What is the Korean New Deal?

As the Korean government looks to recover from the coronavirus pandemic, Asia’s 4th largest economy will need to deal with not only high unemployment but the closing down of many businesses in Korea. Therefore the Korean government has recently announced the Korean New Deal which plans to invest over $144 billion (160 trillion won) to create over 1.9 million jobs by 2025 (890,000 by 2022). Around $100 billion will come from the Korean treasury. $24 billion will come from local governments. Finally, $20 billion will come from the private sector.

South Korean President Moon Jae-in will be personally involved in monthly strategy meetings regarding the Korean New Deal. This will be done to ensure both the government and private sectors are meeting their commitments. These meetings will also focus on regulatory innovation and legislation required for the Korean New Deal. This means the speeding up of regional participation in the Korean New Deal projects by cutting regulatory red tape, evaluation requirements, and local government fiscal situation reviews.

Moon Jae In Korean New Deal

“The Korean New Deal is the blueprint for South Korea’s next hundred years,” said President Moon Jae-in.

The Korean New Deal Fund

The public sector will lead the New Deal Fund in the amount of 20 trillion won ($18 billion) for 2021-2025. The New Deal fund will invest in wide-ranging areas of New Deal projects and businesses through various investment methods, such as equity investments and loans. Therefore this will provide the general public with opportunities to invest in K-New Deal projects through public offerings at lower risk.

Financial institutions such as KDB (Korea Development Bank), IBK (Industrial Bank of Korea), and Korea Credit Guarantee Fund will inject $91 billion (100 trillion won) through loans and guarantees.

Five of Korea’s largest financial holdings firms such as KB, NH, Hana, Shinhan, and Woori Bank will inject $63 billion (70 trillion won) through loans and investments.

K-New Deal Index

Korea Exchange will come out with the K-New Deal Index. It will consist of companies in the fields of biotech, the internet, gaming, and batteries. In addition, they will also have the carbon-efficiency green index which will focus on companies with lower carbon emissions.

Recovery from the Coronavirus Pandemic

Korea has been successful compared to other countries when dealing with the coronavirus pandemic. They were able to effectively quarantine their citizens without having to shut down Korea’s economy. This type of effective quarantine is now being referred to as K-Quarantine. K-Quarantine has helped minimize the economic impact in Korea and has built confidence in Korean citizens that the Korean government can fully recover from the pandemic. The Korean New Deal will be the biggest economic recovery package in Korea. While Korea has done well compared to other countries, they were still affected by the pandemic.

The coronavirus pandemic has left the Korean economy in its worst shape since the Asian financial crisis of 2008. Job losses were the highest in both the retail and wholesale sectors. The same can be said for the accommodation and food services sectors. Therefore, how well Korea recovers will be the key moving forward. The Korean New Deal is the start of this recovery.

The Korean New Deal project can be broken down into three major components.

  • The Digital New Deal
  • The Green New Deal
  • The Human New Deal

In addition, there are 10 key projects under the Korean New Deal.

Korean New Deal

The Digital New Deal

The Korean Digital New Deal finds reform in the digitalization of all kinds of economic and social activities for a better future. This means providing the infrastructure that is compatible with 5G technology, artificial intelligence, and big data. The Korean government will create a single digitalized integral system (intelligent government) for production distribution, management, human resources allocation, and financial administrations. The system will also help with sectors such as traffic, water resources, and disaster response. In addition, the Korean government aims to supply digital equipment to all secondary schools, daycare centers, and over 160,000 SMEs to help them conduct daily education or business without being physically there.

The first step in the Digital New Deal will be to open over 140,000 pieces of public data to be digitized. This will be called the data dam project and its aim is to establish an infrastructure for collecting and trading big data related to daily life such as manufacturing, health care, finance, transportation, and biomedicine. Big data will be critical in creating a smart medical infrastructure in Korea.

The Green New Deal

The Korean government will aim to construct an eco-friendly and carbon-free society through the Green New Deal. Therefore Korea’s main objective of the Green New Deal is to establish an eco-friendly industrial and social environment. In addition, they plan to make an innovative ecosystem in the 5 leading green industries by selecting 100 of the top leaders in the industry.

Under the Green New Deal in Korea, the government will invest $66 billion for green infrastructure, renewable energies (wind, solar, and hydroelectric power), and will install solar panels on over 225,000 public buildings in Korea. This will lead to the creation of over 320,000 jobs by 2022 and 660,000 by 2025. Furthermore, Korea plans to close 50% of its coal plants by 2034.

Finally, there is a plan in the Green New Deal to make zero energy consumption for all public structures such as parks, cultural facilities, schools, daycare centers, and museums. The Korean government will also build new smart cities, city forests, and national parks in Korea. In these smart cities, Korea will install “smart meters” in over 5 million apartments to help residents lower their electricity usage. Smart schools in Korea will involve setting up high-quality Wi-Fi and the distribution of 240,000 tablet PCs.

Mobility Project

Furthermore, in order to reduce carbon even further, the Korean government aims to add over 1.1 million electric cars and over 200,000 hydrogen fuel cell cars by 2025. This also means building electric vehicle recharging stations and hydrogen refueling units all across Korea.

The Ultimate goal of Korea’s Green New Deal is to end the use of fossil fuels. This will lead to Korea having zero net emissions by 2050.

The Human New Deal

The Human New Deal aims to provide emergency safety nets to the working class in Korea. The widening of the social safety net in Korea will narrow the gap between the rich and the poor. Projects under the Human New Deal will involve job training in new technologies and projects that will create jobs in new innovative sectors. It will provide jobs for the young population through various programs. Examples include forest management, fire prevention, industrial safety, and public data collecting projects. In addition, the Human New Deal will guarantee unemployment protection to all workers. As well as emergency relief funds to self-employed small and medium enterprises.

The Human New Deal aims to expand the number of people eligible for employment insurance from 13.67 million in 2019 to over 21 million by 2025. Furthermore, the Korean government will train 100,000 key personnel in software and AI technologies. As well as, 20,000 in green convergence technology in order to respond to the changes in the employment structure in Korea.

“We will use the COVID-19 crisis as an opportunity to strengthen the social safety net and reduce inequality. The role of the government has become bigger and the responsibility has become heavier. We will expand fiscal spending and make bold investments for the future. The government will take the lead in creating new jobs,” Moon said.

Korean New Deal – Regional Projects Outside of Seoul

Korean New DealThe Korean New Deal aims to shift the economic balance in Korea toward regions outside of Seoul. These regional projects will bring changes to the daily lives of Korean citizens that are living outside of Seoul through job creation. 50% of the 160 trillion won will be invested in projects that are conducted outside of Seoul. This will lead to more balanced development and recovery in South Korea. Some of these projects include:

  • Installing green technology in outdated government-leased apartments
  • Expansion of robotics factories
  • Autonomous vehicle testing sites
  • Development of publicly backed delivery platforms
  • Installing AI technology in traffic systems
  • Smart digital power plants
  • Upgrades to liquified natural gas production
  • Creation of special economic zones
  • Setting up smart grids to raise energy efficiency and expand renewable energy farms