South Korea is a country lacking natural resources. Its economic development is export-oriented, and its industrial structure is dominated by heavy chemical industries. The five major industries, including automobiles, shipbuilding, semiconductors, steel, and smartphones, earn a lot of foreign exchange for the country's economic growth.
According to South Korea’s Seoul Economic Daily’s December 2020 report, the South Korean government recently announced that South Korea’s economic growth rate for the year was 1.1%. But this was still the highest among the OECD countries. Among the G20 countries, it only lagged behind China, ranking second.
The South Korean government announced the "Korean New Deal" in July 2020, a comprehensive national development strategy that aims to free South Korea's economy from the impact of COVID-19 and long-term low economic growth. Korean New Deal is a comprehensive development strategy that outlines the blueprint for the future of the Korean economy over the next ten years. After the COVID-19 epidemic, the key of the blueprint is that the economic development trend of "Un-contact" and "Green Economy" will likely have a positive impact on the Korean economy and related industries.
Current global situation:
- As a multinational alliance, the EU is still slow in decision-making.
- With the rapid increase in COVID-19 cases in the United States, national policies and relief programs are facing difficulties in implementation.
- Although China is actively sprinting for economic development, it has continued to have trade conflicts with the United States, and there are still doubts about whether its IT infrastructure policy can be implemented quickly.
Korean New Deal
The focus of the Korean government’s "Korean New Deal" is to build a more digital and green economy. To promote sustained economic growth, development in this direction is necessary, and the impact of the epidemic has accelerated the pace of change. The New Deal promises to make huge investments in a wide range of areas, which may have a significant impact on specific industries and companies in the short term, rather than the entire market.
The Korean version of the New Deal has 28 projects across 9 areas, and it has recommended investing in 10 key projects. Of the 10 key projects selected by the Korean government, 3 items are related to the Digital New Deal, 3 items are related to the Green New Deal, and the remaining 4 items are combinations of digital and green energy industries.
In terms of the Digital New Deal, it focuses on three project areas: the "data dam", artificial intelligence government, and intelligent medical care.
Data dam (5G, smart factories, and autonomous vehicles)-Data dam refers to the foundation established by big data to promote the combination of 5G communication technology and artificial intelligence.
- The goal is to build a complete 5G platform to promote the development of future trends such as virtual and augmented reality. The 5G platform will also enable the deployment of autonomous vehicles and enhance the competitiveness of Korean companies in related industries.
- Another area that benefits from the 5G platform are the smart factory. Smart factories driven by artificial intelligence systems could attract the return of production facilities that have moved overseas due to rising labor costs, helping to cope with the accelerated deglobalization trend after COVID-19.
Artificial intelligence government (cloud and big data-related industries)-The artificial intelligence government project hopes to improve the quality of public services through 5G and blockchain technology.
- Under the circumstances that countries are gradually considering the introduction of central bank digital currencies, the adoption of 5G and blockchain technology is no longer an option, but inevitable.
- With the development of public system networks aimed at improving the convenience of government service users, the demand for large-scale data centers will also increase significantly.
Smart medical (IoT) devices, smart medical equipment, and artificial smart medical systems are the focus of smart medical projects being designed to establish a medical service platform that does not need to be completed face-to-face, thus reducing the risk of infection.
- Smart hospitals should promote cooperation between medical institutions, and provide high-quality services for people who find it inconvenient to seek medical treatment.
- The project will also focus on developing a diagnostic system with big data analysis and self-learning functions to reduce the rate of misdiagnosis.
Three key project areas of the Green New Deal: green energy transformation, green energy, and environmentally friendly transportation systems.
- The green energy renovation project aims to improve the energy efficiency of buildings by using solar power generation systems or environmentally friendly insulating materials. Companies that produce or install environmentally friendly tools/materials, LED lights and solar panels are expected to benefit from this.
- The green energy project hopes to increase renewable energy power generation from 12.7GW in 2019 to 42.7GW in 2025 by cultivating an industrial ecosystem. To achieve the goal of 3-4 times expansion of power generation in the next six years, large-scale investment and technological research and development in the fields of wind, solar, and hydrogen energy are required.
- The focus of the environmental protection transportation system project is to invest in the development of renewable energy vehicles such as electric vehicles and hydrogen fuel vehicles. It also includes the early scrapping of old diesel vehicles and the use of diesel particulate filters (DPF) on old ships that help reduce emissions. This will strengthen the competitiveness of Korean automakers in the development and production of hydrogen-fueled vehicles.
Regarding the integration of digital and green energy industries, the government plans to promote four key projects: Smart Green Energy School, Digital Twin, Social Overhead Capital (SOC) Digitalization, and Smart Green Energy Industrial Park.
The Smart Green School Project will focus on digital education platforms to improve public satisfaction with online courses launched during the epidemic, while turning to online education to further increase the demand for private education services for supplementary or alternative learning.
The Digital Clone Project aims to create a real-time digital copy. The focus is on establishing a real-time monitoring system for public utilities and developing a highly accurate roadmap. Digital SOC projects have similar goals. The goal of the Smart and Green Energy Industry Project is to establish a system that can monitor and control the energy and environment-related activities of private companies. Companies related to the Internet of Things, virtual/augmented reality, and monitoring software systems are expected to benefit.
Since the Korean version of the New Deal covers a wide range of industrial and infrastructure projects, it will have a huge impact on the overall economy of South Korea in the long run. The Korean Composite Stock Price Index KOSPI predicts that there will be significant growth starting in 2021.
In addition, the South Korean government launched the Central Economic Council to respond more effectively to the impact of the COVID-19 epidemic.
The following are the topics discussed at the Central Conference Report:
- Plans to expand financial support to small businesses and enterprises
- Approximately KRW 10 trillion will be added to the current KRW 16.4 trillion support.
- The government provided loan guarantees to six commercial banks to provide new support.
- Loans with an interest rate of 3-4% will be extended to new borrowers.
- Improve business regulations in 10 industries
- Select 65 regulations to be improved to develop 10 major areas: big data and AI, future cars and mobility, medical technology, healthcare, financial technology, venture capital startups, industrial parks, recycling, tourism, e-commerce, etc.
- Deregulation to promote telemedicine, distance education, online business, and other businesses that can be run without contact.
- South Korea New Emerging Policies
- How to implement South Korea’s New Deal to help create jobs and prepare for the economy after COVID-19.
- Focusing on the transition to a digital economy, preparing for the fourth industrial revolution and the post-COVID-19 economy.
- Discussed possible large-scale IT projects.
The government will not only create employment opportunities but also promote employment through the implementation of large-scale national projects to promote the development and innovation of the South Korean economy.