Clashing over different policy tenets
Moon’s signature Korean New Deal on verge of being scrapped
The outgoing and incoming administrations of President Moon Jae-in and President-elect Yoon Sukyeol are increasingly on a collision course over major economic policies, as the transition committee is materializing plans to overturn Moon’s several policies that Yoon deems unpractical.
The conflict between the two has been foreseeable to some extent, considering Yoon prioritizes market-driven economy as opposed to Moon’s income-led growth that premised on the government’s active intervention.
Under the circumstance, the transition committee, following its launch on March 18, is geared toward scrapping or scaling down Moon’s devoted economic projects day after day in a bid to implement Yoon’s economic vision characterized with anti-expansionary fiscal policy and soft regulations.
Among the targeted projects are the Korean New Deal aimed at fostering digital technology and green energy to revitalize pandemic-hit economy and a package of measures that protect tenants from being pushed around by landlords amid soaring housing prices.
Introduced in 2020, the Korean New Deal has been Moon’ signature economic roadmap, under which an investment of 220 trillion won ($181.6 billion) will be made through 2025.
The project was not mentioned at all in a guideline for 2023 budget plan announced by the Ministry of Economy and Finance, March 29, stoking speculation it may be scrapped.
The multi-trillion-won project requires the government spending, including 600 billion won this year.
It accordingly was believed to be burdensome for the incoming Yoon administration that desperately seeks to finance 50 trillion won as a relief aid for pandemic-hit small business owners.
The president-elect has wanted to make such financing possible through restructuring of the budget, instead of issuing government bonds as did the outgoing government despite snowballing government debts.
“The 2023 budget plan is linked to the new government’s economic policy direction, and accordingly, the ministry consulted the transition team in advance,” Choi Sang-dae, the deputy minister of the ministry’s budget office said.
Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki, Moon’s key economic aide, still expressed dissent against his own ministry’s decision.
“The investment on the Korean New Deal using national expenditure should go on,” he said, Wednesday. He noted the International Monetary Fund (IMF)’s assessment in a report released on March 29, in which it noted that Korea’s “policy focus will need to shift to structural reform priorities centered around the Korea New Deal to reinvigorate potential growth and foster greater inclusion.”
Sources say the ruling Democratic Party of Korea (DPK) may not cooperate with the incoming government in case it struggles to finance 50 trillion won through budget restructuring and inevitably issue equivalent amount of bonds with a parliamentary approval.
In case of policies concerning tenants’ rights, the transition team announced on March 29 that it will discard or scale down three disputed policies introduced by the Moon administration in 2020.
Under the policies, the tenants who live on a two-year jeonse contract, the most common form of housing contract in Korea, have rights to extend the contract for another two year.
To enhance tenants’ rights, there is also a 5 percent cap on increasing jeonse deposit or monthly rent when contracts are renewed. Plus, the details of contracts should be reported to local government to ensure transparency in housing deals.
The measures, however, resulted in side effects, including noticeable shortage of rental homes on jeonse that pushed housing prices higher.
“We are committed to deal with the three policies on rental housing regardless of the circumstances, to normalize the housing market,” transition committee deputy spokesperson Won Il-hee said.
“Scrapping and scalding down the policies are among our options as we will consider step-by-step measures to tackle the relevant problems.”
The transition team’s move immediately brought criticism from the DPK, with its floor leader Yoon Ho-joong calling such move “a grave mistake.”
“It is like messing up a whole thing to correct minor errors,” Yoon said.
It is speculated that the disputes between the outgoing and incoming governments may flare up, as Yoon wants to correct other polices of Moon such as 52-hour workweek and the workplace disaster law.