.” 

“The government will come up with steps to boost fiscal investments and invigorate domestic demand so as to shore up economic flows in keeping with current economic policies while redoubling efforts to provide support to vulnerable areas by communicating with the people and companies and aggressively seeking out difficulties.” 

“We strive to concentrate on ramping up our capabilities to overcome the crisis by taking a look at the economic conditions surrounding companies and households from an objective fashion based on a sense of confidence in the nation’s potential power,” he said. Choi stressed the need for the government’s continuous, thorough management of risks such corporate financial structure and household debts, and making investments against the post-crisis situations

“I believe that the nation will succeed in overcoming the current crisis if the people, companies, and the government communicate closely and collaborate in an organic manner, as it did in the previous two crises,” he said.  

Dir.-Gen. Choi discussed the government’s policies in the second half to safeguard the economy from any impact of the European debt crisis and create jobs. He said the government will intensify its checkups on the stability of the economy and take measures to perk it up when needed through various means, including measures to help soften the landing for household debts to prevent it from harming the economy. He also said the government will increase investments in SOC projects to spur economic growth this year and foster the service industries including tourism, leisure, sports, and cultural industries and create jobs for youths and baby boomers in particular. 

The following are excerpts of the interview:

“The basic directions of economic policies are as follows:

The government plans to continue to push policies to make the economy strong with the focus on invigorating growth and stabilizing the daily lives of the general public amid the global economic slump caused by the European debt crisis.

The government will continue to try to prepare for a lengthy and drawn out economic slump by strengthening the vibrancy of economic activities by sector through systems and organizational efforts.

Emergency checkups on economic situations as they arise will be conducted to fully cope with external impacts on the economy and see to it that household debts will have a soft landing to ensure healthy government treasury conditions and make each sector strong as well.

Policies will also be directed toward spurring investments by SMEs and foreigners in Korea and make the construction industry healthy to improve the environment of civilian sector investments.

Policies will also be made to explore new export markets for Korea, taking advantage of the second Middle East boom as well as the markets of emerging nations with tailor-made strategies for each.

The government will also supplement future growth engines, such as service and green industries, and secure the bases for policies to cope with population and climate changes and mid- to long-term structural changes.

Intensive efforts will be made to stabilize the lives of the public as they are jeopardized when external factors grow worse. Policies will be made to take care of problems in the supply and demand of commodities and also to cope with short-term unstable inflation factors by improving the structure of distribution and the settlement of advanced nation type of price systems in the country through structural efforts.

Measures will also be taken to improve job conditions for youths and baby boomers by supplementing the major systems including the tax systems to be job-creation friendly.

The government will take measures to invigorate financing for the general public with expanded support for buying or leasing houses and ease burdens for living expenses.

The government will make the social safety net realistic so that the real needy can get the help they need.

The seven major tasks to be implemented in the second half are as follows: Total preparation for the global crisis; the expanding of government investments; the invigoration of civilian investments; maintaining the inflation rate at 2 percent for the year; the creation of 400,000 new jobs; easing financial burden of households through the stabilizing of housing expenses and the expanding of microfinance supports; and setting up the framework for future preparation.

The government aims to strengthen the pan-national structural means to cope with global crises that could prolong. It will change the monitoring system to make it a more consistent system and continue to check and improve upon the contingency plan. The government will take preemptive measures on foreign exchange and financial markets to minimize the side-effects of external uncertainties on the real economy.

The monthly government-civilian meeting to check up on economic situations presided over by the President will be held regularly to focus on inspections on external dangerous factors and coping with them if they develop. Civilian economic experts and representatives of SMEs and large businesses and economic organizations will attend the monthly economic meeting.

The vice ministerial meeting to check up on financial market and economic conditions will be merged with the macro-economic and financial meeting and held regularly to check up on the health conditions of the economy and financial market.

The early warning system will be reformed as a key factor for the macro-economy and its evaluation system will be strengthened in line with the reform of the management system.

On the improvement of economic structure, measures will be taken to improve household debts, secure the soundness of the government treasury, and build the safety net for the financial system in keeping with the crisis prevention measures.

In order to lead sound consumption, the tax rates on direct pay cards will be changed to encourage its use more than credit cards. The tax exemption rate will be increased to 30 percent for direct payment cards, while that for credit cards will remain at 20 percent with the upper limit for tax exemption at 3 million won.

In order to encourage the banks to offer long-term loans at fixed interest rates, the government will soon legalize the covered bonds and allow the government and the Bank of Korea to hold stakes in the Korea Housing Finance Corp. to take effect from sometime in 2012 or 2013.

The exemption of local taxes will not be allowed by principle and we will expand the objects of government treasury loan objectives. The government will try to boost the soundness of local government finances by strengthening the procedure for launching local government-run corporations.

The government also plans to make the financial system more competitive by improving the management structure of financial firms and the capital market to make the financial firms’ assets healthier and boost their capital adequacies.

The government also intends to increase the support funds for nurturing the service industry and SMEs and stabilize the livelihoods of poor families by from 2 to 3 trillion won annually. Measures will be taken to support poor families in their purchasing or leasing of houses by making funds available and also stabilize the prices of daily necessities, mainly by spurring distribution and expanding the stocking of goods. The measures will include an increase of funds for house purchases and leasing by 1.23 trillion won and 62.2 billion won to stock up on daily necessities such as farm products and produce.

Furthermore, in order to help small businessmen and youths to start businesses, the government will provide more support fund. The support funds for SME start-ups will rise to 160 billion won and those for small businessmen will increase to 80 billion won.

The government will also expand the guarantees to support small businesses substantially to 6.2 trillion won total, including 2.1 trillion won from the Korea Credit Guarantee Fund, 3 trillion won from the Korea Trade Insurance Corp., and 1.1 trillion won from the Korea Technology Finance Corp.

In addition, the government also intends to foster the service industries, including tourism and leisure industries, by providing support to firmly build their bases for further development while expanding support to sports and cultural sectors, too. Funds allocated include 32.5 billion won for the construction of lodging facilities and the Incheon Asian Games (30 billion won).

Investments in public facilities such as SOC will be expanded by 1.7 trillion won from the initially allocated amount in the second half to further boost economic activities with both the government and the private sector chipping in. Total funds allocated for the construction of “innovative cities,“ power plants, dams and other public facilities and installations will rise to 69.7 trillion won this year from the initial 68.5 trillion won.